ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 323 



Formula VI is an expression of the conditions which exist when 

 an establishment, comprising a given amount of land and capital, is 

 operated by varying amounts of labor. If the plant is undermanned, 

 the product may be very small in proportion to the labor employed, 

 whereas a larger amount of labor, being able to run the plant effi- 

 ciently, might produce a more than proportionally increased product. 

 But a point is soon reached at which the plant yields its maximum per 

 unit of labor. This is where every laborer is most actively employed, 

 with the largest amount of machinery at his disposal which he is 

 capable of handling. But the purpose of the management of such an 

 establishment is not to get the largest product per unit of labor, but 

 the largest product in proportion to the total cost of operation. This 

 purpose is not fulfilled by merely working the plant at that rate which 

 will yield the largest returns in proportion to the labor, unless the 

 cost of labor is the only item of expense in the running of the estab- 

 lishment. 



We must conclude, therefore, that if land were free and labor 

 expensive, it would be most profitable to combine them in that pro- 

 portion which would yield the largest product per unit of labor which 

 would require. an extensive system of farming. On the other hand, 

 if labor were free and land expensive, the most profitable combination 

 would be the one which would yield the largest product per unit of 

 land which would require very intensive farming. Where ooth land 

 and labor are expensive, the most profitable proportion must lie some- 

 where between these two extremes, depending upon the relative 

 expensiveness of the two factors. That is to say, where land is dear 

 and labor cheap, the tendency is toward intensive cultivation; but 

 where labor is dear and land cheap, the tendency is, for equally good 

 reasons, toward extensive cultivation. In the real world, where labor 

 is always more or less expensive, land is never profitably cultivated 

 up to that point which will force it to yield its maximum product per 

 acre, and only in extremely new countries, where land is free, is it ever 

 profitable to cultivate it so extensively as to yield the maximum per 

 unit of labor. 



Since so much labor is never profitably used in connection with 

 a given amount of land as to produce the maximum per acre, it follows 

 that, in any normal case, an increase in the amount of labor on such 

 given amount of land will always increase the gross product. But 

 since so little labor is never profitably used in connection with a given 

 amount of land as to produce the maximum per unit of labor-, it follows 



