ABSTRACT
SUMMA.Ry,-The CU1'rent exposition of the law of 1'ent, basea on a diagram of "decreasing returns" to labour, for a constant of land, mistakes the charctcteristics of til e constant for those of larld. Hence many errors in nomenclatu1'e and in thMtght have arisen, It is equally easy and equally legit'imate to rep1'esent the same facts in the form of a diag1'a1n with labour f01' the constant nnd land for the variable. This will shew that both 1'ent and wages are shares in the F1'oduct determined by marginal efficiency; and that when all the factors lta1:e received their sha1'e in this marginal di{ltribution there is no S111'Plus 01' 1'esid1tum at all,
The roots of the error concerning the exceptional treatment of land, which we examined in the last chapter, go 'l'h d' down far deeper than the point to which we e mgram of rent, Its have as yet traced them, and the process of form, its iIl-t' t' t b 1 ted ' h terpretatioIl, ex ll'pa 1011 canno e comp e Wit out an and its im-elaborate examination of the current exposition plications, f h h f W'11 h t-o t e t eory 0 rent, e WI t ere10re go on
to the examination of the ordinary diagram given to illustrate both the supposed "law of decreasing returns" and the "law of rent" derived from it. In :Fig. 39 increments of "labour" applied to a constant of land are reckoned along the axis of X, and rates of increment to the crop per unit increment of labour along the axis of Y. The total yield for OXl "labour" is Orw1x1, and labour being rewarded at the rate of Xl WI per unit receives the area Ow]
altogether, the balance Yl1·U\ being rent. If OX2 only had been applied to the same amount of land the total yield would have been the smaller area of 01·W.';;;." but the reward of "labour" per unit would have bee~" higher, namely. X 2W 2• Rent would only be y2rw2, a smaller proportion of a smaller total. Thus decreasing returns to land per unit and increasing returns to "labour" per unit are read as we recede from the margin, and decreasing returns to " labour" per unit and increasing returns to land per unit; as we advance from the origin. More labour bestowed on
the same land means less land under the same labour. So we have these results: More labour on the same land or less land under the sam" labour means a larger rent per unit of land and a less "wage" per unit of "labour"; whereas less labour on the same land or more land under the same labour means a lower rent per unit of land and a higher "wage" per unit of "labour." Those of the results just formulated which are directly illustrated in the figure are very familiar to all students of Political Economy, and familiarity has made them appear axiomatically true. But those of them which are just as explicitly contained in the data, but are only indirectly illustrated by the figure. and
which have been italicised in the statement just made, are unfamiliar to most students of Political Economy, and may appear startling and perplexing, though they are absolutely identical with those expressed in the more familiar form and at once accepted as axiomatic.
