ABSTRACT
The problem of distribution is analogous to the problem of personal expenditure of resources, inasmuch as it involves the balancing and mutual substitution at the margin of factors in the production of a desired result which cannot be substituted for each other at the origin. The same material product may result f rom different combinations of productive agents, such as tools, land, output of muscular or intellectual effort, and so forth; and sime a marginal subtraction of one may be compensated by a due marginal addition of another, they can all be reduced to a common measure, expressed in terms of each other, and therefore summed up in terms of a common unit. The product divided by that sum yields the unit share in the distributed product. The last problem we shall discuss is that of the relation of cost of production to exchange value, What a thing has cost cannot determine its value, but what a thing will cost may determine whether or not it will be made. If it has cost more to make than it is worth at the margin, it will not be made again in such large quantities, and if it is worth more at the margin than it has cost to make, it will be made in larger quantities. Thus there is a constant tendency to equality between price and cost of production, but not because the latter determines the former. But the cost of production sometimes exerts a sentimental reaction on the conduct of the producer which is an effective though not an economic force; and low prices may sometimes produce a genuine effect in lowering the cost of production by stimulating invention and economy, since a man will fight harder to escape ruin than to increase his fortune.
