DISTRIBUTION OF AGRICULTURAL INCOME 293 



pay for it diminishes also. Thus we have the clearest possible 

 reason for the observed fact that abundance of labor makes low 

 wages. Vice versa, if the number of laborers should diminish 

 relat iyely to the land and capital, there would then be more land 

 and more and better tools for each laborer to work with. Unless, 

 mea awhile, the laborers had forgotten something about farming 

 or ol herwise become less efficient, this would increase the product 

 of each one. By a process of reasoning similar to that just given, 

 we arrive at the best possible explanation of the observed fact 

 that scarcity of labor makes high wages. 



But this principle can be carried still further. It is not enough 

 to show why wages are high when labor is scarce, and low when 

 it is abundant. If it were possible, it would be important to 

 know just what proportion of the agricultural income would go 

 to labor, or take the form of wages, under different conditions. 

 Such exact information is probably unattainable in the present 

 state of human knowledge, but the principle which determines 

 wages is fairly well understood. To this principle is given the 

 name ''marginal productivity," which means the productivity of 

 the marginal unit of labor or the last unit of labor employed on 

 a given area of land. 



Marginal productivity. Let us assume, for the sake of an 

 illustration, that one man working alone on a certain farm can 

 produce, on the average, $1000 worth of product, and that two 

 working together on that farm can produce $1600. This shows 

 diminishing returns, the average product being only $800 when 

 two men are working as against $1000 when only one man is 

 working. 



But the marginal product is quite different from the average 

 product. In this case, while the average product is $800, the 

 marginal product is only $600, this being the sum added to 

 the total product by the coming of the second man. This is the 

 maximum which the owner of the farm, if he knew his business, 



