Page:The Harvard Classics Vol. 51; Lectures.djvu/332

322 than was produced before—it is obvious that the proportion of x to the other factors is too high. Consequently, more of x will be little desired as compared with y and z, because if there is too much of x in the combination there must be too little of y and z. But if the increase in x results in an increase of five units of product proportional increase, in the product, then the factors are nearing the right proportions. Whether it is better to increase x by one unit will then depend upon the cost of x and the value of the increased product. Let us suppose that the increase in x results in an increase of five units of product (105 p). If one unit of x cost less than five units of p, it will be profitable to increase the factor x from 10 to 11; otherwise it will not.

Of course the formula and all that comes after it could be repeated with respect to y or z, as well as of x, if either were regarded as the variable factor. x, y, and z may represent labor, land, and capital in industry in general; they may represent different grades of labor in any industry; they may represent nitrogen, potash, and phosphorus in the soil; or they may represent any group of factors anywhere combined to get any product. The essential thing to remember is that in any combination the scarcest factor is the limiting factor, and the product will vary more directly with that than with any other. Since the variation in the product follows more sharply the variation in this scarce factor than that of any of the more abundant factors in the combination, it is not uncommon to speak of the scarcest factor as having the highest productivity. Whether that be an accurate use of terms or not, there is not the slightest doubt that it will be most highly prized, will command the highest price, and will need to be economized most carefully. This formula and the remarks under it will serve to bring out the underlying physical fact of productivity upon which the law of supply and demand is based.

THE CONFLICT OF INTERESTS BETWEEN MAN AND MAN

That utility and scarcity, and these alone, are the factors which give value to a thing, whether its utility consists in its power to satisfy wants directly or indirectly, that is, whether it be an article of consumption or a factor of production, is now perhaps sufficiently