But even the recourse to money fails us, if we want to bring to a common standard the productiveness of lands in distant times or places; and we must then fall back on rough, and more or less arbitrary modes of measurement, which make no aim at numerical precision, but will yet suffice for the broader purposes of history.We have to take account of the facts that there are great variations in the relative amounts of labour and capital in a dose: and that interest on capital is generally a much less important item in backward than in advanced stages of agriculture, in spite of the fact that the rate of interest is generally much lower in the latter.For most purposes it is probably best to take as a common standard a day's unskilled labour of given efficiency: we thus regard the dose as made up of so much labour of different kinds, and such charges for the use and replacement of capital, as will together make up the value of, say, ten days' such labour.the relative proportions of these elements and their several values in terms of such labour being fixed according to the special circumstances of each problem.(21*)A similar difficulty is found in comparing the returns obtained by labour and capital applied under different circumstances.So long as the crops are of the same kind, the quantity of one return can be measured off against that of another: but, when they are of different kinds, they cannot be compared till they are reduced to a common measure of value.
When, for instance, it is said that land would give better returns to the capital and labour expended on it with one crop or rotation of crops than with another, the statement must be understood to hold only on the basis of the prices at the time.
In such a case we must take the whole period of rotation together, assuming the land to be in the same condition at the beginning and the end of the rotation; and counting on the one hand all the labour and capital applied during the whole period, and on the other the aggregate returns of all the crops.
It must be remembered that the return due to a dose of labour and capital is not here taken to include the value of the capital itself.For instance, if part of the capital on a farm consists of two-year-old oxen, then the returns to a year's labour and capital will include not the full weight of these oxen at the end of the year, but only the addition that has been made to it during the year.Again, when a farmer is said to work with a capital of ?0 to the acre, this includes the value of everything that he has on the farm; but the total volume of the doses of labour and capital applied to a farm during, say, a year, does not include the whole value of the fixed capital, such as machinery and horses, but only the value of their use after allowing for interest, depreciation and repairs; though it does include the whole value of the circulating capital, such as seed.
The above is the method of measuring capital generally adopted, and it is to be taken for granted if nothing is said to the contrary; but another method is more suitable occasionally.
Sometimes it is convenient to speak as though all the capital applied were circulating capital applied at the beginning of the year or during it: and in that case everything that is on the farm at the end of the year is part of the produce.Thus, young cattle are regarded as a sort of raw material which is worked up in the course of time into fat cattle ready for the butcher.The farm implements may even be treated in the same way, their value at the beginning of the year being taken as so much circulating capital applied to the farm, and at the end of the year as so much produce.This plan enables us to avoid a good deal of repetition of conditioning clauses as to depreciation, etc., and to save the use of words in many ways.It is often the best plan for general reasonings of an abstract character, particularly if they are expressed in a mathematical form.
The law of diminishing return must have occupied thoughtful men in every densely peopled country.It was first stated clearly by Turgot (OEuvres, ed.Daire I, pp.420-1), as Prof.Cannan has shown; and its chief applications were developed by Ricardo.
NOTES:
1.Increasing return in the earlier stages arises partly from economy of organization, similar to that which gives an advantage to manufacture on a large scale.But it is also partly due to the fact that where land is very slightly cultivated the farmer's crops are apt to be smothered by nature's crop of weeds.The relation between Diminishing and Increasing Return is discussed further in the last chapter of this Book.
2."The land was not able to bear them, that they might dwell together: for their substance was great, so that they could not dwell together." Genesis xiii, 6.
3.As to this term see the Note at the end of the chapter.
4.Ricardo was well aware of this: though he did not emphasize it enough.Those opponents of his doctrine who have supposed that it has no application to places where all the land pays a rent, have mistaken the nature of his argument.
5.An illustration from recorded experiments may help to make clearer the notion of the return to a marginal dose of capital and labour.The Arkansas experimental station (see The Times, 18Nov.1889) reported that four plots of an acre each were treated exactly alike except in the matter of ploughing and harrowing, with the following result: --PlotCultivation Crop yields bushels per acre 1 Ploughed once 162 Ploughed once and harrowed once 18 1/33 Ploughed twice and harrowed once 21 2/34 Ploughed twice and harrowed twice 23 1/4This would show that the dose of capital and labour applied in harrowing a second time an acre which had already been ploughed twice gave a return of 1 7/12 bushels.And if the value of these bushels, after allowing for expenses of harvesting, etc.
just replaced that dose with profits, then that dose was a marginal one; even though it was not the last in point of time, since those spent on harvesting must needs come later.
