earns more or less than what he adds to the profits of his employers. The income of the new
entrepreneurs also fulfils the law; for the remuneration of this species of entrepreneur—unlike that
of entrepreneurs in general—is proportional to the amount of the factor which they
contribute,—namely, capital invested.
The affinity between entrepreneurs and salaried managers in modern industry supplies the
missing link for the general proof of the new law. For, normally, it may be presumed that an
independent entrepreneur (of our second species) does not make less (in addition to the profits that
he makes or might have made by investing in some other business money of his own) than a
manager of like abilities. And perhaps he does not make much more. The difference is possibly
small,39 probably diminishing, certainly difficult to verify statistically, perhaps hardly worth fighting
about. Interpreted cautiously, the law holds good approximately. If the remuneration of the manager,
like that of the “marginal shepherd,” is just equal to the amount that he produces, then the
remuneration of the entrepreneur is not very different from the amount that he produces. But, if the
law of marginal productivity is fulfilled for the manager only while we consider doses less than his
total work, say hours of work, then the law is fulfilled for the entrepreneur only so far as it is pre-
sumed from the similarity in nature and habits between the manager and entrepreneur that, when the
total remuneration of each is nearly the same, the amount of work and its marginal productivity are
not very different.
According to the interpretation which has been suggested, the new law of distribution would
be fulfilled by an adjustment of the quantities involved, the amount of each factor, not simply in
virtue of the relation which subsists between the product and the factors of production.40 The sense
in which the law is fulfilled is otherwise conceived by a distinguished mathematical economist, Mr.
Wicksteed, who regards the law as following from “the modern investigations into the theory of
value,”41 and seems to treat it as a clue whereby to investigate the nature of the relation between the
product and the factors of production, including the work of the entrepreneur.42 In fact, he finds that
the product depends upon the factors by a relation which mathematicians designate a “homogeneous
39. Mainly and apart from “rents” of the order of quantity called by Mangoldt Unternehmerlohn.
40. The form of a function such as that represented by f in a preceding note, or rather what that
function becomes when the work of the entrepreneur enters as a variable.
41. Essay on the Co-ordination of the Laws of Distribution (1894), §2, and prefatory note.
42. The product being a function of the factors of production, we have P = f ( a, b, c, . . .); and the
form of the function is invariably such that if we have π = f (α,β,γ, _), we shall also have
Vπ = f ( Vα, vβ, vγ, _) (loc. cit., p. 4).
“Let the special product to be distributed (P) be regarded as a function (F) of the various factors of
production (A, B, C, ... )” (loc. cit., p. 8).
dP dP dP
dAA + dB B + dC C+
_= K
“under ordinary conditions of competitive industry” (loc. cit., pp. 33-38).