ELASTICITY OF SUPPLY AS A DETERMINANT OF 
DISTRIBUTION * 
Paul H. Douglas 
p=» 
ae 
The Positwe Contributions of the Marginal Theory of 
Distribution 
THE marginal theory of distribution as developed by Professor 
Clark has made a great contribution to economic theory by 
extending to labor and capital the classical doctrine of diminish- 
ing returns on land. As applied by Ricardo and James Mill,* 
a combined “dose” of fixed proportions of labor and capital was 
applied to land with the result that while the total output 
increased, it did not increase in proportion with the rate of 
increase of “doses.” The return specifically attributable to 
the combined dose was in consequence less than before and the 
difference between (1) the yield of the combined dose multiplied 
by the number of doses, and (2) the total product, became rent. 
But the quantity of capital was not varied independenfly in 
relation to either land or labor, nor was the quantity of labor. 
The relationship between capital and labor was one of fixed 
technical coefficients and the only variation consisted of the 
quantity of labor and capital on one side and the quantity of 
land on the other. Yet out of this simple relationship, the classi- 
cal law of rent was deduced. 
Von Thiinen * made an approach to a more malleable theory 
by breaking up the fixed “dose” of James Mill and by varying 
the quantity of labor which was applied to land. He hinted that 
the quantity of labor as compared with capital could also be 
varied but did not work out his own suggestion. This failure to 
* This paper was received by the Publication Committee on March 23, 
1927 —EDITOR. 
The author wishes to acknowledge the invaluable assistance which has 
been given him by his colleague, Mr. S. W. Wilcox. 
* Cf. James Mill, Elements of Political Economy (1824), p. 24; pp. 30-34. 
3 Der lsolierte Staat.