Economic output

“ The efficiency of the new manufacturing processes has provided a large surplus of goods that must be taken somewhere, exchanged for food and raw materials, which must, in turn, be brought to the producers of manufactured goods. In the course of these transactions, a generous share of the values produced goes, in the form of profit, to the owners of the industry, another considerable portion goes into reinvestment, thus swelling the volume of productive capital.
The increased wealth, the larger capital and the greater amount of surplus all make possible the maintenance of a larger population. ”

“ 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. ”

“ I maintain, as I think you have done, that consumption as compared with production is always greatest where capital is most accumulated. Diminish the capital of England one half, and you undoubtedly augment profits, but it will not be in consequence of a greater proportion of demand but of a greater proportion of production; demand as compared with production could hardly fail to diminish. Individuals do not estimate their profits by the material production, but nations invariably do. ”

“ Manufacturing industry increases its produce in proportion to the demand, and the price falls; but the produce of land cannot be so increased; and a high price is still necessary to prevent the consumption from exceeding the supply. ”

“ But if, on the other hand, growth in the supply of money does not keep pace with the economy's current production, then prices will fall, the nations's labor force, factories, and other production facilities will not be fully employed, or both. ”

“ PRODUCTION.
§ 1.⁠But money, no more than commodities in general, has its value definitively determined by demand and supply. The ultimate regulator of its value is Cost of Production.
We are supposing, of course, that things are left to themselves. Governments have not always left things to themselves. They have undertaken to prevent the quantity of money from adjusting itself according to spontaneous laws, and have endeavoured to regulate it at their pleasure; generally with a view of keeping a greater quantity of money in the country, than would otherwise have remained there. ”

“ In manufactures, accordingly, the causes tending to increase the productiveness of industry, preponderate greatly over the one cause which tends to diminish it: and the increase of production, called forth by the progress of society, takes place, not at an increasing, but at a continually diminishing proportional cost. ”

“ At present the national output, which is only another way of expressing the national income, is produced from certain channels of production in response to the expectation of demand from those whose possession of claims to goods, that is to say, money, gives them the right to say what kind of goods they will consume, and consequently the industrial part of the population will produce. ”

“ I must, therefore, contend that the high scale of industrial remuneration in America, instead of being evidence of a high cost of production in that country, is distinctly evidence of a low cost of production—of a low cost of production, that is to say, in the first place, of gold, and, in the next, of the commodities which mainly constitute the real wages of labor—a description which embraces at once the most important raw materials of industry and the most important articles of general consumption. ”

“ Many economic questions are treated fully in such articles as Banking, Federal Reserve Banking System, Federal Farm Loan Board, Excess Profits Duty, Income Tax, City Government, Interstate Commerce, Conservation Policy, Insurance, Cost of Living, Food Supply, Rationing, Marketing, Price Control, Profiteering, Profit-Sharing, Savings Movement, ETC. For industrial development see also the articles Shipping, Railways, Telegraph, Telephone, and Electricity Supply, as well as those on important industries such as Coal, Copper, Cotton and Cotton Industry, Dyeing, Petroleum, Iron and Steel. ”

“ If every commodity on an average remained unsold for a length of time equal to that required for its production, it is obvious that, at any one time, no more than half the productive capital of the country would be really performing the functions of capital. ”

“ The injury suffered will be what I have just described; there will be a worse distribution of the general capital and industry, and therefore less will be produced. The natural price of commodities will be raised, and therefore, though the consumer will be able to purchase to the same money value, he will obtain a less quantity of commodities. ”

“ Who would lend at 5 per cent. per annum to agriculture, to manufacturers, and to commerce, when a borrower may be found ready to pay an interest of 7 or 8 per cent.? That sort of income, which is called profit of stock, would rise then at the expense of the consumer. Consumption would be reduced by the rise in the price of produce; and the other productive services would be less in demand, less well paid. The whole nation, capitalists excepted, would be the sufferers from such a state of things. ”

“ Your statement requires that with every additional labourer not only an equal increase but a greater increase of surplus produce should be obtained. More labourers may then be employed without limit, and rent and profit together must not only increase, but increase in a geometrical progression. I am sure I am correct in thus stating your proposition, because if as you say the whole corn expense of production per quarter will be diminished with every rise of price, the surplus must increase in a geometrical ratio with the capital employed. ”

“ This will in some measure account for the different value of money in different countries; it will explain to us why the prices of home commodities, and those of great bulk, are, independently of other causes, higher in those countries where manufactures flourish. Of two countries having precisely the same population, and the same quantity of land of equal fertility in cultivation, with the same knowledge too of agriculture, the prices of raw produce will be highest in that where the greater skill, and the better machinery is used in the manufacture of exportable commodities. ”

“ If the cost be low, it means that the industry is very productive; that the same capital and labor produce more for their exertion in this than in other industries. And yet it is precisely in the most productive industries that higher wages and profits can be, and are, paid. Although each article is sold at a low price, the great quantity produced makes the total sum, or value, out of which the industrial rewards, profits, and wages, are paid, large. ”

“ If the market price rises high above the cost of production, producers make a profit greater than the average profit made in the country. This induces them, by the appropriation of new land and the employment of new labor and capital, to increase their business. ”

“ We demand that the volume of circulating medium be speedily increased to an amount sufficient to meet the demands of the business population of this country and to restore the just level of prices of labor and production. ”

“ The real price of manufactures, the quantity of labour and capital necessary to produce a given quantity of them, is almost constantly diminishing; while the quantity of labour and capital, necessary to procure the last addition that has been made to the raw produce of a rich and advancing country, is almost constantly increasing. ”

“ If all commodities were produced in one day and by labour only without the assistance of capital, they would vary in proportion as the quantity of labour employed on their production increased or diminished. If the same quantity of labour was constantly employed on the production of money, money would be an accurate measure of absolute value, and, if shrimps or nuts or any other thing rose or fell in such money, it would only be because more or less labour was employed in procuring them. ”

“ Has the progress of wealth and industry no effect in regard to cost of production, but to diminish it? Are no causes of an opposite character brought into operation by the same progress, sufficient in some cases not only to neutralize, but to overcome the former, and convert the descending movement of cost of production into an ascending movement? ”

“ You say demand and supply regulates value [sic] ; this I think is saying nothing, and for the reason I have given in the beginning of this letter: it is supply which regulates value [228] , and supply is itself controlled by comparative cost of production. Cost of production, in money, means the value of labour as well as profits. Now, if my commodity be of equal value with yours, its cost of production must be the same. But cost of production is, with some deviations, in proportion to labour employed. ”

“ The natural price of all commodities excepting raw produce and labour has a tendency to fall, in the progress of wealth and population; for though, on one hand, they are enhanced in real value, from the rise in the natural price of the raw material of which they are made, this is more than counterbalanced92 by the improvements in machinery, by the better division and distribution of labour, and by the increasing skill, both in science and art, of the producers. ”

“ With general growth of population and wealth the increased consumption of cloth calls, in the end, for more capital in the form of the looms themselves.
General Consumption as affected by a Specific Increase of Productive Power.—Consumption in the generic—the use of consumers' goods of every kind—grows as the power to make the good increases; but a point that is of great importance is that any specific increase of productive power brings about a general increase of consumption. It brings about a greater all-round creating and using of commodity. ”

“ If on these two branches of industry a tax be imposed of five per cent ad valorem, the last will be charged only with 25l., the first with 55l.; leaving to the one 75l. profit, to the other only 40l. To equalize, therefore, their expectation of profit, the one commodity must rise in price, or the other must fall, or both: commodities made chiefly by immediate labour must rise in value, as compared with those which are chiefly made by machinery. ”

“ The gross produce of industry consists of two parts; one portion serving to replace the capital consumed, while the other portion is profit. Now equal capitals in two branches of production must have equal expectations of profit; but if a greater portion of the one than of the other is fixed capital, or if that fixed capital is more durable, there will be a less consumption of capital in the year, and less will be required to replace it, so that the profit, if absolutely the same, will form a greater proportion of the annual returns. ”

“ The labourer may obtain greater comforts; wages in kind real wages may rise. Or the progress of population may force down cultivation to inferior soils, and more costly processes; thus raising the cost of production, the value, and the price, of the chief articles of the labourer's consumption. On either of these suppositions, the rate of profit will fall. ”

“ Production is not a fixed but an increasing thing. When not kept back by bad institutions, or a low state of the arts of life, the produce of industry has usually tended to increase; stimulated not only by the desire of the producers to augment their means of consumption, but by the increasing number of the consumers.
We have seen that the essential requisites of production are three—labor, capital, and natural agents; the term capital including all external and physical requisites which are products of labor, the term natural agents all those which are not. ”

“ Accumulation necessarily increases production and as necessarily increases consumption. Accumulation of produce, if properly selected, may always be accumulation of capital, and it cannot fail to be worth more than it cost, estimated in corn or labour,—and this I think would be true although all our soldiers, sailors, and menial servants were employed in productive labour. ”

“ For in each case the uncertainty arises only when we are dealing with one of the factors of production, land, labor or capital, regarded as a whole. If we are dealing with the capital available for a particular industry, a rise in the rate of profit in that industry will certainly increase the supply of capital available there ”

“ Besides this equivalent, which he gives for the portion of agricultural labor consumed by him, and this supply of manufactured commodities for his own consumption, he furnishes still a surplus, which compensates for the use of the capital advanced, either by himself or some other person, for carrying on the business. ”

“ A commodity can only permanently rise in price, either because a greater quantity of capital and labour must be employed to produce it, or because money has fallen in value; and on the contrary, it can only fall in price, either because a less quantity of capital and labour may be employed to produce it, or because money has risen in value. ”

“ 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. ”