Oskar Engländer, Unternehmergewinn (1928)

Oskar Engländer’s encyclopedia article explains entrepreneurial profit through five successive inquiries: its definition, the interest earned by productive capital, profit in a stationary economy, changes caused by saving and monetary expansion, and the exceptional profit generated by economic initiative. Its central distinction is between an income that persists under unchanged economic conditions and a temporary gain arising from innovation. Engländer begins by defining the former narrowly:

Wir verstehen im Folgenden unter Unternehmergewinn den Ueberschuß, den eine Wirtschaft bei Führung eines kapitalistischen Unternehmens unter Verwendung von Leihkapital über den von ihr zu zahlenden Leihzins hinaus erzielt.

English translation: In what follows, we understand entrepreneurial profit as the surplus that an economic unit conducting a capitalist enterprise with borrowed capital obtains over and above the loan interest it must pay.

This definition separates entrepreneurial profit from the return earned by an owner operating with personal capital, which Engländer calls productive-capital interest. The distinction is substantive: lending introduces an entrepreneur between capital owners and workers, making the determination of income a three-sided relationship.

The article’s longest preliminary argument constructs a closed, single-stage economy comprising capitalists and workers. Production uses labour without machinery or purchased materials; other productive resources are freely available. Capitalists divide their money between wage advances and consumption expenditure. Workers spend their wages on the resulting goods, while capitalists’ consumption expenditure returns to them as aggregate interest income. Engländer expresses stationary reproduction through monetary balances: with each monetary unit changing hands once per period, workers’ opening balances equal the wage capital, and total money equals twice that capital plus capitalists’ consumption funds. Different velocities require different balances.

These identities establish functional relationships, not sufficient causal explanations. Capital’s productive advantage—such as cooperation and division of labour—places an upper limit on interest because workers must receive at least what independent production would yield. Capitalists’ dispositions impose further limits. The Vorsorgezahl measures the years over which wealth would be consumed if it earned no income; its reciprocal supplies a lower interest boundary. The Opferzahl measures the prospective increase required to redirect intended consumption into investment and supplies another upper boundary. Within these limits, no accounting identity determines distribution: wage bargaining remains decisive.

Introducing productive lending extends this argument to entrepreneurial profit. Neither comparison with a manager’s salary nor the treatment of entrepreneurial activity as a separately priced productive input explains its formation. Engländer instead locates it in bargaining over the jointly obtainable proceeds:

Es bleibt also nur der Ausweg, daß sich der Unternehmergewinn im Preiskampf zwischen Unternehmer, Kapitalisten und Arbeiter bildet, wobei jeder dieser Mitwirkenden eine Stütze in einer bestimmten Untergrenze, eine Schranke aber in einer bestimmten Obergrenze findet.

English translation: The only remaining explanation, therefore, is that entrepreneurial profit is formed through price bargaining among entrepreneur, capitalists and worker, each participant finding support in a definite lower limit and a constraint in a definite upper limit.

In a fully stationary economy, entrepreneurial tasks become sufficiently routine for an abundant supply of capable people to undertake them. Comparable salaried employment, with an allowance for risk, then determines profit’s level without turning that income into wages. Entrepreneurs need not disappear: some owners can employ their capital only by lending it. Nor is profit generally a deduction from an independently established wage or interest income; all three emerge through the conditions governing their participants’ cooperation.

Engländer consequently rejects the decomposition of profit into entrepreneurial wages, a risk premium, and a residual “pure” profit. Alternative earnings and risk affect the minimum acceptable return, but they are not independently existing payments contained within it:

Es handelt sich bei diesen angeblichen Bestandteilen tatsächlich nicht um Teile, sondern nur um Grenzen des Unternehmergewinnes.

English translation: These supposed components are in fact not parts, but only limits of entrepreneurial profit.

The same reasoning governs the relation between enterprise size and profit. Greater borrowing may accompany greater earnings because greater entrepreneurial ability supports a larger operation; capital size is not thereby the ultimate explanation. Introducing borrowers also changes monetary circulation, since funds must pass through entrepreneurs before reaching workers and returning to lenders.

The fourth section tests this framework against changes in saving and money supply. Redirecting capitalists’ consumption funds into lending raises the wage fund and reduces interest. Yet adjustment can become disruptive when workers retain cash reserves proportional to their wages: part of their increased earnings is withheld from consumption, leaving entrepreneurs unable to recover their advances and meet fixed repayment obligations. Saving can thus produce insolvency rather than a smooth transition. Monetary expansion initially benefits particular recipients, but its lasting distributive effect depends on expenditure and bargaining; money growth alone generally does not permanently alter relative incomes. Engländer maintains that the basic account also applies to multistage production.

The final section distinguishes ordinary entrepreneurial profit from the exceptional return to opening a new economic path. Initiative means commercially introducing new goods or supplying existing goods more cheaply, not necessarily inventing them. The pioneer benefits while prices remain detached from new costs or reflect competitors’ older, higher costs.

Die Nachfolge der anderen Wirtschaften läßt diesen besonderen Unternehmergewinn sodann verschwinden, so daß er eben aus diesem Grunde in dem neuen beharrenden Zustande der Volkswirtschaft nicht mehr erscheint.

English translation: Imitation by the other economic units then causes this special entrepreneurial profit to disappear, so that precisely for this reason it no longer appears in the economy’s new stationary state.

The article’s distinctive contribution is to preserve both explanations without conflating them: entrepreneurial income can persist through routine intermediation and bargaining, while innovation generates a separate, temporary advantage extinguished by diffusion.