688 AGRICULTURAL ECONOMICS 



221. CONDITIONS OF DEMAND FOR LOAN FUNDS 1 

 BY F. W. TAUSSIG 



Production with capital has been aptly described, in Bohm- 

 Bawerk's phrase, as indirect or roundabout production. Labor is first 

 applied to making tools, collecting materials, perfecting means of 

 communication ; finally, at the close of preparatory steps which may 

 be long and arduous, the enjoyable produce emerges, and emerges in 

 much greater abundance than if labor had been applied directly. 

 Practically all modern forms of industry are carried on by a prolonged 

 and time-requiring process of production. 



Further, production in the most advanced communities of modern 

 times is "capitalistic" in another sense; there is a class, separate in 

 the main, of capitalists. The long-maintained application of labor 

 in successive steps is possible only if at the outset there has been a 

 surplus if there has been saving and accumulation in some form. 

 The persons who do the saving and possess the surplus are commonly, 

 though not necessarily, a different set from those who do the labor. 

 They hire the laborers in the various stages of the productive opera- 

 tions. The creation of capital, and the emergence of interest as a 

 distinct element in distribution, are alike the consequences of the 

 double process of surpluses saved and of labor applied in roundabout 

 ways. 



We have now to note more explicitly that this process means an 

 increase in the productiveness of labor. The great modern flour mill 

 is more efficient than the modest grist mill of former tunes. Per unit 

 of labor applied, more is accomplished. To make an accurate com- 

 parison of labor product between two x such cases would call for intri- 

 cate computation. On the one hand, the modern mill stands for 

 much more of preparatory labor. On the other hand, it is usually 

 more durable, and the labor applied to making it continues to play 

 its part through a long period, until the mill is worn out and discarded. 

 The later labor in the series that done by the current workers in the 

 modern flour mill, who turn out their thousands of barrels a day 

 seems much more effective than that of the old-fashioned miller; 

 because we do not ordinarily think of the preliminary labor embodied 

 in the plant as engaged in milling. That, even so, the efficiency of 

 all the labor engaged, of earlier as well as of later date, is greater, is 



1 Adapted from Principles of Economics, II, 6-n. (Copyright by The Mac- 

 millan Co.) 



