THE PROPORTIONS OF THE FACTORS OF PRODUCTION 1 35 



All these problems may be studied from the individual and 

 from the social point of view. 



Standpoint 1. Most of the discussion of this subject has been 

 from standpoint 1. In the discussion of this problem, land, 

 labor, and capital equipments are assumed to be at the disposal 

 of a manager (a farmer), who is attempting to use men and 

 equipments upon land in the proportions which will yield 

 maximum profits for himself as the responsible party who stands 

 the losses or secures the profits. The problem of how much 

 land, labor, and equipment he should operate is another ques- 

 tion of proportions which will be considered in the chapter on 

 the size of farms. 



To illustrate the economic principles underlying the proper 

 degree of intensity of culture on a given farm in the production 

 of a given crop, let us first suppose that the farmer can get as 

 much land of a given grade as he may want to use, without 

 paying anything for its use. Under such circumstances, how 

 many composite units made up of laborers and capital-goods 

 should be associated with an acre of land ? For the purpose of 

 this illustration let us assume a small composite unit, the use 

 of which costs the farmer one dollar. It is obvious that in the 

 production of corn, for example, the application of one of these 

 units, per acre of land, would ordinarily produce very little, 

 if any corn at all. It is possible that the expenditure of two 

 units would produce a small crop ; but then the third unit would 

 increase the product more than the second, the fourth more 

 than the third, and so on until a point of stationary returns 

 has been reached, after which the succeeding units may be said 

 to continue for a time to add less and less to the total product, 

 until a point may be reached where further applications would 

 add nothing to the total product. Thus in agricultural produc- 

 tion the returns to succeeding composite units made up of laborers 

 and equipments may be said to follow the law of increasing returns 

 until a point of stationary returns has been reached, after which the 

 law of diminishing returns per succeeding unit commences to operate. 



This may be illustrated by means of a diagram. In Fig. 7 

 the composite units of labor and capital-goods applied to a given 



