ENTERPRISE 1 1. Factors of production must be combined. § 2. Non-contractual and contractual incomes. § 3. From small shop to large factory. 14. The residual share. f 5. The typical owner-manager. § 8. Empirical methods of estimating and apportioning the residual share. § 7. Utmost possible degree of separation of investment and management. § 8. Cor porations and their control. I 9. Single investment function of minor ity stockholders.
§ 1. Factors of production must be combined. Every separate filing that enters into the making of goods is called an econrmic agent; as in agriculture, the seeds, plows, fields, fences, barns, cattle, and labor; in manufacture, the buildings, machines, material, labor, etc. Bul, these numerous agents fall into two great groups called factors of production, vari ously named as man and nature, labor and material agents, or humanity and wealth. We have studied separately the processes by which value is attributed to these agents, yet we have borne in mind always that tikey are complementary agents and complementary factors. (See Chapter 18, section 10, and Chapter 19, section 14.) Labor in a void and wealth without labor would be equally useless. The process of valu ing uses of goods and services of labor goes on while all of these goods help make up the situation in which the desires exist.
The stock of economic goods of whatever sort is limited, while the upspringing desires are practically unlimited. To increase goods, labor is applied to material objects. Man's part in production is almost passive when goods come into existence without his effort. One can imagine the indolent savage of the tropics, lying under the banana-tree, letting the 317 fruit drop into his mouth. But at least he must be there ready for it to drop. One can conceive of a tribe living upon manna, where every day the people awoke to discover a certain amount of food provided to each person's hand. Tho no effort could increase that amount, still, if the food differed in flavor and the better qualities were rare, value would come into existence and exchange would arise. Now there is some
thing analogous to that in daily experience. There are some goods which effort can do little to increase. Usually, how ever, there is a possibility of change and adaptation to make them better suited to needs, and there is required the use of intelligence to choose among the goods and to employ them in the best way. Further, man can intervene and direct the course of industry ; he does not merely gather what is pro vided. It is this active intervention and effort that is here to be considered.
§ 2. Non-contractual and contractual incomes. It is from this process of combining the factors that the various yields and incomes emerge which have been heretofore treated. The variants laborers and kinds of wealth when brought to gether produce goods and the values attributable respectively to the various agents are their yields. The various persons to whom the yields accrue are said to secure incomes out of these yields. The incomes are of two kinds.
(1) A non-contractual (impersonal or "economic") in come is obtained ?rom the yield of the agents, not from an other person to whom the agent has been rented or loaned. The laborer gets an economic income from his labor when he gathers wood for his own fire, or builds a house for himself. Wealth yields an economic income to its owner, as the products of the field, the use of (or the objects made with) the tools of the craftsman. Etirect labor-incomes and the usances of wealth appear first as economic incomes. This is the only kind of income possible on Crusoe's Island and in any non-exchanging economy.
(2) A derivative kind of income appears as soon as men begii to hire labor and borrow the uses of wealth. A con tractual income is one received from a person for the right to receive an economic income. For example, the carpenter building a house for another man does not possess the eco nomic yield of his own labor as it is performed. That be longs to the owner of the materials from whom the carpenter gets a contractual income. Alt wages and rents (as we use the terms) are contractual into es.