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of other wants. Now the capital, the hired labor, and the entrepreneur form a coöperative productive group. Jointly they produce something, -a something which is calculated to gratify human wants. If the product sells for a price sufficient to make the contractual payments and to retain the services of the entrepreneur himself, the business goes on. The want which it supplies has won in the competition against other wants. If not, it fails, and the direction of industry is altered.
Where business is successful, contract wages and interest are paid (a process which contributes to the evaluation of the services of the labor and capital concerned) and a sum is left over which goes to the entrepreneur. Wages are what the laborer gets: contract interest and rent are what the owners of borrowed or rented agents get. The sum which goes to the entrepreneur is that part of the total proceeds which he secures for the services which he offers. as is commonly the case, he contributes both capital and labor, his return is a return for the services of the two. From a general point of view it is not separable into interest and profit, or into interest, salary, and profit.
In the personal calculations of the entrepreneur, to be sure, it may be divided up. He may call a certain part of it the interest on his capital, and the remainder profit, or he may divide it into interest, salary, and profit,
setting down as salary the sum which he thinks he could command if he entered the service of another. But these are merely devices which assist him in visualizing the prosperity of his enterprise. They do not alter the fact that the business yields him a single lump sum in return for the services of himself and his capital. No contract or transfer divides it into either two or three parts.
Of the total amount to be distributed, then, there is a functional distribution of contract wages and interest (including rent). But in the case of the entrepreneur the industry does not make any functional distribution. It pays him a lump sum. "Not for his life" can the entrepreneur tell what part of his gain is due to his capital and what part to his labor. And by the same token it is impossible to distinguish between the "product of the entrepreneur and of those whom he employs. Their rewards are matters of hard fact, but their specific productivities we cannot disentangle. The entrepreneur's share in distribution is an accurate measure of his acquisitive rather than of his productive powers. It is what he can get, not what he produces.
It is, to be sure, apparent to everybody that a rough (very rough) degree of correlation exists between ability and reward. All around us we see the able man succeeding, and the inefficient or lazy man becoming a failure. And a certain validity remains in our judgment of a man's character on the basis of his business success. Certainly it is by virtue of his contributing to the gratification of human wants that he gains his wages, or his salary, or his profit. But that his reward is in proportion to any supposed specific productivity cannot be shown. That a man has acquired a fortune in competitive business may tell us a good deal as to the man's sagacity, or will power, or business relationships. It also tells us that he has marketed a commodity which somebody wanted to buy, thus largely promoting the gratification of human wants. But he did not do it by his own unaided efforts. He was but a cog in the machine, — a large one, it may be, but inseparably integrated with the other cogs. We can get no information that is at all accurate as to the amount of his own separable contribution, his specific productivity.
he has given his competitors a fair and square beating, he has, to be sure, proved himself more efficient than they in diagnosing wants or in combining the factors of production in such a way as to make the gratifying of those wants personally profitable to himself. But the productivity which has achieved the success is the productivity of a complex of factors of which he is the directing head. And it is no more possible to say what is the specific product of his labor (or of his labor and capital combined) than it would be to say what part of the cutting of the tree was done by Robinson Crusoe and what part by his ax.
If, then, it is urged that the reward of human services is a rough measure of productive contribution, we cannot assent unless the emphasis is placed very strongly indeed upon the word "rough." The ordinary view that income is an index of social service, in addition to being open to the various corrections mentioned above, assumes a specific productivity which it is absolutely impossible to disentangle. The productivity thesis has seemed to give a scientific sanction to a popular notion, which, while it contains a kernel of truth, is extremely inexact, and ordinarily overlooks some of the most essential elements in the problem.
We have then merely a theory of value, - a thing which falls short in two particulars of being a satisfactory explanation of the distribution of income among persons. In the first place it takes for granted the existing distribution of wealth, and, in the second place, it gives us competitive shares which are the result of a process of valuation, but not with any accuracy an index of productive contribution. In other words, what men would get, even under perfect competition (whatever that may mean), would not of any necessity
be an accurate measure of what, on the score of their supposed specific productivity, they ought to get. A thing which has no existence can hardly serve as a criterion of desert. When the efforts of men are merged in social or coöperative production, they can never be again "unscrambled " into specific productivities.
We shall, however, be giving up a great deal if we surrender completely the idea of specific productivity. It has been, even before its precise formulation by Professor Clark, a tacit tenet of economic thought. It is with us all a sort of rudimentary survival of the conception of things which included the "economic harmonies," the doctrine of laissez faire, and the dogma of the unqualified beneficence of the competitive process.
Let us, however, go wherever our analysis leads us. With the idea of specific productivity eliminated the process of valuation remains just what it has been, an orderly, systematic, incontrovertible thing, just as logical as any member of the Austrian school ever conceived it to be. But the distribution of personal income stands out for what it is, - a system of haphazard uncertainties, not merely skewed by the discrepancies of inheritance and original title, not merely vitiated in part by productivity of a predatory sort, but deprived of the erstwhile soothing correlation between reward and productive contribution.
Things-as-they-are have been the beneficiary of an overdone system of apologetics. The concept of specific productivity, both in the explicit form into which it has been cast by Professor Clark, and also as it appears disguised and latent in an uncritical approval of the competitive idea, has tended to blind us to the evil which is mixed with the good in our distributive arrangements, has tended to make us, as economists,
more conservative than we have any right to be. The Distribution of Wealth has been denounced as the apologia of an unwarranted conservatism.1 Denunciation, however, needs to be followed up by specific disproof. The error in the specific productivity thesis must be precisely located, and must come to be generally understood if it is to be deprived of the undue influence for conservatism which it undoubtedly continues to exercise even in the rarified and corrected form in which it is still cherished.
WALTER M. ADRIANCE.
1 E. g., by Professor Wicker at the New York Meeting of the American Economic Association.