Distribution of Profits. 39 



questions I make the following five cases, each of which presents 

 a different phase of the question : 



CASE I. 



In this case, capitalist, business manager and laborer are com- 

 bined in one perron. Examples of this case are farmers who own 

 land and furnish their own labor; mechanics who own their own 

 shops and tools and do their own work ; and merchants who 

 own their own stores and stock in trade, and keep no clei ks. This 

 case is the simplest in p'-actice and the most difBcult in theory. 

 As one person combines the functions of capitalist, business man- 

 ager and laborer, there is no distribution of the proceeds. No one 

 pays interest or wages to himself. The question, who gets the 

 profits, is easily answered. But the question, what are the profits, 

 is much harder to answer, and indeed the producers who come 

 under this class rarely attempt to answer it. They confuse together 

 interest, wages and profits in one lump sum, and often fail to sep- 

 arate their personal or family expenses from the expenses of the 

 busine-s, or to account for the proceeds of the business which they 

 or their families consume. 



To find the true profits of such a business, not only should all 

 business expenses be deducted from the gross proceeds, but also 

 interest on the capital invested and wages for the labor done. 

 The farmer, mechanic or merchant, as the case may be, owes him- 

 self as a capitalist interest on the capital invested. He also owes 

 himself as business manager and laborer, wages for labor per- 

 formed. But all products of the business consumed in his family 

 should be added to the gross proceeds of the business, and charged 

 to family expense account. 



In this case a real business loss is frequently concealed under 

 the profits of capital and labor. The producer thinks he has 

 made so much out of his business, when in fact the business has 

 made nothing, and his receipts are really less than interest and 

 wages should be. So also a real business profit is frequently con- 

 cealed under extravagant personal or family expenses. 



But it does not always follow that a farmer is losing money 

 who does not clear the interest on his land and stock, and wages 



