ABSTRACT
The causes underlying the demand for factors of production can be discovered only by a judicious fusion of statistical measurement, that approaches, though it may not exactly hit the point, with relevant theoretical orientation and interpretation. In the case of all four factors, labour, the entrepreneur, land, and capital equipment, one theoretical explanation or interpretation of decreasing returns to successive doses of any one of them, will lie in the forced selection of less naturally efficient hands, brains, soils and sites, and tools. Various attempts have been made to verify this theoretical hypothesis of diminishing return in the long-run period by reference to statistics, though hitherto without much success. The expenses of production, average or marginal, of any exchangeable, may be variable or constant for different amounts of the exchangeable. The line of demarcation between prime and supplementary expenses varies with the length of time under consideration.
