THE CONSTRUCTION OF A NEW THEORY OF PROFIT.

Most modern authors define profit as the income of the firm as such or as the price paid for performing the function of enterprise. This has not always been the case, however, Adam Smith, the founder of the classical school, so little a classicist himself shows profit as the income of the capitalist entrepreneur, that is, as the income of the individual owner of a capital sum who uses this capital to hire workers, buy machines and manufacture products which he sells on a market. But after Smith have come a whole series of authors, who have in one way or another, with all the resources of excessively atomistic analysis, dismembered Smith's basic idea. In profit, as Smith defined it, they treat as separate elements the interest which remunerates the capital provided by the entrepreneur himself and the wage which pays for his labor of direction and coordination of the factors of production. In the income of the entrepreneur, designated as gross profit, they isolate, after eliminating the interest on the entrepreneur's own capital and a wage for his labor of direction, a net profit which seems to them to be pure profit and which they then proceed to try to explain.