690 



KEPOET 1889. 



the annexed diagram. Let OE in fig. 6 represent the entrepreneur's demand, 

 OW the workmen's offer of labour, the abscissa representing work done, and the 

 ordinate wages payable out of the wages and profits funds (abstraction being made 

 of interest and rent for land). Let OE be formed by the composition of Oeo, the 

 collective demand curve for the lowest entrepreneurs, and one or more curves, such as 

 Oe„ appertaining to the entrepreneurs of higher abiUty. Now let us shrink these 

 higher natures to the zero of business ability. The individual demand-curve 

 for each degraded entrepreneur will become identical with that from which O^-,, was 

 formed (by the combination of all the demand-curves for the lowest grade). The 

 new demand-curve will therefore be of the form OE' intersecting with OW as at the 

 point r'. (Whether the disturbance will stop there will depend upon the nature of the 

 communication between the departments of employer and workman; whether the 



Fig. 6. 



w 



E' 



mobility is one-sided, like that of fluid allowed by a valve to escape from one vessel 

 to another, but not back again — see the end of the passage cited on page 689 from 

 the ' Quarterly Journal of Economics '—or whether the permeation is perfect.) 

 If Of„ is small, if the part played in production by the marginal employers is in- 

 significant, it is probable that the annihilation of the higher grades will result in the 

 destruction of the greater part not only of profits, but also of wages. 



Accordingly it appears in general inexact to say that the ' surplus which is left 

 in the hands "of the higher grades of employers ... is of their own creation' 

 (' Quarterly Journal of Economics,' April 1887, pp. 274-5) ; if we define their own 

 creation as the difference between the actual produce and that which would have 

 existed if their superior faculties had not been exercised. In that sense (and what 

 other sense is there ?) the sm-plus of the higher grades is likely to be much less 

 than their own creation (especially in the case where the marginal employers are 

 relatively few). We seem to have proved too much. But may we not deduce the 

 qvA)(l est dem(mstrandum, that actual profits are deserved, from the larger proposition 

 that the entrepreneurs' ' own creation' is by a certain amount greater than their profits ? 

 No ; for that larger proposition is blocked by the antinomy that the workmen (or the 



