Suchaconceptbelongstotheregimeofhandicraftandpettytrade，anditisfrom，orthrough，theeraofhandicraftthatithascomedowntothepresent。6*Itfitsintotheschemeofhandicraft，anditislessfullyinconsonancewiththefactsoflifeinanyothersituationthanthatofhandicraft。Associatedwiththesystemofhandicraft，asitscorrelate，wasthesystemofpettytrade；andasthedifferentiationofoccupationswascarriedtoahighdegree，purchaseandsalecametoprevailverygenerally，andthecommunityacquiredacommercialcomplexionandcommercialhabitsofthought。Underthesecircumstancesthenaturalrightofownershipcametocompriseanextremefreedomandfacilityinthedisposalofproperty。Thewholesequenceofgrowthofthisnaturalrightis，ofcourse，tobetakeninconnectionwiththegeneralgrowthofindividualrightsthatculminatedintheeighteenth-centurysystemofNaturalLiberty。
HowfartheEnglisheconomicdevelopmentistobeaccountedthechieforfundamentalfactorinthegeneralgrowthofnaturalrightsisaquestionthatcannotbetakenuphere。Theoutcome，sofarasitimmediatelytouchesthepresenttopic，wasthatbythetimeoftheindustrialrevolutionafairlyconsistentstandardizationofeconomiclifehadbeenreachedintermsofworkmanshipandprice。ThewritingsofAdamSmithandhiscontemporariesbearwitnesstothis。Andthiseighteenth-centurystandardizationstandsoverasthedominanteconomicinstitutionoflatertimes。7*Such，inoutline，seemtobethehistoricalantecedentsandthespiritualbasisofthemoderninstitutionofproperty，andthereforeofbusinessenterpriseasitprevailsinthepresent。8*
Thissketchofthegenesisofthemoderninstitutionofpropertyandofmodernbusinessprinciplesmayseemdubioustothosewhoareinclinedtogiveitamoresubstantialcharacterthanthatofahabitofthought，-thatistosay，thosewhostilladheretothedoctrineofnaturalrightswithsomethingoftheeighteenth-centurynaivete。ButwhatevermaybeacceptedastheulteriorgroundsofthatculturalmovementwhichculminatedinthesystemofNaturalLiberty，itisplainthattheindustrialandcommercialexperienceofwesternEurope，andprimarilyofEngland，fromthefifteenthtotheeighteenthcentury，hadmuchtodowiththeoutcomeofthemovementinsofarasnaturallibertytoucheseconomicmatters。Itisasanoutcomeofthisrecentlypastphaseofeconomicdevelopmentthatwehaveincorporatedinthelaw，equity，andcommonsenseofto-day，thesepeculiarlyfreeandfinalpropertyrightsandobligations，thatistosay，thosepeculiarprinciplesthatcontrolcurrentbusinessandindustry。WeowetotheeighteenthcenturyaveryfulldiscretIonandfreeswinginallpecunIarymatters。Ithasgivenfreedomofcontract，togetherwithsecurityandeaseofcreditengagements，wherebythecompetitiveorderofbusinesshasbeendefinitivelyinstalled。9*
Thesubject-matteraboutwhichthismodernpecuniarydiscretionturns，withallitsfreedomandinviolabilityofcontract，ismoneyvalues。Accordinglythereunderliesallpecuniarycontracts。anassumptionthattheunItofmoneyvaluedoesnotvary。Inviolabilityofcontractsinvolvesthisassumption。Itisacceptedunquestioninglyasapointofdepartureinallbusinesstransactions。Inthemakingandenforcementofcontractsitisafundamentalpointoflawandusagethatmoneydoesnotvary。10*Capitalizationaswellascontractsaremadeinitsterms，andtheplansofthebusinessmenwhocontrolindustrylooktothemoneyunitasthestablegroundofalltheirtransactions。Notoriously，businessmenarejealousofanyattempttochangethevalueorlessenthestabilityofthemoneyunit，whichgoestoshowhowessentialaprincipleinbusinesstrafficistheputativeinvariabilityofthemoneyunit。11*
Usagefortifiedbylawdecidesthatwhenpricesvarythevariationisheldtooccurinthevalueofthevendiblecommodities，notinthevalueofthemoneyunit，sincemoneyisthestandardofvalue。Thereis，ofcourse，nointentionheretoquestiontheposition，familiartoalleconomists，thatfluctuationsinthecourseofpricesmayaswellbeduetovariationonthepartofthemoneymetalsastoavariationonthepartofthearticleswhosepricesfluctuate。Insofarasthedistinctionsomadebetweenvariationsintheoneortheothermemberofavalueratiohasameaning-whichitisnotalwaysclearthatithas-itdoesnottouchtheargument。Itisamatterofcommonnotoriety，whichhasalsohadthebenefitofreiteratedstatisticalproof，that，asmeasured，forinstance，intermsoflivelihoodoroflabor，thevalueofmoneyhasvariedincontinentlythroughoutthecourseofhistory。
Butintheroutineofbusinessthroughoutthenineteenthcenturytheassumedstabilityofthemoneyunithasservedasanaxiomaticprinciple，inspiteoffactswhichhavefromtimetotimeshownthefalsityofthatassumption。12*
Theall-dominatingissueinbusinessisthequestionofgainandloss。Gainandlossisaquestionofaccounting，andtheaccountsarekeptintermsofthemoneyunit，notintermsoflivelihood，norintermsoftheserviceabilityofthegoods，norintermsofthemechanicalefficiencyoftheindustrialorcommercialplant。Forbusinesspurposes，andsofarasthebusinessmanhabituallylooksintothematter，thelasttermofalltransactionsistheiroutcomeinmoneyvalues。Thebaselineofeveryenterpriseisalineofcapitalizationinmoneyvalues。
Incurrentbusinesspractice，variationsfromthisbaselinearenecessarilyratedasvariationsonthepartoftheotherfactorsinthecase，notasvariationsofthebaseline。Thebusinessmanjudgesofeventsfromthestandpointofownership，andownershiprunsintermsofmoney。13*
Investmentsaremadeforprofit，andindustrialplantsandprocessesarecapitalizedonthebasisoftheirprofit-yieldingcapacity。Intheacceptedschemeofthingsamongbusinessmen，profitsareincludedasintrinsictotheconductofbusiness。Sothat，inplaceofthepresumptioninfavorofasimplepecuniarystabilityofwealth，suchasprevailsintheratingofpossessionsoutsideofbusinesstraffic，thereprevailswithintherangeofbusinesstrafficthepresumptionthattheremustinthenaturalcourseofthingsbeastableandorderlyincreaseofthepropertyinvested。Undernoeconomicsystemearlierthantheadventofthemachineindustrydoesprofitoninvestmentseemtohavebeenaccountedanormalorunquestionablylegitimatesourceofgain。Undertheagrarian-manorialregimeoftheMiddleAgesitwasnotfeltthatthewealthofthelargeownersmust，asamatterofcourse，increasebyvirtueofthecontinuedemploymentofwhattheyalreadyhadinhand-whatevermaybethehistoricalfactasregardstheincreaseofwealthintheirhands。
Particularly，itwasnotthesenseofthemenofthattimethatwealthsoemployedmustincreaseatanystated，“ordinary“ratepertimeunit。Similarlyasregardsothertrafficinthosedays，evenasregardsmercantileventures。Gainfrominvestmentwasfelttobeafortuitousmatter，notreducibletoastatedrate。
Thisisreflected，e。g。，inthetenaciousprotestsagainstthetakingorpayingofinterestandintheingenioussophistriesbywhichthepaymentofinterestwasdefendedorexplainedaway。
Onlyundermoresettledcommercialrelationsduringtheeraofhandicraftdidthepaymentofinterestgraduallycometobeacceptedintofulllegitimacy。Buteventhengainsfromotherbusinessemploymentsthanmercantiletrafficwereapparentlyviewedasanincreaseduetoproductivelaborratherthanasaprofitoninvestment。14*Inindustrialpursuits，asdistinctfrommercantiletrafficproper，profitsapparentlycometofigureasaregularandordinaryincidentonlywhentheindustriescometobecarriedononamercantilebasisbyrelativelylargeemployersworkingwithhiredlabor。
Thisorderlyincreaseis，ofcourse，takenaccountofintermsofthemoneyunit。The“ordinary“rateofprofitsinbusinessislookeduponasamatterofcoursebythebodyofbusinessmen。Itispartoftheircommon-senseviewofaffairs，andisthereforeanormalphenomenon。15*Gain，theyfeel，isnormal，beingthepurposeofalltheirendeavors；whereasalossorashrinkageinthevaluesinvestedisfelttobeanuntowardaccidentwhichdoesnotbelonginthenormalcourseofbusiness，andwhichrequiresparticularexplanation。Thenormality，ormatter-of-coursecharacter，ofprofitsinthemodernviewiswellshownbythepositionofthoseclassicaleconomistswhoareinclinedtoinclude“ordinaryprofits“inthecostofproductionofgoods。
Theprecisemeaningof“ordinaryprofits“neednotdetaintheargument。Itmaymeannetaverageprofits，oritmaymeansomethingelse。Thephraseissufficientlyintelligibletothebusinesscommunitytopermitthebusinessmentouseitwithoutdefinitionandtoresttheirreasoningaboutbusinessaffairsonitasasecureandstableconcept；anditisthiscommonplaceresorttothetermthatisthepointofinteresthere。
Atanygiventimeandplacethereisanacceptedordinaryrateofprofits，moreorlesscloselydefined，which，itisfelt，shouldaccruetoanylegitimateandordinarilyjudiciousbusinessventure。Howevershiftythedefinitionofthisrateofprofitsmaybe，inconcrete，objectiveterms，itisfeltbythemenofaffairstobeofsosubstantialandconsistentacharacterthattheyhabituallycapitalizethepropertyengagedinanygivenbusinessventureonthebasisofthisordinaryrateofprofits。
Dueregardbeinghadtoanyspecialadvantagesanddrawbacksoftheindividualcase，anygivenbusinessventureorplantiscapitalizedatsuchamultipleofitsearning-capacityasthecurrentordinaryrateofprofitswillwarrant。16*
Proceedingonthecommon-senseviewbuiltupoutofthisrangeofhabitsofthoughtwithrespecttonormalprofitsandpricephenomena，thebusinesscommunityholdsthattimesareordinaryornormalsolongastheacceptedorreasonablerateofprofitsaccruesontheaccustomedcapitalization；whereastimesaregoodorbriskiftherateofgainisaccelerated，andhardordullifprofitsdecline。Thisisthemeaningofthephrases，“brisktimes“and“dulltimes，“ascurrentlyusedinanybusinesscommunity。
Undertheexigenciesofthequestofprofits，asconditionedbythelargerindustryandthemoresweepingbusinessorganizationofthelastfewdecades，thequestionofcapitalinbusinesshasincreasinglybecomeaquestionofcapitalizationonthebasisofearning-capacity，ratherthanaquestionofthemagnitudeoftheindustrialplantorthecostofproductionoftheappliancesofindustry。Frombeingasporadictrait，ofdoubtfullegitimacy，intheolddaysofthe“natural“and“money“
economy，therateofprofitsorearningsoninvestmenthasinthenineteenthcenturycometotakethecentralanddominantplaceintheeconomicsystem。Capitalization，creditextensions，andeventheproductivenessandlegitimacyofanygivenemploymentoflabor，arereferredtotherateofearningsastheirfinaltestandsubstantialground。Atthesametimethe“ordinaryrateofprofits“hasbecomeamoreelusiveidea。Thephenomenonofauniformrateofprofitsdeterminedbycompetitionhasfallenintothebackgroundandlostsomethingofitsmatter-of-factcharactersincecompetitioninthelargeindustryhasbeguntoshiftfromthepositionofastableandcontinuousequilibrationtothatofanintermittent，convulsivestrainintheserviceofthelargerbusinessmen’sstrategy。Theinterestofthebusinesscommunitycentresuponprofitsandupontheshiftingfortunesoftheprofit-maker，ratherthanuponaccumulatedandcapitalizedgoods。
Thereforetheultimateconditioningforceintheconductandaimsofbusinessiscomingtobetheprospectiveprofit-yieldingcapacityofanygivenbusinessmove，ratherthantheaggregateholdingsortherecordedoutputofproduct。
Butthislatestdevelopmentinthefieldofindustrialbusinesshasnotyetcometocontrolthefield。Itisratheraninchoategrowthoftheimmediatepresentthananaccomplishedfactevenoftherecentpast，anditcanbeunderstoodonlybyreferencetothoseconditionsoftherecentpastoutofwhichitcomes。Thereforeitisnecessarytoturnbacktoafurtherconsiderationoftheold-fashionedbusinesstrafficasitusedtogoonbythecompetitivemethodbeforethecompetitiveorderbeganseriouslytobedislocatedandtakeonanintermittentcharacter，aswellastoaconsiderationofthatresorttocreditwhichhas，inlargepart，changedthecompetitivesystemofbusinessfromwhatitwasatthebeginningofthenineteenthcenturytowhatithasbecomeatitsclose。