Reviews Benjamin M. Friedman (Ed.), N e w challenges to the role o f profit: The third series o f the John DieboM lectures at Harvard University. Lexington, Mass./Toronto: Lexington Books, 1978. vii + 126 pages.

This book consists of principal papers by Paul Samuelson, Kenneth J. Arrow, and Eric Lundberg, together with briefer discussions by thirteen leaders in academia, business, and other fields. (While all the participants are distinguished men in their various fields, it is not clear why the jacket copy describes them all as 'distinguished economists'.) The volume is introduced by a substantial paper by the editor. One ought, perhaps, to resist one's inclination to describe this volume as disappointing. Upon reflection, one recognizes that a symposium set up around so broad a theme as that presented in the title to this volume, and designed for a general audience, is almost bound to produce a series of papers and discussions lacking either unity of focus or excitement. One should not be disappointed, therefore, to discover in this volume discussions referring to almost every conceivable aspect of contemporary capitalism efficiency, economic justice, economic growth, the role of the state, the role of the free market, wages, interest, capital, business accounting practices, and a host of other issues that make up chapters in textbooks on economic principles. The principal paper by Samuelson is devoted, in large part, to a review of the various theories of profit. For this Samuelson draws, openly and quite properly, on the chapter on profit in his elementary textbook. No doubt Samuelson adequately presents the material that must be covered in a review of profit theory - but it still does read like elementary text material, judicious, comprehensive, but cut-and-dried and peculiarly uninspiring. Arrow's paper surveys the various criticisms that have been, or that might be levelled against profits. Inevitably, perhaps, his paper turns out to be a broad discussion reflecting - in wise and scholarly fashion on the pros and cons of capitalism in general. Arrow is scrupulously exhaustive, perceptive, and fully sensitive to the subtleties of the issues canvassed. Lundberg's paper apparently f'mds little in capitalism worthy of defense. His paper recounts the path currently taken in Sweden towards socialization - a course which Lundberg appears to take for granted as being both inevitable and obviously desirable. The briefer discussion papers provide a variety of perspectives on various matters raised in the major papers. The business leaders contributed several spirited defenses of the profit system - unfortunately marred on occasion by an undue readiness to accept government 'help'. Abram Bergson contributed an interesting discussion of the role of 'profit' under Soviet socialism. Particularly worthy of mention perhaps, are the remarks of Henry Wallich, C. Lowell Harriss, Russel Palmer and Gabriel Hague. Public Choice 35. 633-635 (1980) 0048-5829/80/0355-0633 $00.45. © 1980 Martinus NifhoffPublishers by, The Hague. Printed in the Netherlands.

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In the span of this not-very-long book, virtually everything that might be said about profit is at least mentioned somewhere. The range of opinions expressed concerning the profit system, - while perhaps not quite wide enough to include powerfully expressed, unambiguous and clearcut positions (either pro or con) - was nonetheless broad enough to ensure that hardly any important idea ever advanced about capitalism escapes some reference in this book; in fact the unexciting quality of the book has much to do with precisely this otherwise laudable circumstance. Genuinely new challenges to the profit role are no doubt not easy to come by. (Nor, of course, are new responses to the old challenges any easier to f'md.) Under these circumstance a reviewer's criticisms are likely to be levelled at matters of emphasis. And indeed what this reviewer found wanting in this volume was an adequate emphasis on and appreciation of the incentive role of pure entrepreneurial profit in a world in which the future is, at best only imprecisely knowable. One should perhaps not carp: Schumpeter is mentioned; Knight is mentioned; the idea that profits are needed to provide incentive is addressed dozens of times throughout the book. But very little of this, it must be pointed out, appears to recognize the essential feature of the entrepreneurial role. Profit incentives, it is argued, are needed to spur investment, to attract managerial talent. In much of the discussion the term 'profit' is used in its everyday business and accounting sense, with little attempt to direct attention to the purely entrepreneurial component within this portmanteau term (of which the major component is, of course, implicit interest). Yet if discussion of profit is permitted to address such broader questions as capitalism in general, it is hard to see how this entrepreneurial element of the market place can be left unemphasized. Surely it is this aspect of the market which is its most characteristic feature. In no other system is entrepreneurial entry unrestricted; in no other system therefore (contrary to some views expressed in this book), can the word 'profit' mean what it does in the market system. No matter how theoretically imprecise the use made by businessmen or accountants of the term 'profit', it almost always refers to something captured in the teeth of market competition - even where it has been gained by virtue of some uniquely superior position itself captured in the teeth of market competition. More specifically, in a world of free market entr.¢, profit opportunities arise from and express the existence of, incomplete entrepreneurial coordination of the desires of owners of resources and of potential consumers of producible goods and services. Such opportunities, however, because they offer pure gain, tend to alert market participants to their presence. It is here that the incentive aspect of pure profit enters; it is at the very nerve center of the process of market coordination and adjustment. Hayek's celebrated insight concerning knowledge and the economic problem is wellknown; pure entrepreneurial profit provides the key to this process of discovery of which the market process consists. This view of the role of pure

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profit has profound implications for normative appraisals of markets. One whishes that these insights - into the positive role of pure profit and into the normative implications of this role - had been more adequately represented in this volume. That such adequate representation could fail to occur in a volume of this kind reflects, in a way, a challenge (but hardly a new one) to the role of profit, fully as serious as any of those discussed more fully in the book. Israel M. Kirzner New York University

Paul C. Baker, Elinor Ostrom and Robert Goehlert, Metropolitan reform: An annotated bibliography. Workshop in Political Theory and Policy Analysis. Bloomington: Indiana University. 1979. xvii + 346 pages. The title of this book is a little misleading. It can more accurately be described as a digest of material on metropolitan reform. Practically every article in the field in recent years is not only listed both under title and under author, but also in a fairly complicated subject matter index so that articles on a given subject can be readily put together. There is a brief summary of the contents of each article. It would be an invaluable research tool for anyone turning to any aspect of metropolitan government today. The authors ought to be congratulated for producing it and to be thanked for having put in what must have been a very large amount of work. Gordon Tullock Virginia Polytechnic Institute and State University Center for Study of Public Choice