Quote of the Day for June 19, 2013

In books on Political Economy our attention is called to the following facts. If successive doses or increments of labour (or labour and capital) are applied to a piece of land, we find that, at any rate after a certain point, doubling the amount of labour does not double the product. As we increase the amount of labour, therefore, each successive increment secures a smaller return in the shape of product. This is called the "law of diminishing returns," and is said to apply generally to agricultural and extractive industries. On the other hand, if an industry such as that of the cotton or iron trade so increases that, say, twice as much labour (or labour and capital) is employed in it as before, it will generally be found that the result is a more than doubled output. This is said to illustrate the "law of increasing returns," and to apply generally to manufactures.

II.5.2 (paragraph number)

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