the defaulting of payments for goods sold, the
chances of unwise or dishonest conduct on the part of clerks
or overseers, always impend over a business, but these
dangers are at a minimum when the man who is at the head of
the force of managers has capital of his own in the business.
Risks are at a static level only when they are thus reduced;
and for our present purpose it is best to consider that
competition has eliminated the establishments where any
recklessness has been shown in the management, and that the
unavoidable remainder of risk resolves itself, nearly enough
for practical purposes, into a _deduction from the product_
which the surviving establishments turn out in a long period
of time. A small percentage of their annual gains, set aside
for meeting unavoidable losses, will make good these losses
as they occur and leave the businesses in a condition in
which they can yield as a steady return to owners of stock,
to lenders of further capital, and to laborers all of their
real product.

_How the Entrepreneur contributes to Production under Dynamic
Conditions._--In a dynamic state the _entrepreneur_ emerges from this
passive position. He makes the supreme decisions which now and again
lead to changes in the business. "Shall we adopt this new machine?"
"Shall we make this new product?" "Shall we enter this new market?"
are questions which are referred to him, and on the decisions he
reaches depends the prospects of profit for the business. This
activity is not ordinary labor, but in a true sense it is a productive
activity, since it results in placing labor and capital where they can
produce more than they have done and more than they could do were it
not for the enabling act of the _entrepreneur_ which places them on a
vantage ground of superiority. This subject will be discussed in a
later chapter and in connection with other phases of economic
dynamics.

_Values at a Static Level only when Entrepreneurs' Gains are
Nil._--Any net profit on an _entrepreneur's_ part means that his
product is selling for more than the elements of it have cost him. But
this is a condition which, if labor and capital are as mobile as the
static hypothesis requires that they should be, will cause this
_entrepreneur_ and others to move labor and capital into his industry,
thus increasing its output and lowering the selling price of its
product. If there is no su