Introduction

Frank Knight described the German socialist approach to profit – including Rodbertus and Lassalle as well as Marx and Engels – as entailing “a simple classification of income in which all that is not wages is a profit which represents exploitation of the working classes. Capital is equivalent to property…. It is analogous to a robber baron's crag, a toll-gate on a natural highway, or a political franchise to exploit” (Knight 1964 [1921]: 27–8; also Sowell 1967: 71, Baumol 1975: 64). There is no place here for “profit” as a return to one or more productive activities, and certainly none for Knightian “uncertainty”-bearing – uncertainty not susceptible to actuarial measurement – the presence of which “by preventing the theoretically perfect outworking of the tendencies of competition gives the characteristic form of ‘enterprise’ to economic organization as a whole and accounts for the peculiar income of the entrepreneur” (Knight: 232).

J. A. Schumpeter in his The Theory of Economic Development expounds his famous notion of development as “the carrying out of new combinations [of productive means]” viewed as “a special process and the object of a special kind of ‘function’,” one undertaken by the entrepreneur (Schumpeter 1959 [1926]: 66, 79).