Economic essays

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Monograph

Identifikator:: 1753623200

URN:: urn:nbn:de:zbw-retromon-136107

Document type:: Monograph

Title:: Economic essays

Place of publication:: New York

Publisher:: Macmillan

Year of publication:: 1927

Scope:: viii, 368 S.; Ill., graph. Darst.

Digitisation:: 2021

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Elasticity of supply as a determinant of distribution / Paul H. Douglas

Collection:: Economics Books

72 ECONOMIC ESSAYS IN HONOR OF JOHN BATES CLARK explore the influence of varying the proportions of all the factors upon production and consequently upon distribution retarded the development of the marginal productivity theory for nearly half a century. It was the great merit of Professor Clark * to complete the work which von Thiinen began. He conceived of varying the quantity of each factor while holding the others constant and thus altered the amount of labor to a given supply of capital and the amount of capital to a given supply of labor, the supply of land being eliminated by assuming that this variation in the proportion of the factors took place at the margin. He thus brought the yield attributable to each factor under the principle of diminishing returns and the return to each under that of marginal productivity. The addition of successive units of a given factor, the supply of all other factors being constant, resulted in an increase in the total product but to a lesser extent than that resulting from the addition of the previous unit of this same factor.” Since all the units of this factor were assumed to be uniform and interchangeable, the loss of any one would only cause the diminution or increase in the total product which resulted from the addition of the last unit. It was this amount which was therefore imputed to all of the units of the factor in question and which fixed therefore the unit return. Varying the quantities of labor in relation to those of capital thus gave the marginal productivities of labor and the prevailing wage while varying the quantity of capital as compared with that of labor established the marginal productivities of capital and the rate of interest. It should be emphasized that the theory only deals with the expansion or contraction of a unit, or at most of a few units, in the supply of a factor. It does not deal with the withdrawal of the entire supply of a factor. Failure to under- stand this principle of infinitesimal differences has led to ludicrous misinterpretations. Thus Mallock has urged that by far the major share of the national product should go to management. (ability) since if all of this factor were removed, the total product Ai Er at 1 The Distribution of Wealth, Essentials of Economic Theory, The Dis- tributive Process, The Philosophy of Wealth. 9 2 Expressed mathematically, the marginal productivity would be oe AX where O represents the total product or output and X the quantity of the factor.

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