THE PRESIDENTIAL ADDRESS 13 



of old things, due to science. If we are presenting science with part 

 of the responsible account of frictional unemployment at any moment, 

 it will be the total technological reduction due to new processes and 

 displacement due to altered directions of demand, less the total new 

 employment created by new objects of demand. This has to be 

 remembered when we are being frightened by the new machine that 

 does with one man what formerly engaged ten . Perhaps birth control 

 for people demands ultimately birth control for their impedimenta. 



The rate of introduction of new methods and the consequent 

 impact upon employment may depend upon the size and character 

 of the business unit. If all the producing plants for a particular 

 market are under one control, or under a co-ordinated arrangement, 

 the rate of introduction of a new labour-saving device will be 

 governed by a simple consideration. It can be introduced with each 

 renewal programme for each replacement of an obsolete unit, and 

 therefore without waste of capital through premature obsolescence. 

 But this applies only to small advantages. If the advantages are 

 large, the difference in working costs for a given production between 

 the old and the new types may be so considerable that it will meet 

 not only all charges for the new capital, but also amortize the wasted 

 life of the assets displaced before they are worn out. In neither case 

 then is there any waste of capital, and the absorption of the new idea 

 is orderly in time. But it is quite otherwise if the units are in 

 different ownerships. Excess capacity can quickly result from new 

 ideas. A new ship or hotel or vehicle with the latest attractions of 

 scientific invention, quite marginal in their character, may obtain the 

 bulk of the custom, and render half empty and, therefore, half 

 obsolete, a unit built only a year before. The old unit has to compete 

 by lower prices, and make smaller profits. The newer unit is called 

 upon to bear no burdens in aid of the reduced capital values of the 

 old. It may be that the enhanced profits of the one added to the 

 reduced profits of the other make an average return upon capital 

 not far different from the average that would result in a community 

 where orderly introduction on a renewal basis is the rule. Or per- 

 haps the community gets some of its novelties rather earlier under 

 competitive conditions and pays a higher rate of interest for them 

 as a net cover for the risks of obsolescence. Waste of capital would 

 be at a minimum if the ' physical ' life before wearing out were as 

 short as the ' social ' life of the machine. To make a thing so well 

 that it will last ' for ever ' is nothing to boast about if it will be out 

 of fashion in a few years. 



Scientists often look at the problem of practical application as if 

 getting it as rapidly as possible were the only factor to be considered 

 in social advantage, and this difference in the position of monopoly 

 or single management in their ability to ' hold up ' new ideas is 



