Q.Write a note on Risk-bearing Theory of profit.

The dynamic profit theory was propounded by J. B. Clark — option (a).

Among the theories of profit studied in distribution analysis:

• Dynamic theory of profit — J. B. Clark: profit arises because the economy is dynamic and constantly changing (in population, capital, technology, wants and production techniques). In a hypothetical static economy profit would disappear; it is change that generates profit.
• Innovation theory — Schumpeter: profit is the reward for successful innovation (new products, methods, markets).
• Risk theory — F. B. Hawley: profit is the reward for bearing the risks of business. …

The risk-bearing theory of profit was propounded by F.B. Hawley (1907).

Among the theories of profit, the risk-bearing theory holds that profit is the reward earned by the entrepreneur for bearing the risks and uncertainties of running a business. Because production is undertaken in anticipation of future demand, the entrepreneur risks loss; profit compensates for shouldering this risk. This theory was advanced by the American economist F.B. Hawley in 1907.

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