The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Hawley, Frederick Barnard (1843–1929)

  • Mauro Boianovsky
Reference work entry


Frederick Barnard Hawley (1843–1929) advanced the ‘risk theory of profit’: profit is the reward entrepreneurs get to relieve the other productive factors from risk in competitive conditions. The normal rate of profit is determined by the expectation of profit that just covers the marginal entrepreneur’s subjective valuation of risk. The current rate of profit will converge to its normal value because of the operation of the ‘readjustment period’, when income contraction brings about a fall in aggregate supply larger than the reduction in aggregate demand. This is explained by Hawley’s concept of the consumption function.


Consumers’ expenditure Entrepreneurship Hawley, F. Keynes, J.M. Knight, F. Paradox of thrift Patinkin, D. Readjustment period Risk aversion Risk theory of profit Uncertainty Underemployment equilibria 

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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Mauro Boianovsky
    • 1
  1. 1.