第4章

Chapter8

ThePrincipleofSolution(continued)。ImputationandtheMarginalLawInthecaseofproductiongoodswhichareavailable，notindividuallybutinstocks，imputationoftheproductivecontributionfollowsthemarginallaw。Toeachsingleitemorquantityisimputedthesmallestcontributionwhich，underthecircumstances，canbeeconomicallyaimedatbytheemploymentofthisparticularitemorquantity——the“MarginalContribution“

asIhavealreadycalledit(UrsprungdesWerthes，p。177)，or，lookingatitfromadifferentpointofview，the“MarginalProduct。“Bohm-Bawerkhasdrawnattention(Werth，p。502)tothefactthatthislawofexchangevaluehaslongbeenrecognisedinthecaseofcertainproductiongoods:——“Thunen，andallthebodyofeconomicdoctrineafterhim，havetaughtthattherateofinterestisdecidedbytheproductivenessofthelastapplieddoseofcapital，andtherateofwagesbythereturnofthelastlaboureremployedintheundertaking。“Nowwhatishereconcededtoalimitedextentholdsgenerallyofallproductiongoods，andforeveryformofvalue，asalawofnaturalvaluation。

Itisself-evidentthatthemarginallawwhichholdsasregardsproducedconsumptiongoods，holdsalsoasregardsthegoodswhichproducethem。Weknowthat，ineverystockofconsumptiongoods，everyunitreceivesitsvaluefromthemarginalutility；thusthevaluewhichtheproductsareexpectedtohaveisalreadyadjustedtothemarginallevel，andthevalueoftheproductiongoods，asderivedfromthis，isconsequentlyplaced，fromthebeginning，onthebasisofthemarginalvalue。

ifthecommunisticstatewishtoproduceamillionnewriflestoonepattern，itwill，inthecalculationsprevioustoproduction，reckoneveryindividualrifleasequalinvalue；andthusitis，fromthefirst，impossiblethatonequantityofmetaldestinedtomaketheseriflesshouldobtainavaluedifferentfromanyotherquantityoflikeamountandquality。Iffrom1000productiveunits10，000unitsofproductareproduced，eachwithamarginalvalueof5(thetotalvaluebeingexposedbytheformula10，000x5=50，000)，theentireproductivestockreceivesavalueof50，000，andeachindividualunitwillbevaluedequallyat50。

Whilethisapplicationofthemarginallawtoproductiongoodsresultsindirectly，throughthemediumofproducts，wehavetoconsiderasecondanddirectapplication。Productiongoodswhicharecapableofbeingemployedinmanydifferentways，areusedtocreateproductsofvariouskinds。Ineachkind，takenbyitself，thevalueoftheproductisadjustedtothelevelofitsparticularmarginalutility，butweneednotexpect——and，infact，itwouldbeessentiallyamerechance——thatthemarginalamountsofallthedifferentkindsshould，whencomparedwitheachother，entirelyagree。Wehavealreadyshown(inBookI。

chap，iv)thatonlyinalimitedsensecanonespeakofacommonlevelofhouseholdeconomy；anditisonlyinthesamelimitedsensethatwecanspeakofacommonlevelofproduction。

Productionstocksmustalwaysbeemployedinsuchawayastobringforwardthoseproductswhichwillsecurethegreatestpossiblesatisfactionofwant。Inparticular，thedestinationofproductiongoodstoindividualbranchesofproduction，——or，whatisthesamething，thechoiceofthekindandamountofgoodstobeproduced，andtheinvestmentoflabourandcapitalintheindividualclassesandbranchesofproduction，——mustalwaysbeweighedanddecidedwithaviewtoproddingthegreatestpossiblesatisfactionofwants。Thisdoesnot，however，intheleastimplythatproductsmusteverywherehavethesamemarginalutility。Manyproductssatisfywantsoftriflingextent，wherethesatiationpointisreachedveryspeedily:othersagainsatisfywantswhosereceptivecapacityisverygreat，andwherethescaleofsatisfactionshowsthefinestshadesoftransitionfromthestrongerintensitiesofdesiredownwards。Totakeasdrasticanexampleaspossible，comparetheemploymentofgoldinthefillingofteethwithitsemploymentforpurposesofluxury。

Thetwoscalesofsatisfactiondonotintheleastcorrespondwitheachother，anditisquiteimpossibleinthetwokindsofemploymentstokeepalwaysexactlytothesamemarginalamount。

Alleconomicdemandsarefulfilledwhencareistakenthatgoodsoflessmarginalutilityareneverproducedfromproductiongoodswhich，ifemployedinproducingotherthings，mighthavebroughtahighermarginalutility。Itmay，therefore，verywellhappen，and，inthecaseofallmeansofproductionwhicharecapableofnumerousandvariedemployments，itwillalwayshappen，thatthemarginalamountsinthedifferentclassesofproductionwilldifferfromeachother。

Suppose，forexample，thatfromonestockofironareproducedthreekindsofproducts，whichwemaydesignateasA，B，andC；that，inkindA，theunitofironreceivesavalueof10——

correspondingwiththeeconomically-attainablemarginalutilityof10；——thatinkindBtheunitreceivesavalueof9——

correspondingwiththemarginalutility9；inkindC，avalueof8——correspondingwiththemarginalutility8。Herewehaveacasewhereutility，atthestageoftheproducts，isnotyetcompletelyadjustedtothemarginallevel，andwheretheequalisationmustfirsttakeplacedirectlyandatthestageoftheproductiongoods。Thattheequalisationmustultimatelytakeplacecannotbedoubted。Itisquiteimpossibletoestimateone-thirdoftheironhigherthananotherthird；indeed，assumingittobeallofonequality，therewouldbenopossiblewayofdecidingwhichconcreteportionofthestockshouldhavethepreferenceovertherest。Solongasanyappreciablequantityoftheironisdestinedtoturnoutproductswithamarginalutilityof8，nounitoftheentirestockcanbevaluedatahigherreturn。Toeveryunitinsuchacasemustbeimputedthemarginalreturnof8，andthevalueoftheentirestockisfoundbymultiplyingthenumberofunitswhichitcontainsbythemarginalvalue8。(1*)

Thefactthatthemarginallawapplies，partlydirectlypartlyindirectly，toproductiongoodsalso，firstrendersitpossibleforvalueactivelytofulfilitspeculiareconomicservice，astheforminwhichwecalculateutilityandthemeansbywhichwecontrolit。Comparedwithstocksofconsumptiongoods，stocksofproductiongoodsarelarger，moreconcentrated，andmorehomogeneous。Inthehouseholdofanindividualtherearenotmanystocksofanything，buttheelementswhichproducealmostallhepossessesareaccumulatedinstocks——inthehandsofproducerssometimesinenormousstocks，——andthusbecomesubjecttothesimplifiedcalculationofvalue，wheretheeconomicamountofeachstockisexpressedbyamultipleofitsamountandmarginalvalue。Andthus，throughthelawofcosts(seenotebelow)，productsalsoaresubjected，ingreatnumbers，tothissimplifiedformofcalculation。

Weconstantlyseeproducersmakingcalculationsastotheirwarehouses，materials，plants，andstocksinthissimpleway；

namely，bytakingtheamountandthepriceoftheunit，andputtingdownasthetotalvaluetheamountobtainedbymultiplyingtheoneintotheother。Thisobservationbyitselfissufficientproofofthewideextenttowhichthemarginallawobtainsintheeconomyofto-day。Notonlyarepricesdecidedbyamarginallaw，but，bymeansofprices，thewholesphereofproduction，whichmakesitscalculationsthroughoutinternsofprice，isbasedallthroughonamarginalvaluation。Isitnotworthwhiletodiscoverwhatismeantbytheapplicationofamarginalvaluationsuchasthis？Andisitnotsatisfactorytoknowthatthenaiveformofestimatinggoods，pursuedfromtimeimmemorialinvirtueoftheoriginalpromptingofman\'snature，isawonderofsimplicityandappropriateness？

NOTES:

1。Thisisoneofthemostpregnantapplicationsofthemarginallaw；weshallreturntoitagainandagainlateron，particularlyinthefifthbook，whereweconsiderthesubjectofcosts。Toassistourcomprehensionofthelawofcosts，wemayhereanticipatesomuchastosay，thattheproductivemarginalvalueonitsparthasalevellingeffectuponthevalueofproducts。Intheaboveexamplethevalueofthemarginalutilities10and9，inkindsAandBrespectively，willbealikepresseddowntotheproductivemarginalamountof8。

Chapter9

TheIndividualFactorsofImputation。I——SupplyThosethingswhicharealwaysadducedascausingthechangesinthevalueofproductiongoods，effectthischange，inthefirstinstance，byalteringtheamountofcontributionimputedtotheproductiongoods。Weshallnowdiscusstheseinturn，andthismaypossiblyprovethemostwearisomepartofourtask。

Inthefirstplacewehavetonoticetheavailablesupply。

Thelargertheavailablesupplyofanydefinitekindofproductiveinstruments，thelessimportantmayandmustbethegoodsproduced——alwayssupposingthatinotherrespectsnodisturbingchangeofcircumstancetakesplace。Ifmoreironberaised，ironproductsofsmallermarginalutilitymayandmustbemade。Itisinevitablethatthisresultshouldbeattributedtothematerial，theiron，andexpressedinalowervaluationofitsmarginalproductiveservice。Itcannotbeimputedtoanyotherfactor，suchasthelabourthatcooperatesintheproduction，asnochangehastakenplaceinthecircumstancesofanyotherfactor。Ofalltheequationsofreturn，onlythoseinwhichironoccurshavebeenreduced，thoseinwhichlabouroccurs，expendedonothermaterials，remainingunaltered；consequentlythecalculationislowerfortheformer，notforthelatter。Toiron，therefore，andnottolabour，isimputedasmallershareofthereturn。Ifoneweretocalculateeverythingasbefore，orweretoimputetolabourthediminishedreturn，thecalculationwoulddefeatitsownpurpose；onewouldbecalculatingasifeverythingcouldbespentasbefore，orasiflabourcouldbeemployedwithgreaterfreedom。Neitherofthesecouldbeallowed。

Ofallproductiongoods，thesmallestcontributionsmustbeimputedtothosethesuppliesofwhicharemostabundantincomparisonwiththedemandforthem。Thesemaybespentmostfreely，downtotheirmostinsignificantuses。Sofarasproductiveexploitationisconcerned，itisdesirablethatthosegoodswhicharemostneededshouldalsobethemostabundant，andshouldhavethesmallestcontributionsimputedtothem。(1*)

NOTES:

1。ItmaybeofusetotheEnglishreadertonotehowourrepresentativeEnglisheconomistexpressessimilarideas:——

“Otherthingsbeingequal，thelargerthesupplyofanyagentofproduction，thefartherwillithavetopushitswayintousesforwhichitisnotspeciallyfitted，andthelowerwillbethedemandpricewithwhichitwillhavetobecontentedinthoseusesinwhichitsemploymentisonthevergeormarginofnotbeingfoundprofitable；and，insofarascompetitionequalisesthepricewhichitgetsinalluses，thispricewillbeitspriceforalluses。Theextraproductionresultingfromtheincreaseinthatagentofproductionwillgotoswellthenationaldividend，andotheragentsofproductionwillbenefitthereby；butthatagentitselfwillhavetosubmittoalowerrateofpay。“——

Marshall，PrinciplesofEconomics，2ndedit。，p。565——W。S。

Chapter10

TheIndividualFactorsofImputation(continued)。II——DemandandComplementaryGoodsInthecaseofgoodsforimmediateconsumption，demandandwantcoincide:theamountofagriculturalproducerequiredforthefullsatisfactionofpersonalwantformsthedemandforagriculturalproduce。Itisotherwisewithproductiongoods；herepersonalwantdoesnotalwayscreateademand。Ifland，ofitsownaccordandwithoutcultivation，weretobringforthfruitsinsuperfluity，therewouldbenodemandforagriculturalimplements。Andlikewise，ontheotherhand，iflandrefusedtomakeanyreturn，ifalllandwerewasteandbarren，therewouldbenodemandforagriculturalimplements，therecouldbenouseforthem。Ademandformeansofproductionarisesonlywhen，ontheonehand，weareobligedtoemploythemorelsegowithoutwhattheyproduce；andwhen，ontheotherhand，wecanemploythem，inasmuchaswehaveatourdisposalthenecessarycomplementarygoods。Solongasthecomplementarygoodsarewanting，wecan，atbest，speakofalatentdemand；thedemandiseffectiveonlywhenwehavealsoacquiredthecomplementarygoods。(1*)

Itfollowsfromthisthattheeffectivedemandformeansofproductionmustvary，notonlywhenthereisavariationinpersonalwant，butalsowhenthereisavariationinthequantityofcomplementarygoods。(2*)Inbothdirectionswemustexaminetheeffectupontheimputation，andthus，inlookingatdemandinthecaseofproductiongoods，wehaveafarmorecomplicatedcausalconnectionthaninthecaseofconsumptiongoods。Weshallfind，however，thatthelawremainsthesameforboth。Thecontributionimputabletoproductiongoodsalwaysvarieswiththedemand，justasdoesthevalueofconsumptiongoods。Ifdemandincreases，fromwhatevercause，sodoesthecontribution，and，asdemandsinks，thecontributionsinkswithit。Toprovethisintheshortestmannerpossible。

First:itmaybegrantedthattheeffectivedemandriseswhentheabundanceofcomplementarygoodsincreases，personalwantremainingthesame。Supposee。g。thattheamountofagriculturalcapitalandavailableagriculturallabourpowerincrease，andthattheeffectivedemandforlandalsoincreasesthereby，inasmuchaslatentdemandbecomesactive；suppose，thatistosay，thatitisnowandhenceforthpossible，——sofarasdependsoncomplementarygoods，——tocultivatemorelandandmorecompletelysatisfywant。Howwillthisaffectthecalculationofagriculturalreturn？Evidentlythereareagainseveralcaseswhichmustbedistinguishedfromeachother。Itmaybethatthegroundwillnotpermitofanyfurthercultivation，sothat，inspiteofincreasedfacilitiesincapitalandlabour，productioncannotbeextended，——asmightreadilyhappenwithvine-growinglandinaspeciallyfavourablesituation。Orthereturnmayincreaseinperfectproportionwiththeincreaseofcapitalandlabour，aswemayassumetobepossibleontheslightlycultivatedlandofanewcolony。Or，finally——andthisisthegeneralruleinoldcountries——thereturnmayindeedbeincreased，butnotentirelyinproportiontotheincreaseofcomplementarygoods；hereindeedallthenewcapitalandlabourfindemployment，butwithdiminishedresults。

Differentasthesecasesare，thefinalresultisthesameinall，althoughitcomesaboutinavarietyofways。Ineverycasealargershareofthereturnwillbeimputedtotheland。

(a)Ifproductioncannotbeextended，thevalueoftheproductsremainsthesameasbefore，asnoreasonforchangehasemerged。Whatdoeschangeisthedistributionoftheimputation。

Theequationonwhich，intheaboveexample，istobecalculatedthereturnofthevineland，ofthecapitalemployeduponit，andofthelabouremployeduponit，alltakentogether，remainsasitwas。Buttheaddedcapitalandlabourmustnowfindemploymentelsewhere；mustenterintonewcombinations，eitheronotherland，orinsometradeorindustrywheretheygiveasmallerreturn。Theirequationsare，therefore，onthewholelessfavourable，andtheconsequenceisthattheequation，whichthewineproductionpresents，isnowsolvedinawaylessfavourableforthem。Theirmarginalproductivecontributionsinks，and，lessbeingdeductedforcapitalandlabour，thevalueofthewineleavesagreatersharetothecreditofland。Landobtainsagreatershare，asitwere，byabsorptionoftheeffectswhichcannownolongerbeattributedtothecomplementarygoods，inasmuchasthemarginallawrequiresthattheseshouldeverywherebeestimatedatthesamevalue，andinasmuchasthecommonmarginoftheirpossibilityofemploymenthasfallen。

(b)Whereproductionadmitsofbeingextendedindefinitelythetotalvalueoftheproductsrises(inthe“upgrade“ofthemovementofvalue)，althoughthesingleproductmayloseinvalue。Theequationsofreturnaremorefavourableequallyforallfactorsconcerned，andthegreatertotalreturngives，equallytoland，capitalandlabour，anabsolutelygreatershare。

(c)Whereproductioncanbeonlypartiallyextendedwehaveacombinationofbothresults。Thecontributioncreditedtolandexperiencesadoubleaugmentation，oneduetoincreasedutilisation，andtheothertothereducedvaluationoftheauxiliarymeansemployed。

Second:theeffectivedemandriseswhenpersonalwantincreases，complementarywealthremainingthesame。Herethematterisverysimple。Thefiguresoftheratiowhichdecidethedistributionofreturnremainunaltered，butthevalueofthereturnhasrisen。Theconsequenceisthatthesamequotahasanabsolutelygreatervalue。

Every-dayexperiencemakesthechangesofrelation，whichwehavejustpointedoutbetweentheco-operatingfactorsofproduction，sufficientlyfamiliartoeveryonewhoknowsaboutexchangevalue。Everyundertakerknowsthatitistohisadvantagewhentheauxiliarymeansheemployscomeuponthemarketinlargerquantities，whetheritbebecausetheyarebeingmorelargelyproduced，orbecausethereislessusefortheminotherdirections。Hecannowextendhisbusiness，ormakemoreoutofit，byspendinglessupontheauxiliarymeansofproductionherequires，whilethereturnremainsunaltered。Everyundertaker，ontheotherhand，knowsthatitistohisdisadvantagewhentheauxiliarymeansheemploysbecomescarcerinthemarket，or，whatamountstothesamething，aredrawnoffinlargerquantitiesbyotherbranchesofproduction。Inthecommunisticstateentirelysimilarcalculationswillrequiretobemade，inordertoestimatecorrectlythemutualeffectsofthecomplementarygoodsoneachother。Assumingthecircumstancesjustmentioned，avineyard，eveninthecommunisticstate，wouldinevitablybemorehighlyvaluedwherevertheauxiliariestowardsitscultivationcameforwardingreaterquantity，orwerelessfreelyemployedinotherdirections:anditwouldcertainlybeestimatedatalowerfigurewherevertheauxiliariestowardsitscultivationweremorehighlyvalued，eitheronaccountofadiminishedamountofthemcomingforward，oroftheirincreasedemploymentinotherdirections。Further，itsshareinthereturnwouldsinktozerowhenevertheauxiliarymeansofitscultivationweresohighlyvaluedthattheircontributionsequalledthewholereturnofwine；anditscultivationwouldhavetobegivenupentirelywheneveritbecameimpossibletomeetthesecontributionsoutofthereturnofwine。

Shouldanyonefactorofproduction，beitland，capital，orlabour，comemorefreelyintoourdisposal，thenaturalrulesofimputationrequirethatalltheothersobtainahighervaluation；

astheyalsorequirethatallthefactorsbemorehighlyvaluedifthereshouldbeanall-roundincreaseofpersonalwant。

NOTES:

1。SeeonthispointMenger，p。39。

2。ComparewiththisMarshall\'sPrinciples，p。563:——“Intheaccountgivenofthedemandfortheseveralagentsofproduction，itwasindicatedthattheultimatedemandforeachdependedontheco-operationoftheothersinraisingthejointproductoftheirlabour；or，tostatethecaseevenmorebroadly，thatthedemandforeachisinagreatmeasuregovernedbythesupplyoftheothers。“——W。S。

Chapter11

TheIndividualFactorsofImputation(continued)。III——

TechniqueTechniqueistheartofmakingthebestuseofproductiveinstruments。Everyadvanceintechniqueimproveseitherthequantityorthequalityofproducts。Evenaso-called“labour-saving“machineactsinthelongrunlikeanintensifiedutilisation。Bydispensingwithanotherproductiveinstrumentatacertainpointorforthepresent，itpreservesitforotherorlateremployments。

Improvementinthequalityofproductsraisestheirvalue。

Multiplicationoftheirquantitycertainlydiminishesthevalueoftheindividualproduct，butatthesametime(inthe“upgrade“ofvalue，which，forthesakeofbrevity，weshallaloneconsideratpresent)increasesthesumofvalueofalltheproductstakentogether。Technicalimprovementshave，therefore，thisresult，thattheknownquantities，intheequationsofreturnbywhichthecontributionsoftheproductiongoodsaretobecalculated，areputhigher，whiletheunknownquantitiesremainthesame。Thus，accordingtocircumstances，thecontributionsofallthefactors，orsimplyofindividualfactorsintheproductioninquestion，willberaised；itfrequentlyhappens，however，thatthecircumstancesaresuchthatthecontributionsofcertainfactorsmustbecalculatedatless。

Whathappens，forexample，whensomeexpedienttoreducecostisintroducedintoakindofproductionincapableoffurtherextension——say，theproductionofwineinalimitedareaalreadycultivatedtotheutmostextent？Thereturnofwineremainsthesame，anditsvalueremainsthesame，buttothevineyardmustbeimputedalargershareofthereturnthanformerly，becauseithastoshareitwithasmallernumberofproductivefactors。Theelementsofproductionthussavedcanandwillfindanotheremployment；theyincreasethesupplyavailableforotherpurposeswhilethedemandforsuchpurposesremainsthesame。Thefinalresultisconsequentlyareductionoftheirproductivecontribution。Thesameistrueofallmeansofproductionwhichhavebeendrivenfromtheirformeremploymentsbyreasonoftechnicalimprovements。Thefamiliareffectoflabour-savingmachineryisthatitmakeswagesfall；andthisarisesfromthefactthat，inthefirstinstance，itreducesthecontributionoflabour。Eveninthecommunisticstatethispartoftheeffectwouldemerge。Themorelabourcouldbereplacedbymachinery，themorelabourpowerwouldtherebelefttodisposeof；andthelessremunerativetheemploymentstowhichitwouldbedevoted。Ifformerlyithadbeenamistaketodevoteittosuchemployments，itwouldnowbeamistakenottodoso。Theroleoflabourinproductionwouldhavealtered；itwouldtakeanotherposition；andothereffectswouldhavetobeimputedtoit，iftheimputationistobebasedonnaturalprinciples，——

thatis，principleswhichpromotethemostadvantageousemploymentpossible。

Inallcaseswhereproductionislimitedbycertainspecificelements，thechiefadvantageobtainedbyimprovementoftechniqueisascribedtotheseelements。Meansofproductionwhichhaveamoreextensiveemploymentarebutlittleaffectedbychangesinindividualbranchesofproduction；onlythosetechnicalimprovementswhichaffectall，oragreaterpartoftheiremployments，areofmuchimportancetothem，sinceitisonlyinthesecasesthattheequationsofreturnarenoticeablyalteredintheirfavour。Theimprovementinmeansoftransport，whichbroughtwithittheincreasedutilisationofanenormousnumberofindustries，isanexampleofacomprehensivetechnicalimprovementwhichactuallyhadthepowertoraisethereturnsofalmostallmeansofproduction。

Everychangeintechnicalartnaturallycallsforacertainchangeintheplanofproduction，acertainrearrangementinthedisposalanddestinationofourproductiveresources。Otherresultsseemnowthemoreattractive；otherproductsarenowthemarginalproducts。Therapiddevelopmentofindustryinthecourseofthepresentcenturyhasattractedmanylabourersfromagriculturaltoindustrialpursuits。Thistransference，whichwasaveryseriousmattertothelandownerssince，amongotherthings，itcompelledthemtopaythelabourerstheyhadleftatthehigherrategivenbythemanufacturers，wasentirelybeneficialforproductiongenerally。Itremovedthelabourersfromoccupationswhichbroughtthemlittle，butwere，however，intheabsenceofanythingmoreremunerative，permissibleuptillthattime，intoothersinwhichtheycouldassesstheirpowersatahighercontribution。Ifinthecommunisticstateasimilarphenomenonshouldevercomeinthetrainoftechnicaldevelopment，italsowouldrequiretobemetbyasimilartransferenceofcapitalandlabour，themeasureforwhichwouldbeobtainedbyobservationofthemarginalproductivecontributions。

Chapter12

TheIndividualFactorsofImputation(continued)。IV——TheImputationtoCostGoodsandtoMonopolyGoodsWhathasbeensaidastotheinfluenceofsupply，ofdemand，andoftechnique，givessufficientevidencethat，intheimputationofreturn，thereisacertaincategoryofproductiongoodsparticularlyfavoured，andanotherpeculiarlyprejudiced。

Thelineofdivision，however，whichseparatesthesetwocategoriescannotbedrawnwithanygreatstrictness；thetransferencesfromonegrouptotheotherareimperceptible；thegroupingchangeswiththechangeofcircumstances；and，evenwithintheseparategroups，thereisthesamedivision。Goodswhicharefavouredabovemanyothersmayneverthelessbequitethereverseincomparisonwithjustasmanymore。

Thefirstgroupiscomposedofthosegoodstowhichattachesanaturalmonopoly(asopposedtoalegalmonopoly)。

Characteristicofthisgroupisthecomparativerarityofsuchgoodsascomparedwiththedemandforthem，or，itmaybe，thecomparativelysmallquantitythatcanbeproduced。Asexamplesofgoodswhichhavepronouncedlythecharacterofmonopolymaybementionedthefollowing；——scarcerawmaterials，landexceptionallysituated，theworkofonepeculiarlygifted，——

particularlyanartistorscientificworkerofthehighestrank，——asecretandatthesametimesuccessfulprocess(or，moreexactly，theexclusiveknowledgeofsuchaprocess，wherebythepersonswhohaveitobtainapreferenceoverothers)，and，finally，worksofhumanhands，which，onaccountoftheirsize，oronaccountoftechnicaldifficulties，cannotberepeated。

Goodswhichbelongtothesecondgroupmaybecalled“CostGoods，“inasmuchastheyaretheelementsinthecalculationsofcost。(1*)Theyaregoodseasilyaccessibleandabundant，orgoodswhoseproductioncanbeindefinitelyincreased。Thefollowinggoodshavemarkedlythischaracter；——unskilledlabour，coal，wood，thecommonmetals，andalsolanddevotedtoindustrialundertakingswherethereisnoquestionofanyparticularadvantageinsituation。Thingswhicharetobehadinsuperfluityarenotcountedamongcostgoods；indeedtheyarenotreckonedamongeconomicgoodsatall。Whilemonopolygoodsarespecificelementsofindividualindustries，costgoodsarethecommoncosmopolitanandindispensablepowersandmaterialsofproduction。

Articleswhosemakingrequiresnomonopolygoodsmaybeproduced，comparativelytoothers，inthelargestquantities；ontheotherhand，thosewillbeproducedinthesmallestquantitieswhichdemandproductivefactorsofapeculiarlymarkedmonopolycharacter，evenalthoughcostgoods，subjecttoverylittlelimitation，shouldbeemployedalongwiththem。Assumingequalwants，then，thevalueofgoodsproducedundermonopolymust，byreasonoftheirsmallavailablequantity，standcomparativelyhigh；andconsequently，tomonopolygoods，ascomparedwithcostgoods，mustgenerallybeimputedacontributionofhighervalue。

Thisisthefirstadvantagewhichmonopolygoodsenjoy。Inthecourseofeconomicdevelopment，however，manyotheradvantagesaccruetothem，asthedevelopmentitselfaccentuatesthegulfwhichnaturallyexistsbetweenthem。

Intheordinarycourseofeconomichistorytheavailablesupplyofmanymonopolygoodsincreasesbutslowly，ornotatall，——inmanycases，indeed，itbecomessmaller；whereastheavailablesupplyofmanycostgoodsincreasesrapidlyanduninterruptedly。Wehaveheretwocauseswhichwidenthedifferencebetweenthetwoimputations，inasmuchasthecontributionimputedvariesforeverygoodininverseratiotothechangeinitssupply，andindirectratiotothechangeincomplementarywealth。Nowintheordinarycourseofeconomichistory，wantsarecontinuallyincreasing，andthenumbersofthosewhowantarecontinuallyincreasing，while，atthesametime，techniqueisalwaysbecomingmoreperfect。Bothofthesefactscreateatendencytowardsraisingthevalueofproductiongoods。Thistendencyaffectsmonopolygoodsunreservedly，but，inthecaseofcostgoods，ontheotherhand，itisfrequentlyoutweighed，——eitherimmediatelyorafteracertainlapseoftime，——bytheopposingtendencywhichcomesfromtheirincrease。Generallyspeaking，costgoodsgainonlybysuchrisesinthevalueofreturnasarewide-reachingenoughtoextendbeyondthesphereofonesingleindustry。Risesinvaluewhichareconfinedtoindividualbranchesofproductionarecompletelyabsorbed，aswehaveshown(BookIII。chaptersx，andxi)bythespecificelementsinthatbranch，bythemonopolygoods。Andevenshouldtherebenosuchelements——assometimeshappens——anincreaseofvalueinoneparticularindustryhascomparativelylittleeffectuponelementswhicharesimultaneouslyemployedinagreatmany。

Althoughcostgoodsarethusprejudicedinthecalculationofthereturn，theyhaveneverthelessthestrongestinfluenceontheresultofproductionanditsregulation，and，consequentlyalso，onthebasisofimputation。Theyarethegoodsofuniversaldiffusion——thegoodswhicharetobefoundineverymarket；

theyformthemajorityofgoods，andbuildupgenerallythebodyeconomic。Monopolygoodsmustconformmoretocircumstancesmadeforthem；theusingofthemchangesconstantlywiththechangeinthegeneraleconomicconditions，foritrisesandfallswiththem，justasthelevelofastreamwhenitrunsbelowgroundrisesandfallswiththelevelabove。Thus，practically，itwouldseemtocometothis；thattheimputationoftheshareduetothemonopolygoodsismadeonlyafterthatduetothecostgoodsisfinished。Thesharesduetocostgoodsarealwaysfirstdeductedfromthetotalreturnofproduction，andtheresiduethenfallstothemonopolygoods。Butcloserconsiderationshowsthemattertobesomewhatdifferent。Itisonlyintheindividualcasethatsuchacalculationcanbemade。Inthetotalityofcasesitisimpossibletooverlooktheinfluenceofmonopolygoodsupontheordinaryformationandimputationofreturn。Thisinfluenceisinpartanindirectone，inasmuchasgreatquantitiesofcostgoodsareemployedinmonopolyproductions，wherebythemarginalproductivereturnofthemonopolygoodsmustbeindirectlyaffected；anditisinpartdirect，inasmuchasthroughtheresultsofmonopolyproductions，valueequationsarefurnished，whichareindispensabletothetotalvaluation。

Monopolygoodshaveoftenreceivedaquitepeculiarpositionintheory。Ricardo，forexample，teachesthattheyowetheirvaluealtogethertotheirscarcity，whileallothergoodsreceivetheirvaluefromthelabourofproducingthem。Asufficientlywideconsideration，however，showsthatmonopolygoodscomealtogetherundertheordinaryconditionsofvaluation，anddifferfromothereconomicgoodsonlyinthattheydisplaymuchmorestrikinglythecharactercommontoall。(2*)

NOTES:

1。Seebelow，BookV。

2。InthesecondnotetoBookIII。chap。iv。referencewasmadetothepresentchapter，statingthatitwouldtherebeshownthat，withouttakingintoaccountthedistinctiontowhichBohm-Bawerkhasdrawnspecialattention，andwhichdealswiththeoppositionbetweenmonopolygoodsandcostgoods，thesubjectcouldnotbefinallysettled。Theimportanceofthedistinctionoughtbythistimetohavebecomeclear。Thereaderwillrememberthat，indistributionasMengerwouldhaveit，thereisan“undividedresidue。“Now，ineverycombination，this“undividedresidue“falls，forthegreaterpart，tothatgoodwhichpossessesmoststronglythecharacterofamonopoly。

Consequently，whereapronouncedmonopolygoodiscombinedwithpronouncedcostgoods，the“undividedresidue“isimputedtothemonopolygood；wherecostgoodsalonearecombineditisimputedtothatgoodwhichmostnearlyresemblesthemonopolygoods；and，lastly，whereseveralmonopolygoodsarecombineditisimputedtothatonewhichmostdistinctlybearsthemonopolycharacter。

Itmustbenoted，however，thatonlythegreaterpart，notthewhole，ofthe“undividedresidue“istobeimputedtothegoodinquestion。Somepartofit——althoughoftenamosttriflingandindeedpracticallyindistinguishablepart——mustalwaysbeascribedtotheotherco-operatinggoods，asalloftheseexperienceacertainincreasedutilityfromthemaintenanceofthecombination，whilethedispersingofitwoulddestroythatplanofproductionwhichisregardedasbest。Thesharetobeascribedtotheotherco-operatinggoodswillbethegreater，themorethemaintenanceoftheabove-mentionedcombinationisdependentuponthem——i。e。themoretheythemselvespossessthecharacterofmonopolygoods，andthelesstheypossessthatofcostgoods。Ascarcegoodwill，asarule，bemoreseriouslyaffectedbyatriflingchangeofproductivedestinationthanonethatislessscarce；aswasexplainedinthetext，theremustbeconsiderablealterationsindemandandsupplybeforethevalueofgoodswhicharemostdistinctivelycostgoods，showsacorrespondingchange。

Thedifference，therefore，between“contribution“and“co-operation“remainsfundamentallyclearforallcases，althoughpracticallyitdoesnotcometomuch，and，solongasonlyunitsofgoodsareconcerned，needforthemostpartscarcelybetakenintoaccount。Somuchthemoreimportantisitwhenweareexaminingtheinfluencethatlargerquantitiesofproductiongoodshaveupontheamountofproductivereturn。

InthissenseIhad，intheUrsprungdesWerthes，althoughonlybywayofsuggestion，alreadydisposedoftheproblemof“complementarity。“ThereIstatedthattoproductiongoodsmustbeimputedtheir“marginalproductivecontribution，“while，tothe“specificproductivefactorsbelongingtoindividualproductions“fallstheresidueofreturn，afterdeductingthequotasofallsupplementarygoods。Theonlymattersomittedwere:

whatwouldhappenwereseveralmonopolygoodscombinedtogether，andanexactformulationofthelawforcalculatingthecontributions。

Chapter13

TheIndividualFactorsofImputations(continued)。V——TheImputationtoProductiveFactorsofPreferableQualityOftwoproductiongoodsofthesamekind，thatonepossessesthebetterqualitywhichshowsthegreater“rentability“——touseaclumsybutconvenientGermanexpression。Inotherwords，itisthatgoodwhich，whenco-operatingwiththesameamountofcomplementarygoods，givesareturnofhighervalue；——whetheritbethatthehighervalueofthereturnarisesfrommorebeingproduced，orfromwhatisproducedbeingofabetterorpreferablequality。Inwhatfollows，forbrevity\'ssake，weshallconsideronlytheformercase。

Ifwepossessedseveralproductiongoodswhich，inthisspeciallylimitedsense，wereofdifferentqualities，weshouldundoubtedly，intheproduction，employthegoodsofpoorerqualityonlywhenthesupplyofbetteroneswasnotsufficientforthedemand；andtheshareofreturnwhichfelltothebettergoodswould，ofcourse，behigherthanthatwhichfelltothepoorerones，byanexactlyascertainablequota。Accordingasthebettermeansofproduction，whenworkingalongwithanequaladditionofcomplementarygoods，produceagreatertotalreturn，thevalueequationbecomesmorefavourabletothembythewholeamountofthesurplusreturn。Theirproductivecontributionisequaltothatofthepoorerqualityplusthissurplusreturn。

Shouldthepoorergoodsbepresentinsuperfluousamountandsohavenocontributionimputedtothem，thecontributionofthebettergoodsalonewillbecreditedwiththesurplusreturn。

Experienceconfirmsthesepropositionsinthousandsofways；theyanswertotheeconomicobservationofeverybody。

Someeconomistswhohavepaidverylittleattentiontothelawsofcomplementarityingeneral，haveshownextraordinaryearnestnessindiscussingthisparticularcase。Ricardo，inhistheoryoflandrent，dealswiththeadvantageobtainedfromgreaternaturalfertilityinthecaseofagriculturallands，orthegreaterproductivenessofmines。Thenhegoesontotheadvantage，asregardsreturn，whichindustrialcapitalfirstexpendedhas，asagainsttheincrementsofcapitalwhichfollow。

Histheoryoflandrentwasamplifiedbypointingoutthatrentoflandisinfluencedalsobyitssituation，i。e。byitsdistancefromthemarketforitsproduct。Finallyithasbeenshownthatthe“rentability“oflandintowns，andalsothatofcapitalandlabour，isgraduatedinthesamewayasthatofagriculturalland，andthattheopportunityofobtainingforthebetterqualityagreaterrent——asurplusreturnandasurplusvalue——

occursasoftenintheonecaseasintheother。

Thesetheoreticstatementsallrelatetoprice，buttheyholdequallyasregardsthetheoryofvalue。Themorefertileland，thelandwhichliesnearertothesphereofdemand，themoreskilledlabourer，themorecapablemachine，arenotonlymorehighlypaid，buthaveimputedtothemaswell，onaccountoftheirbetterquality，acomparativelygreatershareinthereturn，——which，indeed，isthecauseoftheirbeingmorehighlypaid。Inthecommunisticstate，too，calculationwillbemadeinthesameway。Themorefertileormoreconvenientlysituatedlandwillbecultivatedbeforeanyotherland，and，shouldotherandpoorerlandrequiretobecultivated，thebetterqualitieswillbemorehighlyvaluedinexactproportiontotheirsurplusreturn。

PARTII:NATURALLANDRENT

Chapter14

Ricardo\'sDifferentialRent:TheFirstPartRicardo，inhisfamousPrinciples，takesupwhatwemaycallContractrent，therentwhichemergeswhenanownerletshisland。Itisgenerallygrantedthatthelawofthiskindofrentistruealso，inallessentialrespects，ofthatincomewhichtheownerofthelandcouldobtainwithoutlettingit，bysellingitsproducts。Whathasbeensaidastoimputationhasprobablyshownthattheanalogymustbecarriedstillfurther。Thepersonalincomewhichlandyieldsis，inthelastresort，dependentuponthefactthatthelandinquestionyieldsareturnsuchthat，afterthesharesofcapitalandlabourarededucted，thereremainsasharewhichmust，onnaturallaws，beimputedtotheland。Theproblemoflandrent，conceivedofprimarilyasaproblemofdivisionofincome，inthelastresortcontainsalsoaproblemofdistributionofreturn。Asaproblemofdistributionofreturnitwillemergeinthecommunisticstatejustasitdoesunderexistingsocialconditions，andinbothcasesthesolutionisfundamentallythesame。

Ricardobeginshisstatementwithadisquisitionuponprimitivehistoricalconditions。Solongaspopulationisthin，anditisunnecessarytocultivateevenallitsrichandfertilelandinordertoprovidefood，nosinglepieceoflandcanobtainarent。Who“wouldpayfortheuseoflandwhentherewasanabundantquantitynotyetappropriated，and，therefore，atthedisposalofwhosoevermightchoosetocultivate。it“？Should，however，populationincreasetoadegreewhichnecessitatesthecultivationoflandofthesecondquality，rentimmediatelycommencesonthatofthefirstquality。Landofthesecondqualitywouldrequireagreaterexpenditureofcosts，inordertoproducethesamereturnasthatofthefirstquality；itcanthereforebecultivatedonlywhentheincreaseddemandhasraisedthepriceofagriculturalproduceenoughtocoverthenecessarycosts。Butthispriceleavesasurplustolandofthefirstquality，accordingtothesavingofcostswhichitallows。If，further，landofthethirdqualityrequirestobecultivated，arentemergesforthatofthesecondquality，whiletherentforlandofthefirstqualityisincreased；andthuseverynewandpoorerqualitywhichispressedintousecreatesarentforthoseaboveit，measuredbythedifferenceinquality。

Toputitintoexactfigures。Supposethevalueofwheatis40s。perquarter，andthat，withanexpenditureof？00，thecultivationofapieceoflandofthe1stqualityproduceareturnof120qrswithavalueof？40

ofthe2ndqualityproduceareturnof100qrswithavalueof？00

ofthe3rdqualityproduceareturnof80qrswithavalueof？60

aprivateownerwillconfinehimselftothecultivationofthetwobetterclassesofland，andwillcalculatetohimselffromthefirstclassarentof？0。

Inthecommunisticstatetheresultwillbethesame，grantingthesameassumptions。Solongaslandofthefirstclassistobehadinsuperfluity，oris“free，“noshareinthereturnwhichithelpstoproducewillbeimputedtoit。Andwhy？Becausepeoplehavestillthechoiceastowhichofthemanylandsofequalqualitytheywillcultivate，andbecausetheyaredependentuponnosingleoneofthese。Landofthesecondqualityiscultivatedonlywhenthatofthefirstisallundercultivation，andwhen，atthesametime，thedemandforlandproducehasrisensufficientlytomeettheincreasedcost。When，bythehighervalueofthereturn，however，theincreasedcostonthesecondclassoflandhasbeenthuscovered，thereremainstothefirstclassasurpluswhichmustbeattributedtothelandasrent。Thelandanditsbetterqualityareindeedthe“cause“ofthesurplusreturn。Itisimpossibletoderivethesurplusfromthecostgoods，seeingthatsimilaramountsandqualitiesofcostshavebeenspentonbothclassesofland。Averysimplenegativeproofwillconfirmtheproprietyofthismethodofimputation。Supposeapieceoffirst-classlandbeleftuncultivated，thesurplusreturnwillimmediately，disappear。thecostgoodswillbeincapableofreproducingitelsewhere，becausethereisnootherpieceoflandofthesamequalitytotakeitsplace。Thereisnolackofpracticalopportunitytoestablishthisconclusion。Ineveryquestionastotheutilisingofsuchlandswehavetobefullyapprisedthattheyguaranteesuchandsuchrentifproperlycultivated，andthatthisrentwillhavetobegivenupiftheyareleftentirelyuncultivatedorusedinsomeotherway。Ife。g，wehavetomakearoad，weshallsoonknowthatitleadsthroughlandsofthefirstqualitybyitscostingextrathewholeamountoftherent。Butwhymultiplyexamples？Ifwearetocalculateatallinproduction，itmustbeinthisway。Werewetorefrainfromreckoningthedifferentialrent，itwouldmeanthatwedisregardedthecircumstancethatland，asamatteroffact，isofdifferentdegreesoffertility；itwouldmeanthatwewerequiteindifferentwhetherwegotmuchreturnorlittle。

Intheinventoryofthecommunisticstatethelandsofbetterqualitywillbeenteredatanamountcorrespondingtothecapitalisationoftheirrents。Theagriculturalofficialswillrequiretobemaderesponsibleforthereturnofarentfromthesebetterlandscorrespondingtotheirquality。Infact，inallthoseconnectionsitwillbeimpossibleforthecommunisticstatetoactdifferentlyfromanylargelandownerofthepresentday，whotriestomanagehispropertyeconomically，andtohaveaneffectualcontroloverhisservants。

Chapter15

Ricardo\'sDifferentialRent:TheSecondPartThereisasecondParttoRicardo\'stheorywhichisfrequentlyoverlooked，althoughitisreallythemoreimportant。

Fromtheverynatureoflandeverypieceofithaspowersofdifferentquality。Justasonlythebestlandsareatfirsttakenup，soareonlythebestpowersineachpieceofland。Ofthesepowersthepoorestclass——solongasthisclassisinexcessofthedemand——givesnorent，andthebetterclassesgiveanetdifferentialrent。

InthissecondpartofRicardo\'stheoryalso，thenaturalprinciplesofimputationarefoundtobeinperfectagreementwiththeruleshehaslaiddownfortheformationofcontractrent。Thismaybebestshownbyanexample。Say，asbefore，thatthequarterofwheatbrings40s。Thenacertainpieceofland，accordingasitiscultivatedatagreaterorsmalleroutlayincapitalandlabour，willproducethefollowingreturns:——

toafirst？00ofexpensesthereturnis120qrs。andthevalue？40

toasecond？00ofexpensesthereturnis100qrs。andthevalue？00

thereforeto？00ofexpensesthereturnis220qrs。andthevalue？40

toathird？00ofexpensesthereturnis80qrs。andthevalue？60

thereforeto？00ofexpensesthereturnis300qrs。andthevalue？00

Underthesecircumstancesaprivateownerwillfinditadvantageoustoexpendonly？00。Hegainstherebyareturnof？0；and，insteadofsinkingthethird？00inhislandandgainingareturnofonly？60，hewilldobettertoemployitinsomeotherdirection，whereitmaygiveitsfullpossiblereturnof？00。Fromthe？40returnthusobtained，hereckons？00asthecosts；theremaining？0hecanclaim，andthetenantcanpay，asrent。Justsomustthecommunisticstatemakeitscalculationsaccordingtothesenaturalprinciplesofvaluation。

There，too，naturalprincipleswilldemandthatonly？00besunkintheland，andthatthesurplusof？0thusearnedbeimputedtothelandasrent。(1*)

Thedifferentialrentreceivedfrompreferablepowersofthesoilmaybecalledthe“IntensityRent，“becauseitemergesandrisesaccordingasthelandiscultivatedintensively。This“intensityrent，“accordingasRicardoconceivesofit，mightquitewellbeauniversalrentforallthelandsofacountry，orofthewholeworld，supposingthemtobeallcultivatedwithsufficientintensity。Ricardo\'sdifferentialtheoryinnowayrequires——asisoftensaid——theexistenceofnorentland。Itissufficientiftherearenorentpowersinthesoil。

Itneedscarcelybesaidthat“intensityrents“mustreceiveasexactconsiderationfromtheeconomistastherentofbetterlands。Itisperhapsunnecessarytosayanythingfurtheronthispoint。

NOTES:

1。If？00weresunkatotalof？00wouldindeedbereceivedinreturn，butnonethelesswouldtherebealossof？0onthethirdtwohundred。Ifonly？00weresunk，andthesurplusof？0

wereimputednottotheland，buttothecapitalortothelabour，weshouldmaketwomistakes，eachcontradictingtheother。Firstly，theland，assuch，wouldbedeclaredtoyieldnoreturn。Thepracticalconclusionwouldbethatitoughtnottobecultivated，andthatthecapitalandlabourshouldbeotherwiseemployed，inwhichcasethewhole？0wouldbelost。Secondly，thisapplicationofcapitalandlabourwouldbeshowntobepeculiarlyprofitable——thepracticalconclusionofwhichwouldbethatitwouldappearpermissibletosinkevenmorecapitalintheland。Butthisoughtnottobedone，as？00isthehighestexpenditureeconomicallypermissable。Thelandrentof？0is，therefore，therationalexpressionofthemostadvantageousdispositionofproduction。

Chapter16

CriticismofRicardo\'sTheoryAccordingtowhatiscertainlythemostusualopinion，thedifferentialrentofbetterlands，orofbetterpowersofland，istobeexplainedsimplybythefactthattherearenotsufficientofsuchtomeetthedemand；that，infact，asisfrequentlysaid，they“haveamonopoly。“Butitmayeasilybeseenthatthisisnotsufficientforanexplanation。Wemustaddtwootherassumptions。

First，thelandsorpowersoflandlasttakenintocultivationmustbeavailableinsuperfluousamount。Inordere。g，thatfirstqualitylandsmaybearadifferentialrent，notonlymusttheselandsbeinsufficienttomeetthedemand，buttheremustbebesidesthem“free“landsofthesecondquality。

Thelimitationor“monopoly“offirst-classlandsistheproximateoccasionofrent，andrentwouldemergeinanycase，evenifthereshouldbenootherqualitiesofland。Thentheinterpositionofsecond-classlands，whicharemorethanenoughtomeetthedemand，andareconsequentlyrentless，hastheeffectofkeepingdowntherentoffirst-classlands——whichnightotherwiseriseindefinitely——totheamountofdifferenceexistingbetweenthequalitiesofthetwo。Ifsecond-classlandswerenot“free，“theyalsowouldbearrent；andthisrent，again，couldonlybekeptdowntothedifferentialrentthroughtheinterventionofathirdclass。Inshort，ifthereistobeanetdifferentialrent，theremustbealast，rentless，andtherefore“free“categoryoflands(orpowersofland)alongsidethebetterandlimitedones。Theremustbebothlimitationandsuperfluityofland。

Second，theremustalsobe“monopoly“ofcapitalandlabour。

Whydoesanyonepreferthebetterclassesofland？Becauseonthemcapitalandlabourprovemoreproductive。Butwhyshoulditbeofconsequencethatcapitalandlabourprovemoreproductive？

Because，asageneralrule，wedonothaveenoughofeither。Ifitwerequiteamatterofindifferencewhatreturnwasobtainedfromdefiniteamountsofcapitalandlabour，becauseitwasalwayspossibletomakeupanydeficiencybyemployingotherquantitiesofthesame，itwouldalsobeamatterofindifferencefromwhichclassoflandtheygottheirreturn——assuming，ofcourse，thattherewasneveranyscarcityofatanyratethepoorestqualityofland。Andif，infaceofsuchsuperfluityofthepoorestclassofland，thebetterandbestclassesaremarkedoutandpreferred，itisbecausemanhastoeconomisehislabourandcapital。Thedifferentialrentmeasuresexactlytheadvantagewhichthebetterandbestclassesoflandsecureintheaccomplishmentofthattask。

Thusweseethat，whereveranetdifferentialrentexists，landispartiallylimited(inthebetterandbestclasses)，partiallyover-abundant(inthepoorerclasses)，whilecapitalandlabourarealwayslimited。(1*)TohaveoverlookedthiscircumstanceisthefirstdefectinRicardo\'stheory。Hestatespositivelythattheamountoflabour(andunderthisheincludescapital)，whichmaybeexpendedinproductioncanbehad，asarule，fortheasking——maybeincreasedatwill；whiletherent-bearingclassesoflandaretobehadonlyinlimitedamounts。ThisdefectisconnectedwithanotherandstillgreateroneandonethatappliesnottoRicardoalone；hehasnogeneraltheoryofeconomy，ofvalue，andofimputation。Allhisingenuityisexpendedupondetails，such，forexample，astheexplanationoflandrent，andthisinitselfshowsthatthesedetailscanonlyhavebeenlookedatandconceivedofinaone-sidedfashion。

Afurtherdefectofthedifferentialtheoryisthatitdoesnotsufficeforallcases。Itsometimeshappensthateventhelastcultivatedlands，orpowersofland，returnarent，andforthisRicardohasnoexplanation，or，tospeakmoreexactly，nolaw。Wheneverthedemandforlandproductshasincreasedtosuchanextentthattheclassoflandlasttakenintocultivationisnotsufficienttomeetit，while，atthesametime，thevalueofthelandproductshasnotrisensufficientlytopermitofanewandstilllowerclassbeingputundertheplough，thelastcultivatedlandreturnsarent，althoughitbecomesdifferentialonlywhenthenextclassoflandhasactuallybeenputundercultivation。Andwhenalltheclassesoflandhavebeenexhausted，andcultivationingeneralcannotbefurtherextended，thereemergesauniversallandrent，——universalnotonlyforalllands(forinthissensethe“intensityrent“mightbeauniversalone)，butevenforallpowersofland。Thiscase——oftheimpossibilityofextendingcultivation——occursmorefrequentlythanonewouldthink。Itisnot，aswouldseematfirstsight，athingtobeexpectedattheveryendofthehistoricaldevelopmentofeconomiclife，whenthewholeearthisover-populated。Itbelongsrathertothenormalphenomenawhichoccurinthecourseofthisdevelopment。Indeeditisjustasregardsthepastthatitcanbeestablishedwithperfectcertainty；whilepropheciesofwhatistocomemustalwaysbeuncertain，andcanneverbemadewithscientificexactitude。A

slightconsiderationwillsufficetomakethisclear。

Landandcapital，sofarasregardstheconditionsunderwhichtheyareacquired，appeartostandincompleteoppositiontoeachother。Allcapital，withtriflingexceptions，hasbeenworkedforbyhumanhands，andthesumofcapitalisalwaysincreasingandiscapableofindefiniteincrease。Allland，ontheotherhand(withexceptionswhicharequiteinsignificantascomparedwiththewhole)hasbeeninexistencefromthebeginning，anditispracticallyimpossibleforhumanpowertoextenditscompass——soatleastageographerorphysicistwouldhavetosay。Butcanwesaysoeconomically？Certainlynot。

Economicallyspeaking，manhasnotfromthefirsthadcommandoverthewholesolidsurfaceoftheearthanditstreasures。

Startingwithaveryinsignificantportionofit，thesphereofhiscontrolhasextendedataratewhichscarcelycomesbehindtheincreaseofhiscapital。Thelimitsofhispowerarenotyetreached，andhewouldbeaboldmanwhowouldsaywhentheymustbereached，andwheretheirlimitslie。Lookedateconomically，thereisalwaysavailabletohimonlysomuchsuperficiesandsomuchfruitfulsoilashehasthemeansandtheknowledgetoutilise。Thedevelopmentofagriculturalskillandtechniquegenerally，theemploymentofmanures，growthofpopulation，emigration，scientificdiscovery，thespreadofcommerce，theperfectingofthemeansoftransport，increaseofwealthincapitalandlabour——allthesehavegraduallyincreasedlandedpropertytoanenormousextent。Tothehunterbelongsonlythesurfaceoftheground；tothepeasantwhoforceshisploughdownintoitbelongsalsoitsinterior，andthedeepertheploughgoes，somuchmoreofthelandcomesintotheserviceofman。Inourowntime，indeed，theamountoflandinfar-awaycountrieswhichisatthedisposalofEuropeanconsumption，hasincreasedinadegreethatisalarmingtoEuropeanagriculturists。Ifwelookbackonthepast，wemightalmostbelievethatithasbeenquitethesamewithlandaswithcapital；——thatatfirsttheprovisionofitwasveryscanty，andthatlaterithasgoneonrichlyandsteadilyincreasing。Certainlytheerrorwhichthisopinionbetrayswouldbenogreaterthanthatbetrayedbythecommonlyheldopinionthatlandisquiteincapableofbeingincreased。Inanycase，therecanbenodoubtofonething。Itisconceivablethatatimemayarrivewhenalllandavailableforeconomicpurposeshasbeentakenup，andthat，notwithstanding，atsomelaterperiod，somuchnewland，economicallyspeaking，maycomeintotheworld\'spossession，thatamuchgreaterpopulationmaybemaintaineduponit，withouteventouchingthelimitsofsubsistence。Andhasthisconceivablecaseneverbeenanactualfact？Havewenotaccounts，handeddowntousfromprimevaltimes，ofoverpopulationandemigrationcausedbyurgentwant？Hasnotthespectreofhungerhauntedeverylandandeverypeopleonthefaceoftheearth，andisitnotthecasethatonlythemosthighlyculturedofnations，attheheightoftheirdevelopment，havebeenabletoescapefromitsterror？

Still，howeverthatmaybe，evensupposingithasneveractuallyhappenedthatthelimitsofcultivationhavebeenreached，——atheorywhichcannotbringthecaseofa“universal“

landrentunderalawremainsaninadequatetheory。Ifwehavenolawfortheassumedcasethatalllandsandpowersoflandbearrent，wehavenolawfortheundeniablefactthatalleconomicallyemployedlabourandcapitalyieldareturn；wecansayabsolutelynothingmorethanthatthebetterqualitiesofgoodshavemoreimputedtothembytheamountoftheirsurplusreturn。Weareincapableoflearningwhatsharesaretobeimputedtothecommonqualities，whichconstitutethemajorityofproductiongoods。Thelawofauniversallandrent，andtheuniversallawofimputation，areidentical，andatheorywhichhasnoformulafortheformerconfessesitsutterinabilitytosolvetheproblemofthevaluationofproductiongoodsgenerally。(2*)

NOTES:

1。Amongthetreesofaprimevalforestwhichhave，asarule，novalue，becausetheyareavailableinsuperfluity，thereareneverthelesssomewhichmayreceivevalue；allthose，namely，whichhavepeculiaradvantagesasregardsfellingandcarryingtomarket——say，e。g。，thattheystandinthenearneighbourhoodofanaturalwatercourse。Theirvalueisexactlyrepresentedbythesavingincosts——savingoflabourandtransit——whichtheyassureascomparedwiththetreeslessfavourablysituated，towhichnovalueisattached。HereisacapitalwhichbearsaperfectanalogytoRicardo\'sdifferentialrentfromlandsofpreferablequality。Eventothepure“intensity“rentthereareanalogiesincapital。ThesheepontheplainsofSouthAmericadonotreceivevalueintheirentireusefulcontent——ImeanavaluecorrespondingtotheentireusefulnessofsimilarsheepinEurope，oranyotherdistrictofgreatdemand——butonlyinthatportionofthesame——say，perhaps，thehides——whichrepaysthecostsoftransporttothesphereofthegreaterdemand。Theremainingpartismeantimevalueless，butmayalsoreceivevaluethroughanincreaseindemand。Itiseasytoinferfromtheseexamplestheconditionsforapurelydifferentialrent。

2。AfurtherfundamentaldefectinRicardo\'stheorymaybepointedout；thathehasomittedtonoticethereactionoflandrentuponthereturntocapitalandlabour。Rentiscertainlydependentuponthecurrentvaluationsofcost，but，ontheotherhand，thevaluationsofcostaredependentuponrent，ifnotinthesamedegree。Thereturnreckonedtocapitalandlabourisessentiallyinfluencedbytheamountofcapitalandlabourwhichisrequiredforworkingtheland，andbythereturnswhichtheyyieldinsodoing。

Finally，Ricardomightalsobeaccusedofhavingoverlookedtheuniversalimportanceofthedifferentialvaluation(compareBookIII，chap。xiii)。Evenpurelydifferentialvaluationsmaybemetwithelsewherethaninthecaseofland，aswesawbytheexamplesjustgivenofwoodinaprimevalforestandoftheherdsofcattleinSouthAmerica。Butofcourseitisinthecaseoflandthatweoftenestfindtherelationwhichleadstoanetdifferentialvaluationofthepreferablequalities:viz。

quantitativesuperfluityasawholebesidequantitativelimitationasregardsthebestandbetterqualities。ComparewiththisMenger，p。143。

PARTIII

THENATURALRETURNTOCAPITAL

Chapter17

TheProductivityofCapitalLandbeingpermanentandindestructible，itisnotamatterofsurprisethatitshouldcontinueyielding，yearafteryear，thatreturnwhichityieldsinoneyear。Andifwedesignateacontinually-recurringreturnas“rent，“therentoflandrequiresnospecialexplanation。Itismuchthesamewiththefactthathumanlabourissourceofapermanentreturn。Inthecaseofahealthyperson，labourpowerisrenewedconstantlyafterpausesforrestandrefreshment。

Ontheotherhand，itisamatterforwondertofindthattheperishablepowersofthesoil，andallthemovablemeansofproduction，rawmaterials，auxiliarymaterials，implements，tools，machinery，buildings，andotherproductiveapparatusandplant，whichareconsumed，quicklyorslowly，intheserviceofproduction，aresourcesofpermanentreturns，——returnswhichareconstantlyrenewed，althoughthefirstfactorsoftheirproductionmayhavebeenlongbeforeusedup。Thisbringsusfacetofacewithoneofthemostimportantanddifficultproblemsofeconomictheory；withthequestion，namely，howwearetoexplainthefactthatcapitalyieldsanetreturn。(1*)

Allcapitalyields，proximatelyanddirectly，onlyagrossreturn；thatistosay，areturnpurchasedbyadiminutionoftheparentcapital。Theconditionunderwhichthisgrossreturnmaybethesourceofanetreturnisveryeasilyformulated。Inthegrossreturnmustbefoundnewlyproducedalltheconsumedcapital，andbeyondthistheremustbeacertainsurplus。Thissurpluswillbenetreturn；——areturnwhichmay，permanentlyandwithoutdiminutionoftheparentcapital，beobtainedandconsumed。

Ifnowweaskwhetherthisconditionisactuallyfulfilled，wefind，inthefirstplace，thatthenatureofcapitaldoespermitofit。Ifcapitalis，ontheoneside，perishable，ontheother，itisreproducible。Itservesforproductionanditisproduced。Isit，however，producedinsufficientquantity，andproducedfromcapitalitselfinsufficientquantity，tofullyreplacewhathasbeenconsumed，andleaveasurplusbeyond？

BeforetryingtoanswerthisquestionIshouldliketomakeoneobservationofaformalnature。

Capitalswhichyieldgrossreturnmayundoubtedlybedesignated“productivegoods“onthisaccountalone。Theycertainlyproduce；theytransformthemselvesfromanunfinishedformofgoodstoafinishedone，ortoonethatcomesnearerafinishedone。Itis，however，preferabletospeakofcapitalasproductiveonlywhenityieldsanetreturn。Andinthissenseexclusivelyweshallunderstandthe“Productivityofcapital。“

AsBohm-Bawerkhasshown，productivitymaybeeitherphysicalproductivityorvalueproductivity。Itisimportantthatthisdistinctionshouldbeclearlykeptbeforeus。Physicalproductivityexistswheretheamountofgoodswhichformthegrossreturnisgreaterthantheamountofcapitalgoodsdestroyed；andintheforegoingdeductionoftheconceptionsofgrossandnetreturnwehaveassumedthisphysicalproductivity。

Valueproductivityexistswherethevalueofthegrossreturnisgreaterthanthevalueofthecapitalconsumed。Thetaskofourtheoryis，inthelastresort，toprovethevalueproductivityofcapital；butforthispurposeitisnecessaryfirsttoprovethefactofphysicalproductivity，asthescaffoldingonwhichtheotherrests。Thevalueproductivityalreadypresupposesthedeterminationofthevalueofcapital，butthevalueofcapitalcanonlybedeterminedwhenthequestionofhowtoimputethephysicalreturnhasbeenanswered，becausethevalueofcapitalrestsontheshareofreturnimputedtoit。Justastherentmustfirstbeascertainedbeforethevalueofanylandcanbecalculated，andjustas，generallyspeaking，therulesofimputationmustberecognisedbeforethevalueofproductiongoodscanbedetermined，somustalsotheimputationofthereturntocapitalfirstbesettledbeforewecantakeuptheproblemofitsvalue。Inpursuanceofourdivisionofthesubject，wehavemeanwhileonlytheproblemofthephysicalproductivityofcapitaltodealwith。

Thereisnodoubtthatthetotalreturnofallthreeproductivefactors，land，capital，andlabour，takentogether，islargeenoughtoreplacethecapitalconsumed，andgiveanetreturn。Thisisanotoriouseconomicfact，andaslittleinneedofproofasthefactthattherearesuchthingsasgoods，orsuchathingasproduction。Ofcourse，nowandthen，aproductiveundertakingmaybeunsuccessful，andfailtocoveritsoutlay；

indeedmanyundertakingsfurnishnousableproductwhatever。Buttheseareexceptions。Theruleisthatnetreturnsareobtained，——indeed，netreturnsofsuchenormousmagnitude，thatnotonlycanthemillionsofhumanbeingsbesupported，butcapitalcangoonaccumulatingoutofthesurpluses。

Thereremains，therefore，butonethingtoask——whetherashareinthisundoubtednetreturncanbeimputedtothefactorcapital。Butthequestioncannotbeputseriously。Whytocapitalaloneshouldnosuchsharebeimputed？Onceunderstoodandgrantedthatcapitalisoneoftheeconomicfactorsofproduction，towhich，withtheothers，theproductivereturnisascribed(BookIII。chap。iii)，itisalsounderstoodandgrantedthattoitbelongsbyrightashareinthenetreturninwhichtheproductivereturnfirstembodiesitself。Arewetosupposethatcapitalisalwaysinapositiontoproduceonlysomewhatlessthanreplaceitself？Thiswouldobviouslybeanarbitrarysupposition。Arewe，then，tosupposeitcapableonlyofreplacingitsownloss，howevervariousthesuccessofproductionmaybe？Thissuppositionwouldclearlybenolessarbitrary。

Whoeverdeniesnetreturntocapitalcanonlydosobydenyingitanyreturn。

IshouldfeartorepeatmyselfwereItobringforwardanyformalproofofthefactthatcapitaldoeshaveashareintheproductivenetreturn。Ishallcontentmyselfwithmentioningoneortwocaseswhichshow，ineminentlyclearfashion，thenecessityforattributingnetreturntoit。(2*)

Whereverlabouriscrowdedoutbycapital，as，e。g。，whereamachinetakesovertheworkhithertoaccomplishedbyhumanlabour——athingwhichwillhappennolessfrequentlyinthecommunisticstatethanitdoesnow，——thecapital，ormachine，mustbecreditedwithatleastthesamereturnasthatformerlyimputedtolabour。Butthiswasanetreturn:therefore，thecapitalormachinemustalsobecreditedwithanetreturn。Werethemachinecapableofreproducingonlyitsownsubstanceasthatiswornawayincourseofuse，itwouldbelesseffectivethanhumanlabour，andwouldnothavehadpowertodisplaceit。Butwhyshouldamachinesuchasthisbefavouredintheimputationmorethananyotherformofcapital？Whatexperiencewouldspeakforthis？

Inaccordancewiththeuniversallawofdifferentialimputation，everyformofconcretecapitalofbetterqualityhasahigherreturnimputedtoitthantheconcretecapitaloflowerquality，andthisreturnismeasuredbytheamountofincreaseinproductiveresultswhichtheemploymentofthebetterqualitiesbrings。Andas，whenwelookatproductionanditsresultsasawhole，itisonlynetreturnsthataretakenintoconsideration，itistherebyprovedthat，incomparingqualitiesofcapital，thestandardofimputationmustbetakenfromthenetreturn。

Whoeveremployshiscapitalaccordingtothemeasureinwhichheseesitinfluencetheproductivenetreturn，employsitwell；

whoeverdoesotherwise，employsitbadly。Onthispointuniversalopinionisunitednow，asitwillbeinthecommunisticstate。

Theuniversalopiniontowhichwereferisnot，however，theuntrainedjudgmentofthepublicinmattersoftheory，buttheripeexpressionofexperience。(3*)

NOTES:

1。InwhatfollowsIunderstandbythetermcapitaltheperishableor(withtheextendedmeaningexplainedinthetext)

themovablemeansofproduction。Thisconceptionisadaptedtotheconditionsofacommunisticstate，inwhichthenationalincomeisobtainedsolelythroughproduction。Totakenoteofthoseformsofcapitalwhichserveintheformationofincomeoutsideofproduction，seemedtomeoutofplace，thesebeingtoocloselyconnectedwiththespecificconditionsoftheexistingeconomicorderofthings。ForthesamereasonIalsorefrainfromtakingintoconsiderationthoseconstituentpartsofanundertaker\'scapitalwhichdonotbelongtothetechnicalmeansofproduction。Ihave，however，appended，inBookIV。chap。viii，adiscussionoftheinterestonconsumptionloansandhouserent，and，attheendofBookV。chap。xi，Ihavelookedattheintentwhichcomesfromtheundertaker\'swagefund。

Toavoidmisunderstanding，Iwishoncemoretoemphasisethefactthat，amongthetechnicalmeansofproduction，Idonotincludethemeansofsubsistencewhichmustbeheldreadyathandforthelabourers。Theseareconditionsofproduction，butnotitscauses。Thecauseisherethelaboureralone。AndthisisnocontradictiontoourpreviousstatementinBookIII。chap。iii。

Thethingsonwhichthelaboureremployshisstrength，andthethingswhichmaintainhisstrength，standintotallydifferentrelationstotheproductivereturn。Theformerhaveadirectinfluenceuponreturn；thelatterinfluenceitonlythroughthemediumofthelabourpowerintowhichtheymustfirsttransformthemselves。Ifwewishtomakethelatterfactorsofproduction，itcanonlybedonebyregardingthelabourerastheirfirstproduct(compareBookV。chap。vii，onthe“costsofproduction“

oflabour)。SofarasregardshisconceptionofthemeansofsubsistenceforlabourersIamthoroughlyatonewithSax(inparticularp。324)，althoughIexplainotherwisetheemergenceofintentfromthispartofanundertaker\'scapital。

Immediatelybeforethesepageswenttopress，Menger\'streatiseZurTheoriedesCapitalsappearedinConrad\'sJahrbucher。Inthistreatisehedefendsinanimatedfashionthepopularasagainstthescientificconceptionsofcapital，andinterpretsthepopularconceptionasembracingalltheparentwealthofanacquisitiveeconomyexistinginorcalculatedinmoney，withoutrespecttothetechnicalnatureoftheinstrumentsofacquisition。Asamatteroffact，thecircumstancethatacquisitiveinstrumentsarecalculatedinmoneyisofdecisiveimportancefortheirvaluation。Tocalculateinmoneymeans——

leavingtheformoutofconsideration——first，tocalculateexactly，andsecond，tocalculatewithreferencetoexchangeandtheunitofallexchangegoodswhichitcreates。Wealsolookatvaluationentirelyunderthesetwoassumptions，althoughwesubstitutetheinternalexchangeofgoodsinastateeconomyfortheexchangeofprivateindividuals。Thenaturallawswehavededucedholdonlyasregardsindustriesonalargescaleandunderahighlydevelopedeconomy。

2。AmongsuchcasesIshouldincludealsothosewheretheuseofcapitalincreasesthepreviousproductivenessofproduction。Hereweseewithparticularclearnessthattheadditionalnetreturnmustbecreditedtothecapital。Itwould，however，beanerrortobelievethatcapitalcanreceiveashareofnetreturnonlywhenitsusehasdirectlyincreasedthepreviousproductivenessofproduction，orthatitwouldbedeprivedofthisshareassoonastheworldbecameaccustomedtotheincreasedeffects。

Experienceshowsustheproductivityofcapitaleveninastationaryeconomy。Onthisaccountalltheoriesareinadequatewhichderivetheproductivityofcapitalsolelyfromitscapacitytopromotethedevelopmentofeconomiclife。

3。Thetheoryofinterest，likethatofrent，hasalwaysbeendiscussedverymuchbyitself；discussed，Imeantosay，withoutanypreviousexaminationofthegenerallawsofimputation。Theresult，however，asregardsinterest，hasbeenimmenselylesssatisfactorythanasregardsrent。Itiseasytounderstandthatinthecaseofinterestwehavetodealwiththeessentialpointintheproblemofimputation，whileinthecaseofrentwehavetodealsubstantiallywithadetailcapableofbeingconceivedbyitself，——that，namely，ofthedifferentialimputation。

Bohm-Bawerk\'sgreatworkGeschichteundKritikderCapitalzinstheorien(Innsbruck，1884)，translatedasCapitalandInterest(Macmillan)，hasclearlyshowntothescientificworldhowunsatisfactoryallpreviousattemptsatexplanationhavebeen。

Tiesoffamilyandoffriendshipbindmetoocloselytotheauthortoallowofanypraiseofhisworkfrommylipsbeingcountedofvaluebyoutsiders。Ithereforeconfinemyselftoremarkingthateverythingcontainedinthefollowingpagesonthesubjectofthereturntocapitalandthevalueofcapital，waswrittenundertheinfluenceofhispenetratingcriticism，andthat，ifthereisaughtofvaluetobefoundinit，itcouldneverhaveoriginatedwithoutthatinfluence。ItisnotinconsistentwiththisthatIshould，nevertheless，arriveatotherconclusionsthanthosetowardswhichBohm-Bawerk——sofaratleastasmayberecognisedfromthecriticalandpreparatoryworkalreadypublished——appearstopoint。

Note——Sincewritingtheabove，Bohm-Bawerkhaspublishedthesecondpartofhiswork，DiePositiveTheoriedesCapitals(Innsbruck，1888)，translatedbymeasThePositiveTheoryofCapital(Macmillan，1891)——W。S。

Chapter18

TheCalculationofReturntoCapitalinPrimitiveandinDevelopedEconomiesThosewriterswhomaintaintheproductivityofcapitalprefertotakethemostprimitiveeconomiccircumstancesinordertomaketheirmeaningclear。Thunen，forinstance(inhisIsolirterStaat，2ndedition，BookII，divisionI，p。74)takeshisreaderstoalandinwhichthereisnocapitaltobeginwith。Initstropicalclimatetheinhabitantslive，inthemostliteralsense，bythelabouroftheirhands。Therealabourerisinapositiontoproduceyearlythetotalamountrequiredtomaintainhimforayear——weshallputthisdownat100——and，besidesthat，10%

more，or110unitsinall。Atthathecanliveandalsolaypast。

Andnowsomeman，supportinghimselfmeantimeuponhissavingsfromformeryears，succeeds，afterawholeyear\'slabour，inproducingabow，arrows，andanet。Heisrewardedforthisbybeingenabled，withtheassistanceofthenewtools，toobtainhenceforwardayearlyreturnof150units，bymeansofwhichhefindstimetorepairthedamagesufferedbyhislittlecapitalthroughwearandtear，andtomaintainitalwaysinthesamecondition。Thetotalincreasetohisincomeperyearamountsto40units，andthisincreaseisapermanentoneinspiteoftheperishablenatureofthecapital，becausenotonlyisthecapitalperishable，butitcanalsobe，andiscontinuallybeing，reproduced。Towhatfactoristhisincreasetobeimputed？

Obviouslytothecapital。Toitscreditalonecantheincreasebeattributed。Thiswillbeseen，e。g。，inthefactthateveryotherlabourerwillbeinclinedtohirethecapitalatapricewhichisbasedonthecalculationandascriptiontoitofthissurplusresult。

Similarstatementsaregivenbyotherwriters。Theyare，indeed，welladaptedtoclearupourideasconcerningtheproductivityofcapitalinitsmostgeneraloutlines，andtopersuadethereadertoitsacceptance。Ontheotherhand，theyaremisleadingalmostineverydetailasregardsourdevelopedconditionsofproduction，and，inparticular，theygiveathoroughlyfalseimpressionastothemeasureofproductivity。

InsuchprimitiveconditionsasthosepicturedbyThunen，wherecapitalemergesfortheveryfirsttime，thereturntocapitaliscalculatedattheentireincreaseofincome，whichlabourassistedbycapitalobtainsasagainstlabourunassisted。

Inotherwords，thewhole“sharedependentuponitsco-operation“

(seep。91)isimputedtocapitalasits“contribution。“Andrightlyso。Inthesemostprimitiveconditionsthereisaconsiderablesupplyoflabourpower；indeed，ascomparedwiththescantoccasionsforusingit，almosttoomuch；ontheotherhand，capitalisscarceandgreatlyindemand。Muchlabourmustbeexpendedwithoutaidfromcapital，andthecomparisonbetweenlabourassistedbycapitalandlabourunassisted，forcesitselfnaturallyuponeveryone。Thisisnofactfoundoutbysubtleeconomicinvestigation；itisseenpracticallyinmenhavingconstantlytochoosebetweenthetwokindsoflabour。

Butthisisverydifferentfromtheconditionsunderwhichwenowlive。Practicallysuchachoiceisneverplacedbeforeanyone。Itwouldneveroccurtoanyonebutatheorisingeconomist，tomeasurethevalueofcapitalbyestimatingwhatwouldbetheamountoflossifcapitalshouldnotco-operateatallintheproduction，——anymorethanitwouldoccurtoanyonetomeasurethevalueoflabourbyestimatingtheamountoflossthatwouldensueshouldlabourrefuseitsco-operation。Alllabourisjudgedonthequiteintelligibleassumptionthatitisbroughtintoco-operationwithcapital；allcapitalundertheassumptionthatitisbroughtintoco-operationwithlabour。Productionhasbecomeeversomuchmorecomplicated，andwithittheartofcalculatingproduction。Thesimpleformulaeofformertimesarenotnowadequate，andexamplesbasedonthemcanonlybemisleading。

How，then，arecapitalandlabourunderpresentconditionstobedistinguished？Theanswerisnotdoubtful。Accordingtothatcomplicatedformula，andaccordingtoallthoseruleswhichobtain，asregardstheimputationofreturningeneral。

The“contribution“ofcapitalisto-dayfarfromamountingtothewhole“sharedependentuponitsco-operation。“Whilethatshareisverymuchequaltothetotalreturnofproduction，the“contribution“ismerelyonesinglequotaalongsideofthequotasoflandandlabour。

OnlyinoneconnectionhasthefrustrationofThunenanythingtoteachusaboutthemeasureofthereturntocapital。Itprovesdearlythat，inanycase，thereisanetreturntobeimputedtocapital——insofarasitisproperlyemployed；areturnwhichcanbepermanentlyobtainedinspiteoftheperishablenatureofthevariousitemsformingthecapital，andinspiteoftheircontinualtransformationinconsumptionandreproduction。

Capital，rightlyemployed，doesmorethansimplyrenewitself；ityieldsbeyondthisasurpluswhichmustbeimputedtoit。Thispropositionisprovedbeyondadoubt，asregardsprimitiveeconomicconditions，byThunenandothers；andintheseprimitiveconditionstheprogressofeconomygenerallyisshownthroughthediscoveryanddevelopmentofformsofcapital。Butwillanyoneassertthatwhatwasthedueofprimitivecapitalisnotalsothedueofthedevelopedmoderncapital？

Chapter19

TheImputationofGrossReturnandofNetReturnWehavesaidthatcapital，rightlyemployed，showsitselfproductive，inasmuchasitreproducesitselfwithasurplus。Thisproposition，althoughundoubtedlycorrectasaconclusion，requiresoneessentialmodification。Dothearrows，bows，andnets——thecapitalofThunen\'sillustration——reallyreproducethemselvesinthestrictestsenseoftheterm？Certainlynot。

Theyproducenothingbutfishandthespoilsofthechase；inthistheyexhausttheirdirectandproximateactivity。Theydonotintheleastdegreethemselvesbringforthnewarrows，bows，andnets，nordotheygivedirectassistanceindoingso。Thereturnwhich，inthefirstplace，fallstobeimputedtothemis，consequently，agrossreturninforeignthings；things，thatis，fromamongwhichtheycannotreplacethemselves；thingswithwhichtheymaypossiblybecomparedinvaluebutnotinquantity，andbymeansofwhichaphysicalnetreturncannotthereforeberepresented。Butwecannotstopshortinourconsiderationatthispoint:asamatteroffacttheindirectefficiencyofcapitalgoesmuchfurther。Thebows，arrows，andnetsonceobtainedlightentheconditionsoftheirreproduction，iftheydonotactuallyco-operateinit。Theylightenitbymeansoftheextraordinaryincreaseinthegrossreturnoffishandgame，asconsequenceofwhichimmenselymorelabourthanformerlyisfreetobeemployedinthecreationofcapital。Therefore，inthetotalresult，anetreturndoescomeintheendtobeimputedtotheseconcreteformsofcapital，justasiftheydiddirectlyreproducethemselveswithasurplus。

Thesameargumentholdsforcapitalinthedevelopedeconomy，onlythatheretheconditionsaremuchmorecomplicatedandtheprocess，consequently，moredifficulttofollow。Nocapital，eveninthemosthighlydevelopedeconomy，directlyreproducesitself；

eachproducesfirstagrossreturninforeignthings，inwhich，physically，itsproductivitycannotbeseen。Thecapitalofabakerproducesbread，thatofamiller，meal，thatofapeasant，grain。Inorderthatthebakermayreplacehiscapitalagain，hemustturntothemiller，andtoalltheotherpersonswhocanprovidehimwiththenecessarymaterialsandapparatusforhisproduction。Thegrossreturnofeverycapitalmustbeexchangedagainstthegrossreturnsofothercapitals，——indeed，againstthosereturnswhichareattributedtolandandlabour，——inorderthatthecapitalmaybereplied，andthenetreturnbecomephysicallycognisable。Theonlyimputationthatevertakesplacedirectlyisanimputationofgrossreturn，butfromthatfollows，asafinalconsequence，animputationofnetreturn，howevercircuitoustheroutemaybe，——solong，Imean，astheefficiencyofcapitalisconsideredundiminished，andsolongasitissuitablyemployed。Itisjustasthougheverycapitaldiddirectlyreproduceitselfwithasurplus。

Inmostcasesthereturntoallthecapitalinvestedinonebusinessoroneundertakingisgroupedinoneestimate。Itrequiresnoproof，however，that，fromthetotalreturn，eachseparatebitofcapital(assumingsuitableemployment)willhaveitsshare。Everybitofcapital，rightlyemployed，producesdirectlyagrossreturnofgoodsdifferentfromitself，andfinally，afterthenecessaryexchangebetweensimilargrossreturns，reproducesitselfandyieldsanetreturn。Inthissensemachines，tools，rawmaterials，auxiliarymaterials，inshort，allformsofconcretecapital，thesmallestandthemostperishable，eventhosefromwhich，materiallyspeaking，nothingpassesoverintotheproduct，replacethemselvesandyieldasurplus。Fromthispointofvieweverypieceofcoalwhichisburnedforpurposesofproductioncreates，inthelastresort，anothersimilarpieceofcoal，and，beyondthat，aperishablenetreturn。And，inasmuchastherepliedportionsofcapitalareemployedagainandyetagain，eachpieceofcapital——thesmallestandmostperishable——becomesthesourceofapermanentrent。(1*)