PROFITS IN AGRICULTURE 875 



in this particular business the assumption of the legal financial 

 responsibility to the extent of the enterpriser's credit and resources, 

 or in other cases to the extent of the special legal limited liability, as 

 (in most stock companies) to the amount invested, or (often in bank- 

 ing) to double the amount invested. 



Risk is more or less everywhere in human affairs, but among vari- 

 ous kinds of investments there is a well-recognized gradation in the 

 uncertainty of returns. The enterpriser in a business takes the more 

 exposed frontier of risk, and the various senior securities have prior 

 claims. For example, if the business of a corporation goes badly, 

 the first mortgage bonds, getting a low rate of interest, are the first 

 claim on the income and, in case of insolvency, these bonds would 

 be paid out of any assets of the company; so in turn till we come to 

 the common stock which gets nothing until all the other claims are 

 satisfied but which if the business is prosperous may get dividends 

 at any rate permitted by profits. There is thus an investment risk, an 

 element of enterprise even in the safest investment, e.g., government 

 bonds, but this becomes almost negligible in the case of many well- 

 proven investments. 



It is easily seen why the income to enterprise is the most variable 

 from one establishment, and from one time, to another. It contains 

 within it all the non-contractual elements of income. The laborer' 

 has taken a fixed wage, the passive capitalist has reduced his risk and 

 accepted a fixed interest. Both wage workers and passive capitalists 

 have taken the easy way, have "played safe," and have left the 

 enterpriser to bear the brunt of the financial risk. The income of 

 each of these classes tends to conform to a general market-rate, being 

 a medium of the gains and losses when labor and capital are applied 

 with various degrees of risk in various undertakings. Enterprise is 

 the most movable element. It is specialized risk-taking. Enterprise 

 has well been called an economic buffer, which takes up and distrib- 

 utes the strain resulting from variations in the momentum and rate of 

 movement of industry. The enterpriser feels first the influence of 

 changing conditions. If the prices of his products fall, the first loss 

 comes upon him, for the goods already made must be sold. Further 

 loss is avoided as best it can be by paying less for materials and labor. 

 At such times the wage-earners look upon the employer as their evil 

 genius, and usually blame him for lowering their wages, not the public 

 for refusing to buy the product at the former high prices. When, 

 however, prices rise, enterprise gains through selling at higher prices 



