Prof. Walker offers this theory. He says that profit is determined just like the rent of land. He says that as superior grade of land earned more rent then the inferior grade of land, similarly superior entrepreneur earns more than the inferior. Just as the rent is measured from the no rent land in the same way profits of the superior businessman are calculated from the marginal entrepreneur. Profit is not included in the cost of production; it is something extra just like the theory of Ricardo. Marshall says that there is much different between the rent of land and entrepreneur's profit.
Profits cannot arise only due to the superior ability but there are so many other factors, which are responsible for profit. This theory does not throw light on the nature of profit, which is more important. It is also stated that profit is not included in cost, it is not correct. In case of land, there is no chance of loss but incase of entrepreneur loss can also be suffered. PROF. KNIGHT criticizes that all profits are not due to the dynamic changes. This theory also fails to explain that how profit is determined in the market.
Profits cannot arise only due to the superior ability but there are so many other factors, which are responsible for profit. This theory does not throw light on the nature of profit, which is more important. It is also stated that profit is not included in cost, it is not correct. In case of land, there is no chance of loss but incase of entrepreneur loss can also be suffered. PROF. KNIGHT criticizes that all profits are not due to the dynamic changes. This theory also fails to explain that how profit is determined in the market.
