7.As has already been said the land in economic phrase includes rivers and the sea.In river-fisheries, the extra return to additional applications of capital and labour shows a rapid diminution.As to the sea, opinions differ.Its volume is vast, and fish are very prolific; and some think that a practically unlimited supply can be drawn from the sea by man without appreciably affecting the numbers that remain there; or in other words, that the law of diminishing return scarcely applies at all to sea-fisheries: while others think that experience shows a falling-off in the productiveness of those fisheries that have been vigorously worked, especially by steam trawlers.The question is important, for the future population of the world will be appreciably affected as regards both quantity and quality, by the available supply of fish.
The produce of mines again, among which may be reckoned quarries and brickfields, is said to conform to the law of diminishing return; but this statement is misleading.It is true that we find continually increasing difficulty in obtaining a further supply of minerals, except in so far as we obtain increased power over nature's stores through improvements in the arts of mining, and through better knowledge of the contents of the earth's crust; and there is no doubt that, other things being equal, the continued application of capital and labour to mines will result in a diminishing rate of yield.But this yield is not a net yield, like the return of which we speak in the law of diminishing return.That return is part of a constantly recurring income, while the produce of mines is merely a giving up of their stored-up treasures.The produce of the field is something other than the soil; for the field, properly cultivated, retains its fertility.But the produce of the mine is part of the mine itself.
To put the same thing in another way, the supply of agricultural produce and of fish is a perennial stream; mines are as it were nature' s reservoir.The more nearly a reservoir is exhausted, the greater is the labour of pumping from it; but if one man could pump it out in ten days, ten men could pump it out in one day: and when once empty, it would yield no more.So the mines that are being opened this year might just as easily have been opened many years ago: if the plans had been properly laid in advance, and the requisite specialized capital and skill got ready for the work, ten years' supply of coal might have been raised in one year without any increased difficulty; and when a vein had once given up its treasure, it could produce no more.
This difference is illustrated by the fact that the rent of a mine is calculated on a different principle from that of a farm.
The farmer contracts to give back the land as rich as he found it: a mining company cannot do this; and while the farmer's rent is reckoned by the year, mining rent consists chiefly of "royalties" which are levied in proportion to the stores that are taken out of nature's storehouse.(17*)On the other hand, services which land renders to man, in giving him space and light and air in which to live and work, do conform strictly to the law of diminishing return.It is advantageous to apply a constantly increasing capital to land that has any special advantages of situation, natural or acquired.Buildings tower up towards the sky; natural light and ventilation are supplemented by artificial means, and the steam lift reduces the disadvantages of the highest floors; and for this expenditure there is a return of extra convenience, but it is a diminishing return.However great the ground rent may be, a limit is at last reached after which it is better to pay more ground rent for a larger area than to go on piling up storey on storey any further; just as the farmer finds that at last a stage is reached at which more intensive cultivation will not pay its expenses, and it is better to pay more rent for extra land, than to face the diminution in the return which he would get by applying more capital and labour to his old land.(18*) From this it results that the theory of ground rents is substantially the same as that of farm rents.This and similar facts will presently enable us to simplify and extend the theory of value as given by Ricardo and Mill.
And what is true of building land is true of many other things.If a manufacturer has, say, three planing machines there is a certain amount of work which he can get out of them easily.
If he wants to get more work from them he must laboriously economize every minute of their time during the ordinary hours, and perhaps work overtime.Thus after they are once well employed, every successive application of effort to them brings him a diminishing return.At last the net return is so small that he finds it cheaper to buy a fourth machine than to force so much work out of his old machines: just as a farmer who has already cultivated his land highly finds it cheaper to take in more land than to force more produce from his present land.Indeed there are points of view from which the income derived from machinery partakes of the nature of rent: as will be shown in Book V.
NOTE ON THE LAW OF DIMINISHING RETURN
