22 



necessary if we had been using "cost of operation" instead of "size 

 of farm." 



Factors of efficiency. Let us first consider yield of crops per 

 acre. Previous studies have shown that the average yield per acre 

 of a given crop is just about the same on farms of all sizes. This 

 being the case, both high yields and low yields will occur with 

 about the same relative frequency in all the size groups, so that the 

 average yield will be about the same in each group. Hence the 

 average labor income in the various size groups will not be affected 

 by variation in yield. The effect of such variations is canceled by 

 the law of averages. 



Approximately the same is true of all the other factors of effi- 

 ciency, except in so far as they depend on size of farm, and in the 

 latter case, what influence they have on labor income is in reality 

 due to size of farm. Thus it costs more per acre to equip a small 

 farm than a large one, and this makes the expense of operating a 

 small farm relatively greater than that of a large one. Hence labor 

 income is relatively smaller on small farms than on large ones. But 

 this is just the kind of effects we are trying to measure. Table II-A 

 thus gives a clear presentation of the effect of size of farm on labor 

 income. 



In Table II-B the farms are classified according to labor income 

 and averaged on size. Now labor income is the combined effect of 

 many causes. Let us see if the various causes cancel out in the 

 averages as did the effects of these causes in the previous table. 



As previously stated, variation in intensiveness of farming was 

 completely eliminated at the outset by considering only farms that 

 were comparable in type, so that we need not condder thi? factor 

 further. The same is true of difference in form of tenure. 



When the farms were grouped by size, factors of efficiency 

 (yield, income per cow, etc.) canceled out, because their effects 

 are proportional to size of farm, and unusual gains and unusual 

 losses were brought together in the same groups. But in Table 

 II-B they are thrown into different elapses, because the unusually 

 large gains, which occur only on large farms, are found in the 

 groups of large labor incomes, while the unusually large losses, 

 which are also found only on large farms, are found in the minus 



