The distribution of wealth . industry of diminishing returns. DIMINISHING RETURNS AND RENT 125 But whatever may be the facts or the prospects ofthe several industries in the matter of productive-ness, the effect is immaterial in our discussion ofvalue. When we make the transfer to value, wefind diminishing returns universal. How this comesabout has been demonstrated in Chapter I. The demand for every commodity shows a dimin-ishing scale of utility. The value of the wholeproduct is determined by the utility of the marginalproduct. No matter, therefore, what may be theincreasing returns in quant
The distribution of wealth . industry of diminishing returns. DIMINISHING RETURNS AND RENT 125 But whatever may be the facts or the prospects ofthe several industries in the matter of productive-ness, the effect is immaterial in our discussion ofvalue. When we make the transfer to value, wefind diminishing returns universal. How this comesabout has been demonstrated in Chapter I. The demand for every commodity shows a dimin-ishing scale of utility. The value of the wholeproduct is determined by the utility of the marginalproduct. No matter, therefore, what may be theincreasing returns in quantity of product, providingthe scale of demand remains constant, the entrepre-neurs of a given commodity inevitably run againstthe diminishing value of their total product. Thismeans that inevitably the point will be reachedwhere receipts will fall below costs, even thoughcosts themselves are diminishing also. Costs do notdiminish at so rapid a rate as value. The following diagram will illustrate what ismeant: — DlAlrRAM 126 THE DISTRIBUTION OF WEALTH chap. Let the line Ax represent the production of an in-definite quantity of some commodity of increasingreturns. Let the line Bz represent the diminishingcost per unit of product, and the line Cy the dimin-ishing utility of the commodity. If production iscarried beyond the point H, the value of the margi-nal product will be less than the cost of producingthe same, and the value of the entire product, repre-sented by the area AHDG, would be less than itscost, represented by AHDB. But if the productionbe limited at the point F, the value of the entireproduct being AFEB, would be greater than its cost,AFKB, and there would be a profit of BKE. Pro-duction cannot profitably be carried further than,say, AFf, where the total value of the product AFEBwould approximately equal the costs of the total prod-uct, AFKB. Although the demand of the purchasers for everycommodity is a diminishing one, yet there are vari-ous circumstances whic
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Keywords: ., bookcentury1800, bookdecade1890, booksubjectwealth, bookyear1893
