ABSTRACT
How far does the conception of marginal units of production assist toward a theory of distribution? It is easily shown that if an unlimited amount of labor is procurable for a business where the other factors of production are given quantities, the last unit brought into employment will receive no aid—or a minimum aid—from the other factors and will take in wages virtually the whole addition to the productivity of the business which follows its employment. This is clearly set forth by Professor Marshall in the illustration of the marginal shepherd. A farmer with a given farm and farming capital calculates that it is just worth while to employ a tenth shepherd, whose addition to his staff enables twenty more sheep to be marketed in a year than would be the case were nine shepherds employed. These twenty sheep must be accredited to the marginal shepherd as the specific product of his labor, and he will receive them, or their value, for his wages. For though he receives the same assistance from the land and capital as the other shepherds do, it is necessary to assume that no more productivity is got out of these factors when ten shepherds are employed than previously when nine 166were employed; or, put in another way, any assistance the marginal shepherd receives from capital and land is attended by a corresponding shrinkage in the assistance rendered to the other nine. For unless the full economy of the fixed factors were exhausted by the employment of nine shepherds, there would be a surplus gain to the farmer on the employment of the tenth shepherd after paying his wages; in that event it would pay to employ an eleventh shepherd, and the tenth would not be marginal. It is necessary to admit that the marginal shepherd—or, to be more precise, the marginal part of his labor—adds a product which is entirely attributable to his labor and (nearly) the whole of which is returned to him in wages.
