PRESIDENTIAL ADDRESS. 569 
products (or direct fruitions, if they do not apply them industrially). Again 
we have an alias merely. Cost of production is merely the form in which the 
desiredness a thing possesses for someone else presenta itself to me. When we 
take the collective curve of demand for any factor of production we see again 
that it is entirely composed of demands, and my adjustment of my own 
demands to the conditions imposed by the demands of others is of exactly the 
same nature whether I am buying cabbages or factors for the production of 
steel plates. I have to adjust my desire for a thing to the desires of others for 
the same thing, not to find some principle other than that of desiredness, and 
co-ordinate with it as a second determinant of market price. The second 
determinant, here as everywhere, is the supply. It is not until we have per- 
fectly grasped the truth that costs of production of one thing are nothing 
whatever but an alias of efficiencies in production of other things that we shall 
be finally emancipated from the ancient fallacy we have so often thrust out at the 
door, while always leaving the window open for its return. 
I now turn to some of the most obvious consequences of the differential 
theory of distribution. They are all included in the one statement that when 
fully grasped this theory must destroy the very conception of separate laws of 
distribution, such as the law of rent, the law of interest, or the law of wages. 
It is by determining the differential equivalence of all the factors of production, 
however heterogeneous, that we reduce them to a common measure and establish 
the theory of distribution; just as it is by determining the differential equiva- 
lence of all our pursuits and possessions that we attempt to place a shilling or 
an hour or an effort of the mind where it will tell best, and so distribute our 
money or time or mental energy well. There can no more be a law of rent 
than there can be a law of the price of shoes distinct from the general law of 
the market. The way in which the several factors render this service to pro- 
duction differs, but the differential service they render is in every case identical, 
and it is on this identity or equivalence of service that the possibility of 
co-ordinated distribution rests. So the economist, though he may begin by 
giving precision to the student’s idea of how ‘waiting,’ for example, or 
tools, or mere command of ‘ extension’ in space, or manual skill, or experience, 
or honesty, may affect the value of the product, must end by showing him 
that their distributive share of the product depends not upon the way in which 
they affect the product (wherein they are all heterogeneous), but on the differ- 
ential amount of their effect (wherein they are all alike). The law of distribu- 
tion, then, is one, and is governed not by the differences of nature in the 
factors, but by the identity of their differential effect. With this searchlight we 
must scrutinise the body of current economic teaching, and must cast out the 
mischievous survivals that deform it. 
I will conclude, then, with a few illustrations of the course which I con- 
ceive this process must follow. But first I must turn aside to utter a warning 
and emphasise a distinction. 
I have throughout spoken of differential, rather than marginal significances ; 
for there is a fatal ambiguity in the use of the word ‘marginal.’ And yet, 
after all, I have felt like the man who ‘did flee from a lion and a bear met 
him; or went into the house and leaned his hand on the wall, and a serpent 
bit him,’ for by a singular perversity of fate or fashion a closely similar 
ambiguity besets the word ‘differential’ itself, and yet another the equally 
appropriate term ‘incremental.’ All these words have been preoccupied; and 
curiously enough it is speculations on the nature of rent or projects concerning 
land that have done the mischief in every case. ‘Increment,’ instead of sug- 
gesting a small homogeneous addition to any magnitude whatever, at once 
suggests to the reader of economic literature the ‘unearned increment of land,’ 
so that the ‘incremental value,’ ‘efficacy’ or ‘significance’ of anything cannot 
conveniently carry its proper meaning of the value attached to a small incre- 
ment or decrement of anything, varying with the expansion or contraction of 
the supply. This is the conception I have indicated by the term ‘ differential.” 
But here again we are forestalled. Differential payment, for instance, would 
generally be understood by readers of economic literature to mean payment 
made for some articles in excess of that made for others in consideration of 
their superiority. Thus, if I were to say that ‘rent is a differential charge,” 
