on all the working energy employed in producing them. Included in this total interest will be the rent of any land that may be in use in these industries, and included in wages will be the rewards of manager's time and effort. Above all these claims, the selling price of the goods may afford a residuum of pure profit. A discovery that should make the production of aluminium cheap would afford a profit on the making of it until this industry should become so much enlarged as to put upon the market as much of this metal as, under the new conditions, would be normal. After the discovery the competition of different producers would enlarge the production of this metal till the point would be reached at which it would not be profitable to move labor and capital from other working groups to this one. At this point the return of the industry would be theoretically absorbed in wages and interest. In a balance condition of industries superior managers will earn more than others, and superior workers of every kind will do the same; but that gain which results from the distinctively dynamic cause, the discovery or change which throws production temporarily out of balance, ceases to exist. Such a condition of universal equilibrium is never practically reached, and at many points in the industrial system—not for any length of time the same points-pure profit is always to be found. This changeful element of gain is the one part of the actual social income not governed by the law of rent."

We have here a recognition not only of the differential gain or surplus, but also a recognition of the "group,"

marginal" or "price-determining surplus;" the surplus due to an unbalanced condition of industries or to scarcity value; "the one part of the actual social income not governed by the law of rent." Professor Clark, indeed, carries this recognition of these two forms of surplus so far as to call one "rent" and the other "pure profit;" yet elsewhere in this same article, he is betrayed into including both forms of surplus under the common term "rent;" this resulting in

such verbal contradictions as cannot fail to confuse the general reader.

On page 304 he writes: "The differential gain of labor alone applied to fertile land is the more useful type of true rent." While on page 307 he writes: "The earnings of land are a sort of mock rent. They are equal to a differential product, but are not the genuine thing." To say of one and the same thing that it is the more useful type of true rent, and again, that it is a sort of mock rent, would certainly seem to involve a contradiction.

In seeking for the cause of this at least seeming contradiction, it should be noted, that while Professor Clark refers more than once to the Ricardian law of rent, he nowhere gives statement to the essential condition that it is a "pricedetermined surplus." Throughout the entire discussion, he seems to regard the differential aspect of this surplus as its essential condition. To his mind, if it is a differential gain it is a rent; if a true differential gain it is a true rent.

Now this may be true, but we take it that not a little confusion would have been avoided if he had thrown the accent not upon the differential, but upon the "price-determined'' aspect of this gain. It would then have appeared, that what he is pleased to call the rent of land, really includes both the "price-determined" and "price-determining surplus."' This, despite the fact that he had agreed to call the former "rent" and the latter "pure profit," and had said of this latter, "it is the one part of the actual social income not governed by the law of rent." That Professor Clark does include both forms of surplus under his "rent of land," we will now endeavor to show. On page 308 he says: 'In any limited section of the general field of labor, wages must conform to a standard that is set in and for that field.. What determines that level? What fixes general wages? The law in the case is that he gets what he is worth to society. If natural tendencies could have their way, the final man would get as a wage what he actually produces.

It is the productivity of labor that fixes its pay. Such a condition of universal equilibrium is never reached." In other words, the productivity of labor in some parts of the general field is greater than in other parts. The rate of wages, however, is set by the efficiency of labor in the least productive part of the general field. Hence in any part, as in agriculture, in which the productivity of labor is greater, there will accrue to the employer of labor, and later to the owner of land, a surplus equal to the difference between the productivity of labor in this special branch of industry, and its productivity in that branch in which it is least productive, since the rate of wages is set by the latter.

This surplus, however, is manifestly due to an unbalanced condition of industries; to a condition in which labor and capital will tend to move from other industries into agriculture; and so, according to Professor Clark, "is the one part of the actual social income not governed by the law of rent." Again, it is received by all owners of land, and is thus a "group," "marginal" or "price-determining surplus," which all receive in addition to any "price-determined surplus" that may accrue to some individuals within the group.

"It is now clear," says Professor Clark (page 310), "that in the strict sense of terms the rent of land is not a differential product. The surplus product of the earlier increments of labor applied to agricultural land are amounts remaining in the farmer's hands after wages are paid. The pay of the farmer's men conforms directly to the rate that prevails in the general labor market, and the data for calculating the landlord's claim are therefore the product of the farm and the general rate of wages. If, however, land were the only instrument in use, the case would be different. There would be no industry outside of the agricultural limit, and the product of the last increment of work applied to the soil would constitute the standard of wages. The land in this case would yield a true differential product,

since the rent of it would consist of the sum of the difference between the product of the earlier increments of labor and the product of the last one."

When Professor Clark declares that "the differential gain of labor alone applied to fertile land is the more useful type of true rent," he has in mind the "price-determined surplus," the old Ricardian rent. When, however, he says that "the earnings of land are a sort of mock rent," he is thinking of a total which includes both the "price-determined" and "price-determining" forms of surplus, and thus concludes, that "in the strict sense of terms the rent of land is not a true differential gain." It may fittingly be asked, why should the rent of land be made to include both forms of surplus; Professor Clark having declared that the latter form is "the one part of the actual social income not governed by the law of rent."

Professor Clark, as we have seen, not only recognizes the difference between these two forms of surplus, but seeks to fix this in our literature, by giving them separate names, calling one "rent," and the other "pure profit," declaring of this last that "it is the one part of the actual social income not governed by the law of rent." And yet, despite all this, he is betrayed into including both forms of surplus under rent of land. To us there seems to be but one explanation of this confusion, in the work of one whose name has become synonymous with our concept of a most clear and able thinker, and that is, that in his thinking on this question, he has thrown the accent upon the differential, rather than upon the "price-determined" aspect of rent.

While it is undoubtedly true that both forms of surplus may and do arise, yet by what compulsion must both of them be called "rent?" This term has already been appropriated and clearly defined as a surplus which is determined by price. Why then should we surrender this use of it; that it may be re-appropriated and re-defined as any surplus above

cost? We have, in simple, a new concept, a "price-determining surplus," a concept which is diametrically opposed to the Ricardian concept of "rent.” The two concepts have nothing in common, but the fact that they are both surpluses above cost. What then have we to gain by including both under the common term "rent?" The application of this term to the " price-determined surplus" has been fixed by usage, through several generations of economic writers. It would therefore seem wiser to confine the term "rent" to this concept, and seek for some other term for the newer concept of a "price-determining surplus."

This would mean, of course, that wherever we found a "price-determined surplus," whether from land or from the ability of the entrepreneur, we should call it a "rent" of that factor. In other words, if, as President Walker has shown, "the entrepreneur secures a surplus which follows the law of rent," we should call it the "rent" of the entrepreneur. Here we meet with the difficulty, that President Walker, while showing that the entrepreneur receives a surplus which follows the law of "rent," yet calls this the "profit" of the entrepreneur. This is open to the serious objection, that, no matter how confused economists may have been in the use of the word "profit," they seldom failed to hold that it enters into the determination of price, and thus is in direct antithesis to that which is determined by price.

Ricardo, in a foot-note, page 39, of his "Political Economy," writes: "Mr. Malthus appears to think that it is a part of my doctrine that the cost and value of a thing should be the same; it is, if he means by cost 'cost of production,' including profits." Again, on page 45, he writes: "The laws which regulate the progress of rent are widely different from those which regulate the progress of profits, and seldom operate in the same direction. While Mill writes: "Profits therefore as well as wages enter into the cost of production which determines the value of the produce." Again, President Walker, in his criticism of J. A. Hobson in a later