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ge 
A 
INTERNATIONAL TRADE 
Still a further remark, however, is to be made, one which illus- 
trates once again the connection between the various parts of the 
structure of economic theory. Professor Marshall has taught us 
to distinguish between “internal” and “external” economies — 
between those improvements and lowered costs which arise pri- 
marily within each several establishment or industry and those 
which are the outcome chiefly of forces outside the establishment 
or industry. Concerning internal economies, such as mechanical 
inventions, scientific discoveries, better organization within the 
plant, little in the way of a trend or law can be made out. They 
come or do not come, as it so happens. But external economies 
have a trend which is predictable. They are in themselves the 
result of larger aggregate output. The mere fact that there is a 
larger total product of plows, motor cars, safety razors, tends to 
make each unit cheaper. Greater specialization and subdivision 
of labor become possible; there is a greater pervasive facility 
of industrial advance. . 
This is not the place for considering disputed matters relating to 
the general tendency. What concerns us is that it has some 
special consequences for the international trade of those countries 
which export manufactured articles. In agriculture, external 
economies are not indeed lacking in effect ; larger aggregate output 
does bring into action some causes of decrease in cost (better roads, 
for example, or cheaper plows); but these are offset, in part or 
completely, by the tendency to diminishing returns in those opera- 
tions which have to do with the direct culture of the soil. It is not 
easy to say under what conditions external economies may be so 
effective that agricultural costs on added yields from the same soil 
tend to increase or decrease as aggregate output enlarges. Some- 
thing of this kind may happen for a while in a country which has 
intelligent and progressive population. But it would seem that 
with growth of numbers agricultural costs must increase relatively ; 
that is, tho they fall, they will not fall as much as will the costs of 
manufactured articles. A country which is growing fast; whose 
industries are largely manufactures; whose exports of such goods 
are large; whose total output of them is increasing; whose costs