874 AGRICULTURAL ECONOMICS 



the remainder is the amount (or rate) by which this active-capitalist 

 investment exceeds the current rate of passive-capitalist investments. 

 This merely estimated division influences further choice of invest- 

 ment. The rate of interest is taken to represent about what capital 

 can do by itself (or with a negligible amount of judgment and super- 

 vision an abstract conception) and the excess above that is attrib- 

 uted to the successful act of investment. Thus, however far we 

 attempt to eliminate the personal service element of management 

 from profits, there always remains in any active capital income this 

 one element of investing management together with the carrying of 

 financial risk. There is a dual character in investment profit; it is a 

 capital-income and a labor-income, combined. The distinctive feature 

 of investment-profit, which fastens our attention, is precisely this 

 excess (or deficit) of income in active capital as compared with the 

 normal prevailing rate of time-price, which can be secured by the most 

 conservative passive investor. It is the hope of an income of more 

 than ordinary interest that is the inducement to active capitalists to 

 assume the risk. We may call the amount realized more or less than 

 the imputed yield of passive investment, pure investment-profit, 

 attributable to the exercise of pure investment function. The amount 

 may be expressed as a rate on the investment. This is the utmost 

 point that has been attained in the analysis of the complex elements 

 of "profits" as popularly used. 



To the person who exercised this function of active capital- 

 investment various names have been applied : undertaker, its French 

 equivalent entrepreneur, adventurer (especially used in former times 

 of one who embarked in foreign trade), and enterpriser. Each of 

 these was meant to express the assumption of the financial risk in 

 undertaking the ownership of the various factors and of their results 

 embodied in the products, in paying off other claimants, and in waiting 

 for an income not determinable in advance, but contingent on all 

 the various fluctuations of the market. 



Enterprise is the act, or function, performed by the enterpriser, 

 and in a different but related sense is the particular business estab- 

 lishment, or undertaking, which is carried on by an enterpriser. 

 Business management and enterprise are functions not embodied 

 completely in any individuals, but diffused more or less among groups 

 of men. The active capitalist and the passive capitalist are not in 

 contrast absolutely but relatively; the passive capitalist is not, and 

 cannot be, completely freed from financial risk. Enterprise is merely 



