AGRICULTURAL ECONOMICS 



more fundamental principle of seeking the largest 

 net profit per unit of managerial activity, which 

 must be kept uppermost in mind. 



A change in the rate of wages without a cor- 

 responding change in the rate of return to capital, 

 or vice versa, will necessitate a readjustment of 

 the relative amounts invested in the 'employment 

 of laborers and in the employment of capital- 

 goods. As wages rise relatively to the returns to 

 capital-goods, there should be less labor and more 

 capital-goods employed. Improvement in ma- 

 chinery often make it profitable to substitute 

 capital-goods for laborers. The self-binder, the 

 hay-loader, and the windmill are examples where 

 this has been true. 



Having decided upon the proportions in which 

 laborers and capital-goods should be associated, 

 the farmer is still confronted with the problem of 

 determining how many composite units, made up 

 of laborers and capital-goods in the proper pro- 

 portions, should be employed upon a given area 

 of land in the production of a given crop. This 

 is the problem of determining the proper intensity 

 of culture. There is always some degree of in- 

 tensity which will yield the largest net profit ; but 

 what is that degree of intensity ? 



For the sake of simplicity, let us first suppose 

 that the farmer can get as much land of a given 

 grade as he may want to use, without paying any- 

 thing for its use. Under such circumstances, 



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