64 ECONOMIC ESSAYS IN HONOR OF JOHN BATES CLARK 
supply side of the balance, though the more important forces 
appear to be psychological. Along with this goes a transforma- 
tion of the static idea of a margin of employment. It becomes 
clear that the rewards of labor and capital bear no close rela- 
tion to their marginal productivities at any given moment; and 
if there is a long-run marginal productivity which has a close 
relation to the rewards of labor and capital, it requires careful 
redefining. 
11. Overhead Costs 
In all this a large part is played by the existence of overhead 
costs, or costs not specifically traceable to particular units of 
output, and costs which frequently do not vary with the varia- 
tions of output, or not in anything like the same degree. At its 
most difficult levels, the problem of overhead costs is identical 
with the problem of surplus capacity. It gives rise to the danger 
of cutthroat competition, to the practice of discrimination with 
its uses and abuses, to the wastes of irregular production and to 
the chief financial incentive to their removal, and to some of the 
most definite of those ties of common interest which nowadays 
bind producers together into a genuine business community. 
A concern which expands its orders is bestowing intensified 
gains upon those with whom it deals, for their expenses will not 
increase as fast as their output—within limits. And a concern 
which reduces its purchases is imposing an uncompensated bur- 
den on the rest of the business community, because their costs 
cannot be made to shrink as fast as their output. The concern 
which reduces its purchases does so in order to retrench, but the 
entire business community cannot retrench to anything like the 
same extent, and it is a doubtful question to what extent it can 
really retrench at all at a time of general depression. But even 
aside from this question of shifted burdens, it is clear that over- 
head costs introduce doubt and ambiguity into the most essential 
economic service of costs: the service they render when we com- 
pare values and costs to decide whether a given thing is 
economically worth doing. Thus the economist is deprived of 
one of his ready-made yardsticks of economic soundness, and 
must repair the loss somehow, not trusting the results of private 
enterprise and private accountancy to be necessarily correct from 
the standpoint of community economy.