worry of the “boss” do not increase19 with the scale of operations, how is the equality of net
advantages which theory leads us to expect brought about? Ceterisparibus, might we not expect the
entrepreneur’s residue to be larger in the large industries?20 The answer seems to be that, as
equilibrium is approached under the joint influence of Commercial and Industrial Competition, the
amounts of the factors21 are so varied as to fulfil the condition that equal efforts and sacrifices on the
part of the entrepreneur are attended with equal remuneration.22 This equality is irrespective of
identity in the relation between factors and product.23 It may exist whether that identity is supposed
to be present between industries of different sizes or, as in general to be supposed, there is no
identity in the relation between factors and product for different individuals and industries.
The sort of adjustment thus postulated may be illustrated by a more familiar kind of surplus,
that which accrues to the landlord according to the received theory of rent. Let there be a homo-
geneous tract of land equally adapted to the cultivation of wheat and barley, owned by a set of
competing landlords, who accordingly obtain an equal rent per acre whether wheat or barley is to
be grown thereon.24 Now let a tax be imposed on the rent of land used for growing barley. There
must result a new equilibrium, in which it remains true that owners of homogeneous land obtain
equal rent per acre for whichever purpose used, and that cultivators of wheat and barley obtain,
ceteris paribus, equal profits. These conditions can be fulfilled if the extent of the land applied to
the cultivation of wheat is increased while the intensity of cultivation is diminished, and contrariwise
for barley the extent is diminished and the intensity increased. This proposition holds good whether
or not the relation between outlay and product25—corresponding to the shape of the curve in the
illustration which Professor Marshall has made familiar26—is supposed identical for wheat and
barley, and even if the cultivator seeking the greatest possible profits is able to vary that relation in
accordance with the “ law of substitution.” It is here assumed that the case of manufacture is not so
different from agriculture, but that an analogous adjustment of “margins” must be considered to take
place between large and small businesses under the conditions specified, and generally between
different industries where industrial competition acts.
19. That the trouble does not increase proportionately would be a more concrete supposition. As
Sidgwick says, “Though it is more troublesome to manage a large factory than one half the size, it
can hardly be twice as troublesome.” Political Economy, Book II, chap. ix, §3.
20. Cp. Marshall, Economics of Industry, Book II. chap. xii. §4, 1st edition.
21. The factors generally, and sometimes also the form of the function expressing the quantity of the
product in terms of the quantities of the factors used, the function designated f in note 17.
22. The equality is that of an ordinary equation, not an identity.
23. The function which expresses the amount of the product in terms of the factors (including
entrepreneur’s work).
24. Compare II. 78.
25. The function expressing the product in terms of the outlay.
26. Economics of Industry, 1st edition, p. 83. Principles of Economics, 4th edition, p. 232.