Viktor Mataja: Review of Augusto Graziani’s Sulla teoria generale del profitto (1888)

Viktor Mataja’s review examines Graziani’s attempt to define entrepreneurial income as a unified category and formulate a general law of profit. Its movement is from appreciative exposition to conceptual and methodological criticism: Mataja praises the book’s learning and polemical skill, then argues that its definition of profit, representative enterprise, and appeal to Ricardo cannot sustain its conclusions.

The opening places Graziani within an Italian economic literature distinguished by international scholarship and the critical reconciliation of competing doctrines. Mataja treats this clarification of inherited ideas as essential scientific work. His subsequent objections therefore qualify a genuine appreciation of Graziani’s contribution.

In Mataja’s reconstruction, Graziani defines enterprise through the combination of productive means and the assumption of risk. Profit belongs specifically to modern production, in which entrepreneurs employ capital and wage labour and receive their income through sales. Because contractual wages and interest arise differently from entrepreneurial receipts, Graziani rejects the separation of entrepreneurial income into remuneration for labour, interest, and a residual profit. He then proposes an impresa media, an enterprise requiring ordinary managerial work and presenting no special danger, as the benchmark from which other profit rates can be determined. His purportedly Ricardian conclusion makes the profit rate depend on the production costs of the goods constituting real wages.

Mataja’s first objection concerns the purpose of distinguishing total entrepreneurial income from entrepreneurial profit. Such a distinction does not require contractual and noncontractual incomes to obey identical laws. It is an accounting comparison designed to identify what an entrepreneur receives specifically by virtue of the entrepreneurial position. Rejecting that comparison forces Graziani to seek an alternative common measure:

Die „mittlere Unternehmung“, die er sich zu diesem Zwecke construirt, scheint uns jedoch keine erlaubte Abstraction zu sein, sondern eine irreführende Fiction.

English translation: The "average enterprise" which he constructs for this purpose seems to us, however, to be no permissible abstraction, but a misleading fiction.

The distinction between legitimate abstraction and misleading fiction is central to the review. A midpoint can represent differences of degree, such as greater or lesser exertion, but cannot mediate categorically different arrangements of ownership and work. Enterprises financed with owned or borrowed capital, or operated with extensive or negligible labour from their owners, have no meaningful “middle” on those dimensions. Moreover, risk and managerial demands do not determine realized income: market conditions, capital ownership, and the entrepreneur’s own productive capacities also matter.

Es könnten also zwei Unternehmungen vollkommen gleich der aufgestellten Type entsprechen und gleichwohl den Unternehmern sehr verschiedene Einkommen abwerfen.

English translation: Two enterprises might thus correspond perfectly equally to the type set up and nevertheless yield their entrepreneurs very different incomes.

This objection exposes the benchmark’s failure on its own terms. Enterprises meeting the same specification may yield different incomes, while expanding the specification to encompass every determinant destroys the possibility of a coherent representative type.

Mataja next identifies a change in the meaning of profit. Graziani initially appears to mean the entrepreneur’s net income after payments to third parties. Yet, when deriving a general rate for the entrepreneurial class, he treats expenses as reducible to wages, apart from rent. Mataja insists that interest paid to lenders remains an expense even at this aggregate level:

Vernachlässige ich diese Zinsen, so habe ich eben nicht mehr das Einkommen des Unternehmerstandes vor mir, sondern Gewinn und Leihzins, beziehungsweise, wenn man die Arbeitsleistungen der Unternehmer vernachlässigt, den Gesamtanteil des Capitals am Nationaleinkommen.

English translation: If I neglect this interest, then I no longer have before me the income of the entrepreneurial class, but profit and loan interest, or rather, if one neglects the labour services of the entrepreneurs, the total share of capital in the national income.

The omitted interest changes the object of inquiry from entrepreneurial income to capital’s aggregate share. This is also the basis of Mataja’s correction of Graziani’s reading of Ricardo. Ricardo’s “profit of stock” concerns capital’s share relative to labour’s within a broad account of distribution. Graziani, by contrast, explicitly separates entrepreneurs from lenders and attributes different laws to their incomes. He therefore cannot borrow Ricardo’s wage–profit relation while ignoring how returns are divided between those groups.

The review’s larger significance lies in this demand for consistency between the income category defined, the level of aggregation chosen, and the explanatory law proposed. Questions abstracted from in a broad distributive theory must be addressed once entrepreneurial income becomes the explicit subject. Mataja concludes that Graziani’s law explains neither the entrepreneurial class as a whole nor individual enterprises, while affirming that the book’s capacity to provoke sustained disagreement testifies to its intellectual value.