Читать книгу The Principles of Economics, with Applications to Practical Problems - Frank A. Fetter - Страница 48

Economic agents contain uses to be obtained only with progressive difficulty

1. The phrase "diminishing returns of industrial agents" is the expression of the fact that there is an elastic limit to the utility any indirect good can afford within a given time. Successive attempts to get additional services from a thing are usually in part successful, but each additional service is gained with more difficulty, or a smaller added service is gained for an equal expenditure of materials or effort. A book stands many hours untouched on the shelves of the library; but if, as often happens, two or more persons wish to use it at the same hour, time and energy are wasted. The book has a potential use during the twenty-four hours, but all this can be secured only at the cost of the greatest inconvenience. The greatest net uses, therefore, are seen to be to the first user and in the first hour, for these uses cost the least time and trouble. If the members of a family will take turns, one chair will serve for all of them; but if all are to be able to sit down together, a chair must be provided for each. Often it will happen that only one chair is in use, the other nine chairs being valued only for their potential uses. I knew two young men who owned a dress-coat in partnership, and as they had different evenings free from business all went well until both were invited to a reception which both were very eager to attend.

This is true of all classes of agents

Illustrations of this principle may be drawn from every class of durable goods. The example generally given is that of a field used for agriculture. It was long ago seen that a larger crop could usually be obtained on the same area, only with greater effort or expenditure; but this fact has been thought to be peculiar to the use of land. The examples given above have been purposely chosen from very different fields, to show that the truth is a general one: a good that affords a given service can be made to increase that service, ordinarily, only on condition that men put forth greater effort, or sacrifice more goods.

The decreased utility is most clearly seen in the diminished effect which other agents produce when used in connection with the thing. When several are trying to use the same book, and are wasting time trying to get it, we often say their study hours are less fruitful because of the poor library facilities. Again, we speak either of the diminished returns of the field, or of the labor applied to the field. Either the particular thing is said to show diminished returns or the other coöperating agents are said to show them.

Decreasing technical effectiveness of material things

2. As the agents used in connection with a fixed amount of any other agent (for mechanical, chemical, physiological, psychological, and other purposes) increase, their objective effectiveness after a given point decreases. Objective or technical effectiveness means effectiveness independent of the thought or estimate of men. It is not the effectiveness to produce a feeling in men, but to produce results on the material world. In a mechanism, if one part is increased without increasing the other parts, a point is reached where it does not add to the result. If in the building of a bridge the weight of the floor is increased beyond a certain point, the rest of the bridge being left unchanged, the bridge is weakened instead of strengthened. If the weight of the iron in the framework is increased beyond a certain point without strengthening the piers, the structure is weakened. If the pier is greatly enlarged, the bridge may not be weakened, but there is an utter waste of material and effort, and perhaps the main purpose of the bridge is defeated by the damming up of the stream. A bicycle frame, like a chain, is no stronger than its weakest part. If the strength of all parts of the wheel and frame is in equal proportion to the strain they must bear, added weight to any single part weakens the whole machine. The development of the modern type of bicycle, by many experiments, is a good example of the adjustment of materials according to the principle of technical efficiency.

A variation of the same principle is seen in chemical combinations. Exact proportions of materials must be used to get a certain result. Increase of one ingredient will not increase the desired product. Either the added part is rejected, does not enter at all into the compound, or it unites to form another and different product.

That the same principle holds good of the psychological effects of things, we have already fully recognized in discussing wants and marginal utility. A given amount of a good will affect the senses in a pleasurable way, but an increase in the amount will not cause a proportional addition to pleasure of sight, sound, or smell. On the contrary, such an increase may defeat the object entirely. Here we are at the threshold of the economic problem, for we have touched on "feeling."

Economic diminishing returns relate to value

3. The idea of economic diminishing returns arises when man recognizes these technical facts and their relation to gratification, in his use of a limited supply of indirect agents. All economy begins with scarcity. The varying effects produced by different agents therefore require to be studied or the sum or direct goods of enjoyment will not be as great as is possible. Waste will take place. A bridge will have its maximum use with a minimum outlay when the parts are in a certain proportion. Beyond that point, the increase of any part may add something to the usefulness of the bridge, but the agents must be taken from some other and greater use.

The thought of economic diminishing returns always has reference to value. If a particular kind and amount of a certain material is used in varying combinations with other agents, the value of the added product will not always be in the same proportion to the value of the added agent. The bridge-builder must consider not only what the added material will add to strength, but what it will cost, and whether the result will justify this expense. So the economic problem of diminishing returns is more complicated than the mechanical one, for it contains not only the technical but other factors.

The marginal utility in goods

If the value of the product increases less rapidly than the cost of the agents successively added to secure it, a point must at length be reached where the value of the added agents and of the additional product just balance; this is called the point of marginal utility.

If a certain value in labor, fertilizer, or material, be applied to an acre of land, it may be more than recovered in the value of the product. Further applications give a product increased not in equal proportion to the former yield, and so on till the value of the last-added agent just balances that of the added product. This is the best adjustment possible, and beyond this point there will be a deficit in value. Just where the equilibrium is found at any time is the margin of cultivation.

The term "cultivation" is taken from agriculture but must be understood in the broader sense of utilization, as the principle is not confined to the case of land or agriculture, but applies as well to the use of furniture, books, clothing, horses, or any other indirect agents.

Meaning of intensive margin of utilization

The extensive margin of utilization

4. There are two margins, the intensive and the extensive. The margin of utilization in the case of a single piece of wealth is called the intensive margin. Any form of indirect wealth, anything kept to use, may be considered as containing a series of uses. Using one thing more and more while uniting other things with it, is using it more intensively.

Getting more use out of the book by effort, out of the farm by applying more fertilizer, out of the house by putting more people into it, is intensive utilization. The earlier uses come easily, naturally; the later ones are gotten with increasing difficulty.

When a number of agents are of different qualities, the point between the one last used and the next unused is the extensive margin of utilization. The best agents that are available are naturally used first, but as they are more intensively used there is increasing inconvenience. Then recourse must be made to the inferior agents, whose first uses, however, are greater than the later, intensive uses, of the better grades. When the step is made to the use of agents that were before unused because inferior, it is extending the margin of utilization. The intensive margin of use is in the particular thing; the extensive margin of use lies outside of this.

Extensive Grades of Uses

The relation of the two margins may be shown in a simple diagram. Let the better grades of indirect agents be represented by longer rectangles, the upper parts of which represent the more accessible, more easily secured utilities. Each agent consists of many strata of uses. The best uses are grades a, b, and c, in M; but after M has been utilized intensively down to d, N will begin to be utilized at its highest point. When utilization goes down to f, O comes into use, and so on. Therefore it will be seen that until the intensive margin takes in d, M is on the extreme margin of utilization, and N is just outside it; when the intensive margin falls to g and h, P is inside the extensive margin, and Q is just outside.

Equilibrium of the two margins

The marginal utility or effectiveness of added agents tends to be equal on the intensive and the extensive margins. This is simply a case of the substitution of goods in the use of indirect agents. If the value of the added product in the use of a particular good decreases, a point finally is reached where it is better to transfer the outlay to another agent, to change from intensive to extensive utilization, to go over to the use of another field or of another machine not so good. The effectiveness of the labor or capital that men have to apply is being compared constantly in the two cases, and to the extent that this comparison is perfect the effectiveness of the agents tends to be equal on the margin in the two applications.