tions have been organized, representing millions of capital, for the sole purpose of arousing, cultivating and finally institutionalizing habits and appetites that menace the very existence of civilization itself.

The authorities of New York, when investigating the vice conditions in that city, were amazed to find a deep and fundamental similarity between commercialized vice and legitimate business. They discovered that "these associations and clubs are analogous to commercial bodies in other fields." The sole bond that lent unity and effectiveness to this mass of hideous moral corruption was the desire for gain. Profitism welded together into one nefarious group "those who profit off the place the land-lord, janitor, agent, amusement-dealer, brewer, and furniture-dealer; those who profit off the act—the keeper, procurer, druggist, physician, midwife, police officer, and politician; those who profit off the children-employers, procurers, and public service corporations; those who deal in the futures of vice-publishers, manufacturers, and venders of vicious pictures and articles; those who exploit the unemployed-the employment agent and employers; a group of no less than nineteen middlemen who are profit-sharers in vice ".1

The story of commercialized vice is particularly illuminating since it exhibits the utter indifference of the profiteer to those higher moral and spiritual values which after all make life tolerable. There is a sort of grim and ghastly humor in the calculation of the Chicago vice commission of the relative earning capacity of the chaste girl and the prostitute. The pure and honest girl, working in a Chicago department store for the meager sum of six dollars per week, represented a return of five percent on an investment of six thousand dollars, while the girl of the street represented from the standpoint of profitism a return of five percent on $26,000. "In other words a girl represents a capitalized value of $26,000 as a professional prostitute where brains, virtue and other good things are nil, or more than four times as much as she is worth as a factor in the industrial and social economy, 1 The Social Evil in Chicago, p. 231.

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where brains, intelligence, virtue, and womanly charm should be a premium". Can we say that the profiteer ever rises above the ideal expressed in Mandeville's cynical lines?

§ 5. THE MORALITY OF PROFITS

To demand a sanction for profits is to raise the most fundamental ethical issue of business enterprise. It places the entire business world on the defensive since that world is based avowedly upon the principle of profitism. We can distinguish two phases of the problem. The first deals with the general question as to the moral justification for profits in the abstract. Granting the morality of profitism as a business principle, we are faced with the questions arising in connection with the control and distribution of profits in the interest of human welfare.

We have seen that business grows through enterprise. Where business ventures are inaugurated they require, of course, capital. It is an inevitable accompaniment of the capital so used that the risk of its loss is greater than the average investor likes to assume. Society, however, needs the advantages that come through business expansion. It is most important, therefore, that some one should be willing to relieve society as a whole of the risk while undertaking to meet the need for business development. The entrepreneur is the risk-taker of the business world. The risktakers of course vary indefinitely, a fact that affects the amount of the profits that are the reward for this risk. A

1 Bernard de Mandeville, The Fable of the Bees, p. 11, edition of 1795.

fire insurance company, for example, assumes a risk for an individual or a firm. Its profits derived from shouldering that risk are fairly definite and calculable since the risk assumed covers only the money value of the buildings and is based upon statistical averages. On the other hand, the risk taken by the promoter of a gold mine or of an oil field must necessarily be much greater, and from the point of view of the risk theory of profits he is entitled to a much greater reward. It is argued, furthermore, that the experienced and skilful enterpriser is able to avoid losses which the tyro would incur. Society, therefore, becomes the greater gainer by encouraging and rewarding his greater experience and skill. In other words, "Risk-taking is to be ranked along with land, labor, and capital, as one of the four fundamental divisions of the productive forces, and profit, its reward, is to be classed with rent, wages, and interest as one of the four radically distinct forms of income " Such in brief is the commonly accepted risk-theory of profits.

Our reaction to this or to any other theory seeking justification for profits will depend in the last analysis upon the way in which we view the structure of society as a whole. Underlying the orthodox risk-theory of profits is the assumption of a dynamic society in which the creative human wills and the contingencies due to unforeseen changes must be reckoned with. In a social order which sanctions private property and recognizes risk as a permanent element, profitism in some form or other would seem to be inevitable. On the other hand, if we accept a more static conception of society in which private property is eliminated, the notion of profits is apt to be absorbed by that of wages. Profits will be viewed as a form of reward due to the imperfections of the arts and man's lack of control of economic forces. After science has given us complete command of the forces of nature, after competition has done its perfect work in directing social evolution, after prices are brought into close and rational connection

1 Hawley, "The Risk Theory of Profit," Quarterly Journal of Economics, Vol. VII, 1892-93, p. 479.

with the expense of production, it will then be possible to have a highly institutionalized and centralized society in which the risk-taking entrepreneur will be superfluous. His place will be filled by the salaried manager. It must be confessed that a society assuring room for individual initiative, spontaneity, and adventure together with profitism with all its limitations is infinitely preferable to the society of the Socialist, freed from profitism to be sure, but sacrificing individuality on a Procrustes' couch of arbitrarily determined function and status.

The most damaging argument against profitism is the moral one, namely, that it fails to appeal to the highest and the best in man. There is no more striking evidence of this fact than the growing distrust of profitism that can be detected in many directions. Men distrusted profitism before the war; when the supreme values of our civilization were jeopardized by that memorable struggle men suddenly awoke to the fact that the selfish motive of profits was a public peril. Distrust of profitism is evinced in the constant efforts that are being made to take from the sphere of profits one vital activity after another. Education, public health, public utilities, scientific research, the press, art, and even politics have at one time or another provided a setting for the eternal struggle of a free people to keep the well-springs of its national life free from the clutches of the profiteer. This has even suggested to some that the drift of the times points to a stage when profitism like everything that is outworn, mean and futile will be discarded entirely. "What is the meaning of these protean efforts to supersede the profiteer if not that his motive produces results hostile to use, and that he is a usurper where the craftsman, the inventor and the industrial statesman should govern?" 1

Economists themselves frankly admit the lower level from which business seeks its incentive and often express the desire that the great commercial fabric might be animated by those nobler ideals that appeal so powerfully to the hearts of men 1 Lippmann, Drift and Mastery, p. 30.

in religion, science, and education. At the same time they insist that throughout history the more powerful and coarser motives have ever been those that have prevailed with the masses of men. The economist even asserts that without this broad and powerful appeal of business to the lower impulses of men the great economic advancement, especially of the last two centuries, would not have been possible. "It is probable" writes Taussig, "that motives of the same sort will long continue to operate, and will long continue to be indispensable for sustained material progress. The business man, as we know him, with his virtues and his faults, his good effects on society and his evil, will long be with us. Business profits will long be a factor of the first importance in the distribution of current earnings and in the shaping of social stratification "."

§ 6. THE DISTRIBUTION OF PROFITS

Assuming, as apparently we must, that profits will long continue to provide a powerful incentive in business enterprise, the more immediate and practical question arises as to the ethical canons by which profits should be distributed. The problem of the distribution of profits may be considered from the point of view of the economist or the moralist. They seldom agree in the solutions they propose for the simple reason that they approach the problem from different angles. For the economist the physical energies concerned in production and the so-called law of supply and demand are apt to be the determining factors. The moralist, having in mind chiefly the matter of personal worth, is apt to stress the more abstract matters of equality, sacrifice, needs, and welfare. For the moralist the problem is primarily one of human welfare; for the economist it is frequently a matter of the operation of laws that lie without the scope of the moral. We shall find that the economic and ethical phases cannot be divorced.

That supply and demand play a part in the distribution of pecuniary rewards can not be denied. We are made pain1 Principles of Economics, Vol. II. p. 169.