124 SECTIONAL ADDRESSES. 



fruits of a half-century's ordinary progress in a few years. The obstacles 

 are of two sorts. First, the human material which has to be used is 

 resistant to change. New trades have to be learnt and new habits have to 

 be acquired. There has to be a new geographical distribution of the 

 population and established communal groups have to be broken up. 

 Second, the accumulation of the necessary capital takes time, even though 

 the process of accumulation is largely one of turning part of an increasing 

 product into forms which will serve in securing a further increase of product. 

 An acceleration of the rate of accumulation encounters increasing costs, 

 into which both technical and psychological elements enter. One who 

 likes to conceive of all economic processes in terms of tendencies towards 

 an equilibrium might even maintain that increasing returns, so far as they 

 depend upon the economies of indirect methods of production and the 

 size of the market, are offset and negated by their costs, and that under 

 such simjjlified conditions as I have dealt with the realising of increasing 

 returns would be spread through time in such a way as to secure an 

 equilibrium of costs and advantages. This would amount to saying that 

 no real economic progress could come through the operation of forces 

 engendered within the economic system — a conclusion repugnant to common 

 sense. To deal with this point thoroughly would take us too far afield. 

 I shall merely observe, first, that the appropriate conception is that of a 

 moving equilibrium, and second, that the costs which (under increasing 

 returns) grow less rapidly than the product are not the ' costs ' which 

 figure in an ' equilibrium of costs and advantages.' 



Moving away from these abstract considerations, so as to get closer to 

 the complications of the real situation, account has to be taken, first, of 

 various kinds of obstacles. The demand for some products is inelastic, or, 

 with an increasing supply, soon becomes so. The producers of such com- 

 modities, however, often share in the advantages of the increase of the 

 general scale of production in related industries, and so far as they do 

 productive resources are released for other uses. Then there are natural 

 scarcities, limitations or inelasticities of supply, such as effectively block 

 the way to the securing of any important economies in the production of 

 some commodities and which impair the effectiveness of the economies 

 secured in the production of other commodities. In most fields, moreover, 

 progress is not and cannot be continuous. The next important step 

 forward is often initially costly, and cannot be taken until a certain 

 quantum of prospective advantages has accumulated. 



On the other side of the account are various factors which reinforce the 

 influences which make for increasing returns. The discovery of new 

 natural resources and of new uses for them and the growth of scientific 

 knowledge are probably the most potent of such factors. The causal 

 connections between the growth of industry and the progress of science 

 run in both directions, but on which side the preponderant influence lies 

 no one can say. At any rate, out of better knowledge of the materials 

 and forces upon which men can lay their hands there come both new ways 

 of producing familiar commodities and new products, and these last have 

 a presumptive claim to be regarded as embodying more economical uses 

 of productive resources than the uses which they displace. Some weight 

 has to be given also to the way in which, with the advance of the scientific 



