CHAPTER XII 



THE CHOICE AND THE COMBINATION OF THE GRADES OF 

 THE FACTORS OF PRODUCTION 



It has been noted that all the factors of production have 

 this common characteristic that they vary in their capacity 

 and in their efficiency. Much has been heard in recent years 

 about efficiency and the efficiency movement in the industries. 

 About twenty years ago, at a time when some men occupying 

 prominent positions in the field of economics were emphasizing 

 the resemblances of the instruments of production, with a view 

 to formulating simple and comprehensive principles, Professor 

 Ely was saying to his students : " Give careful attention to the 

 differences in the economic characteristics of the instruments of 

 production. In these differences we may find some of the 

 most significant conditions of our economic life." The facts 

 and theories which are presented in this chapter are the result 

 of taking this advice. 



Capacity has been defined as power to receive, absorb, take 

 into, or associate with. The word capacity has in recent years 

 been popularly used to indicate the output of a mill or factory. 

 In this book the original, and still the dictionary, meaning of 

 the word " capacity " will be adhered to. In this sense ca- 

 pacity refers to " input," not to output. It has been recog- 

 nized since the days of Ricardo that land varies with respect to 

 the amount of labor and capital which can be invested per acre 

 with optimum results, that is, land varies in capacity. Cows 

 vary greatly in the amount of feed which they can consume 

 with optimum results when fed with the same care and by the 

 same man, hence cows vary in capacity. The same thing is 

 found true of every specific class of instruments of production 

 from milk pails to threshing machines. Variation in capacity 



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