If men are supposed to know what they are doing there
is no occasion for discussing the first and third stages at all.
The boundaries of the second stage represent extreme
limits where one agency or the other becomes a free good
and passes out of consideration altogether. Beyond this
point the product is absolutely diminished by increasing
one agency or the other, as the case may be, which is an
absurdity. The identity in meaning of the first and the
third stages is evident; the first stage when passing in one
direction is the third when reading the data in the opposite
order. It is a mere matter of the arrangement of results,
not of the results themselves. Beyond the limits of the
stage of “decreasing returns,” therefore, or under circumstances
where the law did not hold, there could not
exist an “economic” situation. Unless the return per unit
of any agency does decrease it is not productive at all; its
use adds nothing to the output of the combination. If we
imagine increasing returns the agency is negatively productive.
This fact has been recognized in the case of land
in the common statement that additional land would
never be taken up until diminishing returns set in on that[1]
already in use.
The facts of variability in the proportions of agencies in the productive organization, and of the variation of the yield relative to the different agencies in accordance with the principle of diminishing returns not merely make
- ↑ Really on the other agencies applied to the land, but we follow the usual formulation. The assumption must be borne in mind that men know what they are doing and are motivated by the desire to maximize production. In fact, the results are much distorted by ignorance, the effect of tradition carried over from a place where land is scarce to new countries where it is abundant, ingrained land hunger, etc., and in the United States by the conditions of land settlement and preëmption.
positively as drawn in our figure, and does not pass through the origin. It follows further from the symmetry of the relation between factors that the curve will cut the X axis again beyond the maximum point and not become asymptotic, as it should do if it passed through the origin. Professor Taylor's curve was incorrectly drawn in this detail as it should either become asymptotic or else not pass through the origin.
