ORGANIZATION OF THE AGRICULTURAL ENTERPRISE 325 



would increase the product, but not so much as the variable factor, 

 or factors, were increased. In every normal case, therefore, where 

 the factors are wisely combined, a law of diminishing returns operates 

 with respect to each of the factors, and not with respect to one alone. 



101. THE INDUSTRIAL LAW OF DIMINISHING RETURNS 1 

 BY F. M. TAYLOR 



One of the most important applications of the general theory of 

 combining proportions and product respects the capacity of any par- 

 ticular quantity of any factor, say land, to increase its output, with 

 the aid of an increasing quantum of auxiliary factors, in response to 

 an increasing demand. We are trying to get more product out of a 

 given farm; what success do we have ? Now, this problem is impor- 

 tant in itself, particularly to the owner of the farm. But there is 

 another problem, depending largely for its solution on the solution 

 of this first problem, which is of much greater importance to people 

 generally as distinguished from the owner of a particular farm. This 

 second and more important problem asks, not, What success shall we 

 have if we try to get more product from a particular piece of ground ? 

 but rather, What success shall we have if we try to get a larger product 

 from some particular industry say wheat raising taken as a whole ? 



Taking up, now, the matter of possibilities for industries as wholes, 

 and assuming general conditions to remain constant, we surely have 

 results which, in form at least, are analogous to those already reached 

 in our study of individual factors. Any industry, taken as a whole, 

 if we were to try to get from it all quantities of output from a very 

 small amount up, would be found at some time or other in each of the 

 following conditions or stages: (i) output increasable at increasing 

 rate or diminishing cost, (2) output increasable at constant rate or 

 constant cost, (3) output increasable at diminishing rate or increasing 

 cost, (4) maximum output or maximum cost, and (5) output actually 

 diminishing. This last, of course, would never be realized, just as in 

 our former case, because it would be foolish to expend effort in 

 diminishing rather than increasing product. The fourth stage would 

 be merely a point as in our preceding case, since there could be but 

 one maximum output. The second stage, however, would not as in 

 our original case be a mere turning-point from increasing to diminish- 

 ing returns. Conditions would be constantly occurring under which 



1 Adapted from Principles of Economics, pp. 118-22. (Copyright by F. M. 

 Taylor, 1911.) 



