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

ELASTICITY OF SUPPLY AS A DETERMINANT OF DISTRIBUTION 75 The Place of Supply Curves of the Factors in a Complete Theory of Distribution Perhaps the most serious inadequacy in the marginal theory of distribution is however in its treatment of the supply of the fac- tors. Professor Clark assumes given supplies of labor and capital and then measures the addition to the total product which accom- panies the last unit of each. But he does not go into the question as to how the factors happen to be combined in the proportions which they are. Instead, he assumes that there is a certain supply of capital which for the purpose of illustration he takes ® as “a hundred million dollars worth.” Then he adds successive incre- ments of labor, each amounting to one thousand workers and points out that the total product will not increase in proportion to the increase in the quantity of labor.” A similar process is applied in the case of capital, the supply of labor being held constant and the supply of capital increased. In this analysis, capital and labor are purely passive factors. They may be expanded or contracted at the will of the manipulator, who, like a prestidigitator, can produce more of a factor out of his hat. Béhm-Bawerk, in one of his replies to Professor Clark, com- plained that the latter had treated capital as though it had dropped from heaven. The supply of labor is certainly treated with equal freedom. But clearly the marginal productivities of labor and capital will be different under different conditions of supply. If 42 million laborers are set to work with 100 billion of dollars worth of capital, then the marginal productivity of labor would be higher and that of capital would be lower than if it were 84 million workers who were at work with 50 billions of capital. Is then the relative supply of each factor which is offered purely a matter of caprice which is unaffected by economic conditions or by the price which is paid for it? If the marginal productivity per unit of labor were to be so high that labor received three times as much as its present return, might this not alter the supply of labor which would be forthcoming and hence effect a change in its marginal productivity? Similarly, if the J. B. Clark, The Distribution of Wealth, pp. 165-66. dO "0 d*0 PARE, Pd CN <3; x0 ? Or in mathematical language

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