A similar adjustment must be postulated when we entertain the third definition of
entrepreneur, and consider competing investors in the stock of companies which may at first be
supposed equal in respect of risk, though not in size. The competitors being free to invest units
consisting, say of £100 or less in any kind of business (of the given riskiness), large or small, it
follows that a return to a dose anywhere invested tends, ceteris paribus, to be the same.27This result,
which is by no means a deduction from the general formula considered under our second head, may
be supposed to be brought about by an adjustment of margins of the sort which has been explained.
Now at length the Ricardian theory of rent as ordinarily stated becomes exact,—the payment
for land rented by a joint stock company ought to be just the difference between the returns (after
capital has been replaced and labour paid) and the amount of capital laid out, multiplied by an
average rate of profit.
Though the class of shareholder is the principal, it is not the only species, of the third kind
of entrepreneur, if defined so as to include all risk-takers. As Mr. Hawley observes,28 workmen take
some risk, entrepreneurs who have no capital of their own run the risk of not being paid for their
trouble. Enterprise may be taken as the essential attribute of a wide class entitled to a share in the
national dividend along with the purveyors of land, labour, and capital. It does not seem to be a fatal
objection that enterprise is hardly to be found in the concrete, separate from other factors of
production. As Mr. Hawley replies,29 labour and waiting, the attributes of familiar classes, are not
to be found in abstract purity.
To some there may seem a more serious scruple: whether the undertaking of risk does even
in thought constitute a fourth factor, whether the distinction between interest and the reward for risk
is radical. It is all very well for Jevons to distinguish by different coefficients, p and q, the
depreciation of future goods due to uncertainty and to remoteness. But, since the distant pleasure is
always uncertain, can we really disentangle the two causes of depreciation?
Fortunately, these questions of logical definition and psychological analysis do not affect the
important lessons respecting the participation of risk which have been taught by Professor J. B.
Clark,—“that a corporation can run risks which the individual could not with prudence,” that by
forming corporations “we reduce the initial terrors of business enterprises.”30 It is an exemplification
of the old maxim not to put all one’s eggs in one basket. If a hundred persons are carrying each a
hundred eggs, each independently running the risk of tripping and by the loss of all or many of his
eggs being exposed to great privation, this great danger will be averted, this chance of great disaster
will be commuted for a somewhat higher probability of a much more easily borne loss, if each
person carries only one of his own eggs and one belonging to each of the rest, the total to be
redistributed at the end of the journey to market or after sale.
It is noticeable that in Professor Clark’s nomenclature this risk is borne by the capitalist. “The
27. Accordingly, in order that equilibrium should be stable in this regime, investment in each
industry ought to be pushed up to a point at which the law of decreasing returns is fulfilled in its
second sense,—that the rate of total cost to total product increases with the increase of product.
28. Quarterly Journal of Economics, Vol. VII, (1893) p. 470.
29. Ibid., Vol. XV, (1900) p. 78.
30. “Insurance and Business Power,” Ibid.. Vol. VII, (1892) p. 40, et seq.