Economic efficiency

“ Increased efficiency of capital.—The efficiency of capital in production is greatly increased by minute division of labor. The shop room required for each man is reduced to the minimum space for himself and his material. His tools, while the most perfect possible, are the fewest possible.
The machinery and motive power are used to their utmost capacity constantly, and the economy of larger engines and machines is well known. ”

“ I find no evidence in the statistics of national production or accumulation of wealth that the efficiency of the American people has so increased during the last 10 years as to afford them an enjoyment of a higher scale of living on the whole. The evidence points rather to failure of production to increase commensurately with the population. ”

“ Increase in efficiency means not only more able production, but also elimination of great wastes. If nothing is done to cut down waste and increase productive efficiency, the people of this country must inevitably suffer a reduction of their standard of living to meet the lower standards of Europe. ”

“ The general effect of improved machinery has been several times referred to already. Its advantages come to the wage-earner directly in multiplying employments and in multiplying the demand by cheapening products. Indirectly, the benefits are still greater, because these cheaper products form the bulk of living for the workers. It is probable that even the better living thus provided has raised the efficiency of labor so as to command better wages. ”

“ The Essentials for Maximum Returns
The efficiency of the economic unit—the mine, the factory, the railroad division—depends upon the attitude of the individual human beings of which the unit is composed. Just as the entire economic system is made up of an aggregate of functioning units, so each unit is made up of functioning individuals. ”

“ There are other commodities where saturation has not been reached. Increasing efficiency not only releases labor and direction for greater production of these things but enables their wider diffusion over the population. A selection of such industries shows a growth of 60 per cent in the last decade. ”

“ Its success is dependent upon the confidence placed by employés in the fairness of the adjustment. It stimulates to highest productiveness when prices are high, and checks production slightly when prices are low. But it provides no direct method for readjusting business under the pressure of great changes in methods of management, nor does it save from strong antipathy against the improvement of a business by labor-saving machinery. Its successful employment depends in general [pg 272] upon the character and efficiency of employers and the general intelligence and enterprise of employés. ”

“ But the increasing power which mankind are constantly acquiring over nature, increases more and more the efficiency of human exertion, or in other words, diminishes cost of production. All inventions by which a greater quantity of any commodity can be produced with the same labour, or the same quantity with less labour, or which abridge the process, so that the capital employed needs not be advanced for so long a time, lessen the cost of production of the commodity. ”

“ Moreover, the results of efficiency methods, within the writer’s knowledge, are sufficient to convince him that their general adoption would so increase the purchasing power of the employe, by increasing his wages and decreasing the cost production, as to have a markedly beneficial and steadying effect upon the business of the country. ”

“ If, for instance, the general efficiency of all labor were increased, so that all things without exception could be produced in the same quantity as before with a smaller amount of labor, no trace of this general diminution of cost of production would show itself in the values of commodities. ”

“ It means more output accompanied with increased efficiency and therefore lower cost of production. It is on cheapness of output that the demands of the home and the foreign consumer for commodities largely depend. ”

“ Eational standards of living are justified by coextensive industrial efficiency. Progressive well-being tends to affect consumption and production in direct proportion; indeed, the stimulus to increased production normally exceeds the desire to spend, and no lasting influence towards advancing prices or costs results. If, however, expenditures are permitted to infringe upon the capital of the country, or of any particular group of the population, or even upon the rate of accumulation of savings, the effect on prices and costs will be immediate. ”

“ If invention and improvement still go on, the efficiency of labor will be further increased, and the amount of labor and capital necessary to produce a given result further diminished. The same causes will lead to the utilization of this new gain in productive power for the production of more wealth; the margin of cultivation will be again extended, and rent will increase, both in proportion and amount, without any increase in wages and interest. ”

“ It was this fierce competition that compelled capital to pay the lowest possible wages in order to market cheap goods. But the same situation stimulated the use, one after another, of new labor-saving inventions in order to increase the per capita productivity. This process was attended by the higher efficiency of the worker and an increase in his earning capacity. ”

“ On the other hand, saving is socially necessary in every industrially developed community in order to furnish the requisite capital for the continued production of wealth. Professor Marshall has estimated that every year one-fifth of the wealth of a nation is used up in the processes of manufacture and production; just to keep machines, factories, railroads, and other instruments of production up to the point of efficiency and restore loss and depreciation would therefore require considerable saving. ”

“ Just as industry, economy, or skill may improve the condition of the workmen who possess them in superior degree, but cease to have this effect when improvement in those respects becomes general, so a special advantage in procuring supplies, or a special efficiency given to some labour, may secure advantages which would be lost as soon as those improvements became so general as to affect the general relations of distribution. ”

“ It is this competition which so adjusts the exchangeable value of commodities, that after paying the wages for the labour necessary to their production, and all other expenses required to put the capital employed in its original state of efficiency, the remaining value or overplus will in each trade be in proportion to the value of the capital employed. ”

“ Several attempts have recently been made to answer this question practically and definitely by inquiring, "How much money is necessary to maintain an efficiency standard of living?"—that is, how much money is required to supply food, clothing, housing, education, recreation and the other necessaries of life in sufficient quantities to enable the recipient and those dependent upon him to maintain normal health, strength and intellectual acumen. A successful answer to this question will, in a measure, enable the employer to gauge the efficiency possibilities of his labor force. ”

“ There is, as is well known, in every industry following its successful launching, a period of demand and rapid growth, with creation of thousands of new jobs, a settling down with the efficiency engineer working to increase production and decrease costs by mechanizing and stabilizing the processes of manufacture. ”

“ The inventive faculty belongs to every class in our country; and, in studying cost of labor, it must be well borne in mind that the efficiency of American labor, particularly as combined with mechanical appliances, is one of the great causes of our enormous production. The result of this, for instance, has been that, without lowering profits, although the price of cloth has been greatly reduced, employers have been able to raise the wages of operatives, and shorten their hours of labor, because machinery has so vastly increased the production for a given outlay. ”

“ With progressing labour productivity and an expanding volume of production, this mass increases not only absolutely but also [Pg 356] relatively to the part which is consumed in production in every case, together with a corresponding increase in the efficiency of the constant capital. It is the more intensive exploitation of this part of the constant capital, irrespective of its increase in value, which is of paramount importance for the expansion of production. ”

“ It is sufficient here to remark, that the efficiency of industry may be expected to be great, in proportion as the fruits of industry are insured to the person exerting it: and that all social arrangements are conducive to useful exertion, according as they provide that the reward of every one for his labour shall be proportioned as much as possible to the benefit which it produces. ”

“ Another is the elimination of many kinds of waste. The third is a general raising of the standards of efficiency. This combination has brought the perfectly astonishing result of a reduction in the index price of commodities and an increase in the index rate of wages. We have secured a lowering of the cost to produce and a raising of the ability to consume. Prosperity resulting from these causes rests on the securest of all foundations. It gathers strength from its own progress.
In promoting this progress the chief part which the National Government plays lies in the field of economy. ”

“ For a high efficiency of production, as a whole, conditions must favor the best organization and direction of industry. Industry is dependent primarily upon natural resources. Climate, rainfall, iron deposits, fuel, supply of wood or coal, predetermine in large measure the limits within, and the direction in which, the industry of any community can move. The progress of production depends also on an increasing efficiency of labor as embodied in individual men, and upon social and political conditions making possible an increase of capital. ”

“ That a considerable degree of efficiency will result incidentally from the pursuit of business profits is not, of course, denied. What seems to be true, however, is that the main interest of those directing an industry which has reached this stage of development is given to financial strategy and the control of markets, because the gains which these activities offer are normally so much larger than those accruing from the mere improvement of the processes of production. It is evident, however, that it is precisely that improvement which is the main interest of the consumer. ”

“ If something is market-based, it is working within the market to create the greatest efficiency, so that the suppliers and the producers have an incentive to keep developing their supplies, and bringing them to the market, so people can afford them and people can buy them. ”

“ The efficiency and the reach of the machine industry in the production of productive goods was not then so great as to lower the cost of their production rapidly enough to overtake the shrinkage in capitalization and so prevent the latter from rising again in response to the stimulus of a relatively high earning-capacity. ”

“ Before such a conclusion is warranted, we must grasp more clearly the nature of the causal relation between high standard of living and efficiency. How far are we entitled to regard high wages and other good conditions of employment as the cause, how far as the effect of efficiency of labour? The evidence adduced simply proves that a b c, certain phenomena relating to efficiency—as size of product, speed of workmanship, quantity of machines tended—vary directly with d e f, certain other phenomena relating to wages, hours of labour, and other conditions of employment. ”

“ Men may compute the probable profits of labour employed in manufacturing, by computing the cost of raw material with the expense of manufacturing it, and what it sold for. But the enormous wealth that has accrued to America,—by the increase of population incident to manufacturing, by the development of its resources, and the gigantic improvements that have followed it—would be utterly out of the reach of all human industry to compute. ”

“ A theory readily intelligible, whether it be sound or unsound, underlies the adoption of the graduated levels. Economically, the theory is that there is a minimum of size for business units below which efficiency is less on the average than expansion would tend to make it; that there are intermediate levels within which efficiency is subject on the average to progressive development; and that there is an ultimate level beyond which efficiency, even if promoted, goes forward more slowly and at a diminishing ratio. ”

“ The grade of "industrial efficiency" recently introduced serves as a further incentive to skill and industry and will secure special recommendation for efficiency when the men are free to take their own places in the world. ”

“ In the case of a more complicated manufacturing establishment, it should also be perfectly clear that the greatest permanent prosperity for the workman, coupled with the greatest prosperity for the employer, can be brought about only when the work of the establishment is done with the smallest combined expenditure of human effort, plus nature's resources, plus the cost for the use of capital in the shape of machines, buildings, etc. ”

“ The value of the productive elements is determined on the ground of utility as afforded by the products, and this holds good of the labour no less than of the coals, the machinery, and all the other means of production. To insist then on cost of production is ultimately to insist on some utility. There is no new principle to be discovered, none save utility. ”