F.— ECONOMIC SCIENCE AND STATISTICS. 125 



spirit, a new kind of interest — which might be described as a scientific 

 interest conditioned by an economic interest — is beginning to infiltrate 

 into industry. It is a point of controversy, but I venture to maintain that 

 under most circumstances, though not in all, and short of the point at 

 which diminishing returns, in the Ricardian sense, become important in the 

 aggregate, the growth of population still has to be counted a factor making 

 for a larger per capita product — although even that cautious statement 

 needs to be interpreted and qualified. But just as there may be population 

 growth with no increase of the average per capita product, so also, as I 

 have tried to suggest, markets may grow and increasing returns may be 

 secured while the population remains stationary. 



It is dangerous to assign to any single factor the leading role in that 

 continuing economic revolution which has taken the modern world so far 

 away from the world of a few hundred years ago. But is there any other 

 factor which has a better claim to that role than the persisting search 

 for markets ? No other hypothesis so well unites economic history and 

 economic theory. The Industrial Revolution of the eighteenth century 

 has come to be generally regarded, not as a cataclysm brought about by 

 certain inspired improvements in industrial technique, but as a series of 

 changes related in an orderly way to prior changes in industrial organisa- 

 tion and to the enlargement of markets. It is sometimes said, however, 

 that wliile in the Middle Ages and in the early modern period industry 

 was the servant of commerce, since the rise of ' industrial capitalism ' the 

 relation has been reversed, commerce being now merely an agent of industry. 

 If this means that the finding of markets is one of the tasks of modern 

 industry it is true. If it means that industry imposes its will upon the 

 market, that whereas formerly the things which were produced were the 

 things which could be sold, now the things which have to be sold are the 

 things that are produced, it is not true. 



The great change, I imagine, is in the new importance which the 

 potential market has in the planning and management of large industries. 

 The difference between the cost per unit of output in an industry or in an 

 individual plant properly adapted to a given volume of output and in an 

 industry or plant equally well adapted to an output five times as large is 

 often much greater than one would infer from looking merely at the 

 economies which may accrue as an existing establishment gradually 

 extends the scale of its operations. Potential demand, then, in the 

 planning of industrial undertakings, has to be balanced against potential 

 economies, elasticity of demand against decreasing costs. The search for 

 markets is not a matter of disposing of a ' surplus product,' in the Marxian 

 sense, but of finding an outlet for a potential product. Nor is it wholly 

 a matter of multiplying profits by multipljang sales ; it is partly a matter 

 of augmenting profits by reducing costs. 



Although the initial displacement may be considerable and the 

 repercussions upon particular industries unfavourable, the enlarging of 

 the market for any one commodity, produced under conditions of 

 increasing returns, generally has the net effect, as I have tried to show, of 

 enlarging the market for other commodities. The business man's 

 raercantilistic emphasis upon markets may have a sounder basis than the 

 economist who thinks mostly in terms of economic statics is prone to 



