ABSTRACT

The units of services, the application of which leads to a change in “product,” are mostly taken as physical units. By measuring units of factors in terms of their market value, marginal productivity analysis is, to my mind, reduced ad absurdum. After all, the marginal productivity curve is to be the substance behind, and under certain assumptions the same as, the demand curves for factors, i.e., for definite services, not for units of value. Value units of factors are what Professor Pigou once called a “Pound Sterling worth of resources.” He used this concept not in the theory of distribution but in an analysis of the national dividend, and he has withdrawn it from the later editions of his Economics of Welfare. Measurement in units of value is a highly abstract conception as long as value is thought of “in real terms.” To make it more realistic, one may think in terms of money.