Are Ownership Rent and Pure Profit Separate Returns to the Entrepreneur?

Abstract

Murray Rothbard developed the concept of decision-making rent as a return to a kind of unhirable labor performed by the entrepreneur in his role as owner and ultimate decision-maker of the firm. Rothbard conceived owner’s rent as separate from profit and loss and the decision-making function as concerned with productive organization and technique, which is distinct from the function of forecasting uncertain future market conditions. Vlad Topan (2012) disputes Rothbard’s position and contends that ownership rent does not exist because decision-making ability is meaningless in the absence of uncertainty. In this paper, I argue that Topan’s critique rests on fundamental misconceptions about the nature of entrepreneurship in Austrian economics.

Keywords: decision-making ability, decision-making rents, ownership function, entrepreneurship, firm

JEL Classification: D20, D21, L20, L21, L26