- Part I. Production and Population.
- Part I, Chapter I Wages a Question In the Distribution of Wealth.
- Part I, Chapter Ii Nominal and Real Wages.
- Part I, Chapter Iii Nominal and Real Cost of Labor.
- Part I, Chapter Iv the Degradation of Labor.
- Part I, Chapter V the Law of Diminishing Returns.
- Part I, Chapter Vi Malthusianism In Wages—the Law of Population.
- Part I, Chapter Vii Necessary Wages.
- Part I, Chapter Viii the Wages of the Laborer Are Paid Out of the Product of His Industry.27
- Part I, Chapter Ix There Is No Wage-fund Irrespective of the Number and Industrial Quality of Laborers.
- Part II. Distribution.
- Part Ii, Chapter X the Problem of Distribution: Competition: the Diffusion Theory: the Economical Harmonies.
- Part Ii, Chapter Xi the Mobility of Labor.
- Part Ii, Chapter Xii the Wages Class.
- Part Ii, Chapter Xiii the Capitalist Class: Returns of Capital: Rent and Interest.
- Part Ii, Chapter Xiv the Employing Class: the Entrepreneur Function: the Profits of Business.
- Part Ii, Chapter Xv CoÖperation: Getting Rid of the Employing Class.
- Part Ii, Chapter Xvi the True Wages Question.
- Part Ii, Chapter Xvii What May Place the Wages Class At a Disadvantage?
- Part Ii, Chapter Xviii What May Help the Wages Class In Its Competition For the Products of Industry.
- Part Ii, Chapter Xix May Any Advantage Be Acquired By the Wages Class Through Strikes Or Trades-unions?
- Concluding Remarks.
Part I, Chapter V
THE LAW OF DIMINISHING RETURNS.
WE have now reached a point where we must consider the principles which govern the relations of population to subsistence.
Why should not population multiply indefinitely and still find, at each stage of increase, food ample for all? Nay, with the power there is in mutual help, and with the wonderful mechanical advantages which result from the subdivision of industry and the multiplication of occupations, why should not the share of each be continually augmenting as the number of laborers capable of rendering such mutual services and uniting in industrial enterprises, increases?
The answer to these questions is found in the Law of Diminishing Returns in Agriculture. Up to a certain point, the increase of laborers increases the product not only absolutely but relatively; that is, not only is more produced in the aggregate, but the product is larger for each laborer. Two men working over a square mile of arable land will not only merely produce twice as much as one man: they will produce more than twice, perhaps three times as much. This is because the two can take hold together of work to which the strength of either alone would be inadequate, or which requires that one person shall be in one place, and another at the same time in another place, in order that the two may act simultaneously, as, for example, one driving oxen and the other holding the plough. Moreover, where the two are not working together, in the usual acceptation of that term, they may yet help each other greatly by agreeing to divide their tasks. Each, confining himself to a certain part, will become, for that reason, more apt and dexterous, will learn to avoid mistakes and save waste, and will acquire a facility in production which would be impossible were he to undertake a wider and more varied line of duties.
For a similar reason, three men will not merely produce three times as much as one: they will probably produce four times, perhaps five times, as much. A minuter subdivision of industry will become possible, and a more effective assistance in those parts of the work which require the actual co-operation of the different members.
Much in the same way is it with the application of capital to land. Let four men be working upon a square mile of arable land, having the use of a capital to the value of $25, comprising rude spades, axes, and hoes. Now, double that capital, allowing an improvement in the quality of the tools or an increase in the quantity as may be desired. There will be, if that additional capital have been judiciously used, an increase of product over the product of the same men when employing the smaller capital, which increase we will call A. If we place in the hands of these men another $25 of capital, in forms appropriate to their wants, making $75 capital in all, we shall have another increment of product; but it will not be A only, but A plus something. And if, again, we give them an additional capital of $75, making $150 in all, including now a horse, a plough, and a cart, the addition made thereby to their product will not be 3A merely: it may be 5A; it may be 10A; it may be 20A.
This process of increasing the labor and capital to be applied to a square mile of arable land might, as we need not take space to show, be continued to a very considerable extent; and all the while it would remain true that the product was increased more than proportionally, so that a continually larger share could be assigned to each individual laborer, and to each dollar of capital. The two principal causes for such increase of product, if we confine our attention to the increase in the number of laborers—as, for simplicity's sake, we shall hereafter do—are those already indicated, namely: 1st, the ability of men actually working together to do things to which any one of them would be singly incompetent, or would do slowly, painfully, and imperfectly; and 2d, the advantages which men acquire by dividing their tasks, so that each may confine himself to a single line of duties, and acquire a higher degree of efficiency therein.
But now appears a new opportunity for at once employing more laborers on our square-mile tract, and increasing the remuneration of each. Let us suppose there are 12 laborers, and that the increase of capital has been such as to give them a sufficiency of the ordinary tools used in agriculture at the time. Let us also suppose that out of their previous production they have been able to save a considerable store of provisions and other necessaries of life, all included under the generic name capital. They have also bred livestock till they have a pretty full supply of working animals.
Up to this time they have been cultivating only certain portions of the tract to which we have assigned them. They could not cultivate the whole successfully with so few hands, and they have accordingly made selection of those parts which were best suited to their immediate purposes. A skilled agriculturist walking over the tract, kicking a clod now and then on the cultivated parts with his toe, and breaking a hole with his heel, here and there, through the natural turf, would say that they had thus far made use only of the light, warm, sandy soils which yield quick returns on the application of little labor, but that there were other portions of the tract, as yet wet and cold, with a strong, deep soil, which would some time, with labor and capital, be much better worth cultivating. Moreover, a portion of the tract is covered with wood, and a hundred acres, or so, lie in swamp, useless, and even pestiferous, to our young community.
Now, having reached the comparative freedom of life we have described, feeling strong in their united labor and their accumulated capital, they resolve to undertake the thorough drainage of the swamp; and with this view invite four new laborers from outside to join fortunes with them. The draining of the swamp involves a year's labor, and requires the community to give up a year's crop, a thing which they would have been unable to do at an earlier period in their history, but which their accumulations now render possible. The ground thus drained and opened, rich with the vegetable deposits of centuries, proves to be by far the most productive portion of their land. So far as they still work upon the old lands they achieve as large a product as before; so far as they work upon the new land the product is greater; and consequently (as we are assuming a community of land, of labor, and of wealth) the share of each is greater in spite of, or indeed by reason of, the increase in their numbers.
A few years pass. The store of provisions and other necessaries, of implements and of livestock, which was drawn down very low by the great effort of draining the swamp, has now, from the increased productiveness of the joint estate, grown to dimensions larger than ever before. The community is now, therefore, in a position to undertake any improvement which, though involving large present expenditures, promises to be remunerative in the final result. The incentive thus arising from the possession of capital joining, as it chances, with the arrival of four new laborers who desire to cast in their fortunes with the young community, leads to the resolution to thoroughly under-drain the rich, deep soils which have been lying so long cold and wet, on the further side of a sharp, rocky ridge, while the thinner but dryer and warmer parts have been cultivated for the sake of their quick returns. Another harvest is foregone and the year given up to the improvement, which again brings the stock of provisions and clothing very low, and reduces the tools and livestock of the community to the smallest dimensions consistent with working efficiency; but the thing is done, and done once for all: soils richer and stronger have been opened to tillage, and the community, now consisting of 20 laborers, is able to withdraw, in the main, from the lighter, sandy soils, and concentrate their energies principally on the site of the former swamp, and on the parts last brought under cultivation; and now the product per man is notably increased, while the capabilities of the soil are so liberal that the land responds to every increase of capital with constantly increasing returns.
It will not be necessary to recite the cutting down of the timber, the clearing up of the ground, and the opening of what is, after all, the best land of the whole tract. Suffice it to say that the poorer lands are now given up entirely, and the community, increased by accessions from abroad to 24 laborers, working on none but those soils which are really in the broad view the most productive, obtains a larger percapita crop than ever before.
So far certainly we have not reached a condition of "diminishing returns." On the contrary, returns have increased with and through the increase of population. But we will now suppose that 24 laborers are as many as can be employed to the best advantage on the good lands of the tract which we have been considering, and that if 25 laborers were to be engaged the product would be more than with 24—for that is a matter of course—but not 1/24 as much more, so that, with community of labor and of wealth, each of the 25 must fain be content with a little less than each of the 24 had received; and, in the same way, were still another laborer to appear, the 26 would produce more than the 25 had done, to be sure, but not 1/25 more, so that each of the 26 would receive less even than each of the 25 had done. This would be a condition of "diminishing returns;" and this condition is liable to be reached in the course of the settlement of any region.
We will suppose our community to become aware of this condition, and thereon to resolve that no further accessions from abroad shall be received; but in the very act of so resolving, one of the number discovers the principle of the rotation of crops. Heretofore they had been accustomed to leave every year a portion of their choicest lands unsown, having learned that this was essential to keeping the soil in its highest productive power. Thus they not only lost the advantage of cultivating these choicest portions of their domain, but, as they found it necessary to plough the fallow in order to keep down the weeds, they had to lay out a part of their laboring-power each year without any result in the crop of the year. But the discovery of the principle of rotation changed all this. The discovery, in a word, was that the soil, like a man or a horse, may rest from one kind of work while doing another; that to the soil the raising of two different crops is the doing of two different kinds of work: that crop A draws from the soil properties a; crop B, properties b; crop C, properties c; and that consequently the soil may be recuperating as to properties a and b, while bearing crop C quite, or nearly, as well as if it were doing nothing.
Now, this discovery of the principle occurred, we will suppose, just in time to prevent the disappointment of 12 worthy laborers who had come a great distance, hoping to join themselves with our community, but were on the point of being turned away on the ground that with 36 laborers, under the existing system of fallows, the community would be obliged to return to some of the less productive lands which had been abandoned. With rotation, however, this objection no longer exists. The 12 newcomers are received, and inasmuch as the laborers in the fields are now relatively more concentrated, not having to go out to work, or to haul the produce over fallow spaces, and inasmuch, too, as the increase in numbers allows a much higher degree of co-operation and a minuter subdivision of industry (always a prolific source of mechanical advantage), while yet all are working on the better lands, the product is found to be not one half larger only, but even more, so that each of the 36 receives more than each of the 24 had done.
It will not be necessary to take our reader's time to relate how the simple suggestion that muck might be taken from the bed of the old swamp and spread on other portions, led to the employment of four additional laborers from abroad; or how the invention of a new plough which turned up the earth from 18 inches depth instead of 8, as by the ploughs previously in use, allowed the number of laborers to rise, one by one, to 48, not only with no diminution of the average product, but with its positive increase.
Now, the above illustrations have not exhausted the number or exaggerated the scope and effect of advantages in the resort from inferior to better soils, in the accomplishment of permanent improvements, in the invention of tools and implements, in the discovery of new resources, and in the utilization of waste, which may enable the number of laborers in any given country to increase from year to year without the part of each being diminished.
But without trying further my reader's patience, I will assume that, in the case taken, all known means of increasing the product proportionally, or more than proportionally, to the increase of the number of laborers, have been tried and exhausted, and that with 48 laborers to the square-mile tract the condition of "diminishing returns" has been reached, so that any increase of laborers beyond that point will result in a diminished per-capita product. In such a condition the remark of Mr. J. S. Mill applies: "It is in vain to say that all mouths which the increase of mankind calls into existence bring with them hands. The new mouths require as much food as the old ones, and the hands do not produce as much." Let it be borne in mind, however, that the aggregate product may still, and may even indefinitely, be increased by additional labor. England, densely populated and highly cultivated as that country is, has not begun to approach the state where additional labor will produce no appreciable increase of crops. "There are," says Prof. Senior, "about 37,000,000 acres in England and Wales. Of these it has been calculated that not 85,000—less, in fact, than one four-hundredth part—are in a state of high cultivation, as hop-grounds, nurserygrounds, and fruit and kitchen gardens, and that 5,000,000 are waste." Prof. Senior proceeds with this striking exposition of the capabilities of production:
"If the utmost use were made of lime and marl and other mineral manures; if, by a perfect system of drainage and irrigation, water were nowhere allowed to be excessive or deficient; if all our wastes were protected by enclosures and planting; if all the land in tillage, instead of being scratched by the plough, were deeply and repeatedly trenched by manual labor; if minute care were employed in the selecting and planting of every seed and root, and watchfulness sufficient to prevent the appearance of a weed; if all livestock, instead of being pastured, had their food cut and brought to them; in short, if the whole country were subjected to the labor which a rich citizen lavishes on his patch of suburban garden; if it were possible that all this should be effected, the agricultural produce of the country might be raised to ten times, or indeed to much more than ten times, its present amount.... But although the land in England is capable of producing ten times, or more than ten times, as much as it now produces, it is probable that its present produce will never be quadrupled, and almost certain that it will never be decupled."
It will not have failed to be observed that the law of diminishing returns does not apply directly to mechanical industry. Yet, inasmuch as the materials of that industry are all of an agricultural origin, or at least are all taken from the soil, the cost of manufactured products will inevitably be enhanced in consequence. All, however, will not rise equally from this cause. Those in which the cost of the material is relatively small may for a long time decline in price in spite of "diminishing returns;" those in which the cost of the material is relatively large may increase steadily in spite of mechanical inventions and improvements.
In 1832 Mr. Babbage stated that pig-lead to the value of £1 became worth when manufactured into
|Sheets or pipes of moderate dimensions...||1.25|
|Ordinary printing characters...||4.90|
|The smallest type...||28.30|
Copper of the value of £1 became worth when manufactured into
|Metallic cloth, 10,000 meshes to the square inch...||52.23|
Bar-iron of the value of £1 became worth when manufactured into
|Slit-iron for nails...||1.10|
|Sword-handles, polished steel...||972.82|
Now, it is evident that the part of the cost of the nearly £1000 of sword-handles, instanced by Mr. Babbage, which is affected by the law of diminishing returns, is the few shillings' worth of pig-iron originally taken plus the few shillings' worth of coal necessary to produce the power and the melting and the tempering heat for the successive processes of manufacture. With the progress of chemical and mechanical discovery, therefore, the cost of the sword-handle and the penknife-blade will approach that of the horseshoe and the nail-iron. The efficiency of human labor, again, in the production of wheat may have increased sixfold since the days of the Odyssey; the efficiency of labor in converting that wheat into bread, as M. Chevalier computes it, has been multiplied one hundred and forty-four times. The efficiency of labor in producing wool may have increased four-fold in this long period, but many living men have seen the efficiency of labor in rendering wool into cloth multiplied fifty-fold.
So far, then, as human wants can be met by the elaboration of the crude materials furnished by the earth, satisfactions (to use the term which Bastiat's writings have brought so much into vogue) may be multiplied almost indefinitely, not in spite of, but partly in consequence of, the increase of population. The mechanic of today, if his wages yield something over the demands of physical maintenance, may purchase with the balance luxuries, in one of a thousand forms, which two hundred years ago would have tasked the means of the wealthiest banker. The wife of a common laborer may wear fabrics which would once have excited the admiration of a court. But, after all, the great bulk of the consumption of the working classes must be in coarse forms of agricultural produce simply prepared. It matters little to the laborer that for a few pence additional he may have his cotton wrought into exquisite designs which a century ago would have required months for their elaboration, if the pence he has are not enough to buy a sufficient weight of cotton to keep him and his children warm. His main concern is with the cost of grains and meats, of cotton and wool, of iron and wood; and to these, in their simplest forms, the law of diminishing returns applies with a stringency that never relaxes. "If the fact were otherwise... the science of political economy, as it at present exists, would be as completely revolutionized as if human nature itself were altered."