_When Interest as Directly Determined equals Interest as Residually Measured._--The area _BCD_ of the first figure measures what the _entrepreneur_ has left after paying wages. This amount and no more he can pay as interest, and he will pay it if he has to. The area _A'B'D'E'_ of the second figure represents what he must pay as interest; and we can now see that, if competition is perfectly free, this amount equals the amount _BCD_ of the first figure. If, after paying wages, there is any more left in the _entrepreneur's_ hands than competition compels him to pay out as interest, he is realizing a net profit; he is selling his goods for more than they cost him, and this, as we saw at the outset, is a condition that under perfect competition cannot continue. The natural price of goods is the cost price. If the market price of anything is in excess of cost, _entrepreneurs_ receive a profit, and in order to do more business and make a larger aggregate of such profit they bring new labor and capital into their industry. The increased output lowers prices, and the excess of gain is thus taken from the _entrepreneur_. If _BCD_ is smaller than _A'B'D'E'_, the _entrepreneur_ incurs a loss and will curtail his business and let some labor and capital go where they can produce more. Taking this remainder of income from the _entrepreneur_ by means of an addition to the output of goods and a reduction of the price of them does not annihilate the income, but bestows it on other recipients; for the reduction in price which destroys an employer's profit can come only in a way that benefits consumers. It means that enlarged production of which we have just spoken, which scatters more goods throughout the community and insures an addition to the real incomes of both laborers and permanent investors. _Effect of Perfect Mobility of Labor and Capital._--Perfect mobility of labor and capital insures that the residuum in the _entrepreneur's_ hands after wages are paid shall all be made over to the capitalist. We encounter here again the static law that, with competition working without let or hindrance, the _entrepreneur_ as such can keep nothing for himself; though if he is also a worker he will get wages, and if he is also a capitalist he will get interest. His business will pay wages on all kinds of labor, including that of management, and interest on all capital, including his own. A net gain above all this it will not afford, and whatever the _entrepreneur_ has left after paying wages he will have to use in paying interest, and _vice versa_. Laborers and owners of capital have, as it were, to take each others' leavings. Such is the situation in an ideally static condition, though we shall see how it is changed in actual and progressive society.