An issue of fact is raised when we inquire whether the waiting that the capitalist does connects itself with the periods of production referred to early in this paper.
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In testing these theses we shall determine in how far Professor v. A more important test is to follow. The waiting must be futile unless, in some way, it brings into existence more goods than could be created without it. Time must be productive of commodities. Lengthening the periods referred to increases the output of goods. As we lengthen them more and more, the increase in the output continues, but the rate of increase diminishes. The later extensions of the intervals that, in the theory, are said to separate labor and its reward, add less to the fruits of industry than do the earlier intervals so interposed.
Time, as a productive element, is governed by the law of diminishing returns. What if the time that is measured by these intervals is not necessarily productive? If it is practicable to lengthen or shorten these periods without affecting the product of industry at all, then the objective effect attributed to them vanishes. Their length is not necessarily connected with the quantity of goods that industry creates. If we establish the claim last made, we shall prove that the objective effects attributed to these intervals do not result from them. They may be lengthened or shortened without changing the productiveness of industry.
Though it were at the cost of an analysis that would make large demands on the readers' patience, it would be necessary to decide these two issues. That time figures as an element in industry, and that it produces results both subjective and objective, is beyond question. The time that is required for the ripening of capital goods, the specific intervals of time that are the subjects of Professor v.
They might be made shorter without diminishing either the burdens or the fruits of industry. Let us first test the power of the periods of production to impose sacrifices. Let us suppose that a forest twenty acres in extent suffices to furnish firewood for a family. A tree will mature in twenty years; and the forest must be kept intact, in point of size and maturity, or the supply of wood will fail. Each year we plant a row of trees along one side of the forest, and cut a row from the other.
The planting and the cutting are, in a way, simultaneous. We do not burn to-day the tree that we plant to-day; but we do burn a tree the burning of which is made practicable by to-day's planting. The tree that is just set is the enabling cause of the consuming of the one that is twenty years old. To plant a sapling and wait for it to mature would be a slow way to make a fire; but to plant one, and by means of this planting and of the maturing of the forest to get at once another tree for use, is a quick way of making a fire.
The forest is a synchronizer of labor and its virtual fruit.
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The fact that is of practical consequence is that, if we have once secured the permanent forest, we have no waiting to do for fuel. The identity of the tree that we burn is of no consequence. To plant one and burn another that is at once made available in consequence of the planting of the one is to annihilate the interval that would have existed if it had been necessary to depend on one particular tree. Moreover, the rate at which trees grow is of no consequence, except as it fixes the size of the for- est that we have to maintain.
If one row of trees has to be cut each year, and if the trees mature in twenty years, then the forest must contain twenty rows m order to supply the demand that is made on it and to continue undiminished in size. If it takes forty years for the trees to grow to the point at which we cut them, the forest will have to contain forty rows. It will be twice as large as in the former case. If, however, the larger forest has once been secured, there is no waiting to be done in order to get those that have had forty years of growth. We continue the planting and the simultaneous cutting, as in the former case.
As affecting the amount of capital that has to be kept in the shape of a growing forest, the period defined by the life of a tree has its only economic importance. The original raising of the forest entails a sacrifice. There is more abstaining to be done in order to get a large forest than is necessary in order to get a small one; but, when once the forest is secured, waiting is at an end.
The forest is a type of one kind of capital goods that figure in industry. All products are gradually matured; and it is necessary to maintain in constant existence a series of them in various stages of completion. We must have growing cattle, hides, tanned leather, partly made shoes and finished shoes, all maintained in a constant quantity, in order that a certain number of shoes may each day be taken for use; but, if this series of capital goods is so maintained, the ranchman, the tanner, and the shoemaker may all get finished shoes to-day in consequence of the work of to-day.
Let the letters A A' A" A"' in the upper horizontal line represent such a series of goods in various stages of completion. A is the raw material, and A"' is the article ready for use. Each transformation is effected by a dis- tinct group of workers. One set of men gets A out of the soil: By the industry of all there is created each day enough of the article A"' for all; and every man has his portion with- out waiting. At the end of the second day there is a new A in existence: The A"' of the first day is available to satisfy the wants of all; and it has become so by reason of the industry of all.
We have added a member at the beginning of the line, taken away one at the end, and ripened the intervening members. All the groups have acted, arid all have taken their pay. It is, therefore, into the original creation of the first series of goods A, A', A", and A"' that all the time sacrifice that industry involves is, as a practical fact, concentrated.
In the further prosecution of the industry, waiting for the ripening of the particular goods is unnecessary; and the periods marked by such goods are, in this especial connection, unimportant. If enough capital has once been created, the length of the periods of production has no connection with the sacrifices entailed by industry. Production might go on forever, either by long periods or by short ones; and, if there is no new capital created, there is no time sacrifice incurred.
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This is equivalent to saying that interest can be earned under perfectly static conditions, and that in such conditions there is no incurring of time sacrifice. As bearing on the unfavorable subjective effects of industry, or the personal costs entailed by it, the length of the productive periods is, in the assumed conditions, unimportant.
We have next to test the objective effect of lengthening or shortening the periods, and must define these intervals carefully. What defines the period of production that is connected with a particular instrument? It comes gradually into existence, and it gradually perishes.
It is not created by mere labor, but by labor aided by other instruments. These earlier appliances were created by still earlier ones. If we are to trace the origin of any goods to the earliest labor that has contributed to making them, we shall follow the series of instruments backward to a point at which no capital existed. In this strict sense, all of the periods of production have their beginnings at the beginning of civilization. Before "Adam delved and Eve span" there was performed the first labor that contributed to the making of the spades and the spindles that are now in use.
Again, instruments both directly and indirectly bring other instruments into existence. Each implement helps, in some way, to create a successor in an endless series of implements. If we try to follow the effect of the action of a tool forward to a point at which consumers' goods, and these only, remain as a result of its action, we shall follow it forever without reaching what we seek.
Productive periods begin with civilization, and never end. It is not possible to lengthen them. It is possible to multiply the number of capital goods that exist through parts of this endless period. In other words, it is possible to increase the quantity of capital in existence. The only practicable lengthening of the interval is really a multiplying of the goods existing within the interval.
The time that figures in Professor v. It affords one possible mode of expressing the amount of a permanent fund of capital. The increase of this fund reveals the law of diminishing returns that Professor v. As the quantity of capital increases, the product of industry grows larger, but the rate of enlargement grows smaller. If the prolonging of periods really means an enlargement of capital, this law of diminishing returns will seem to be true of what is called time. It is, however, because this law of diminish.
It is only in cases in which time can be translated into quantity that the law is thus true. Lengthen the periods of production without increasing the amount of capital, and the law will not hold true. Instruments renew themselves in different ways. A few directly help to create similar instruments, while others accomplish this result indirectly.
All of them, except economic land, do, in effect, create their own successors, since all taken together create, in addition to an income that is interest, new capital goods like them- selves. The hoe does not, of itself alone, create another hoe; but all the hoes, looms, ships, engines, etc. In a static condition this self-renewal of capital goods, taken as a grand total, would be exact.
The whole social equipment of them would pay an income to the capitalist class, and would exactly duplicate themselves, as they should pass off from the stage. There would be an uninterrupted series of exactly similar hoes, looms, ships, engines, etc. This is saying that there would be a permanent social fund of capital that would pay perpetual interest, and renew forever the waste of its own material tissues.
By the isolating method of study it is possible to test the effect of merely changing the length of different periods of production. Let us picture the cardinal features of a static society. Labor and capital remain unchanged in amount and kind. Processes undergo no variations. From year to year implements wear out, and give place to similar ones.
There is a constant originating of capital goods; but there is no originating of capital, since every instrument that is made replaces one that is removed. There is no abstinence. There is one constant social agent, labor; and there is another constant social agent, capital. The conditions of a static state demand that no unrestored waste of substance should take place in either, and that no increase of substance should take place. This means that population and capital goods remain unchanged in quantity. Periods of production may be measured from the date at which the first and rawest material is prepared for the making of an instrument to the date at which that instrument ceases to act in production.
The antecedents of an instrument stretching back to the beginning of civilization may, for present purposes, he disregarded. They measure a quantity that is uniform for all capital goods. The series of other instruments that will follow the present ones may also be disregarded. The variable part of the interval connected with the economic life of an instrument is marked by the beginning of the process of directly making it and the end of its own directly productive action. The beginning is at the point at which labor and capital begin to fashion material for it; and the end is when it wholly ceases itself to produce other goods.
In a static condition instruments are continually made; but the making of them does not defer the enjoyments of either the makers or the purchasers and users of them.
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Here is a loom in operation. It is wearing itself out in weaving cloth. For every flight of its shuttle there is more cloth in existence, and there is a less perfect loom. If we reduce the illustration to the simplest terms, we may say that some of this cloth is going each day to loom-makers, who build a new machine, parri passu, as the old one wears out.
Some of the cloth goes to the owner of the loom. It is interest; and, as it is exchanged for consumers' goods, it helps to maintain the capitalist. In a static state this income would be wholly consumed by the capitalist, and no more wealth would be so used. The capital would remain intact.
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This means that exactly the amount of cloth that is available for making good the wear of the loom is received, as this waste takes place, by the men who make the restoration. Now, who has any occasion to compute the period marked by the life of this instrument for the purpose of making a discount on future goods? The end of the period brings no good thing to the owner or user. If he has let the surplus earnings of the machine accumulate, as a sinking fund for buying another, the time when he draws this fund from the bank means no new enjoyment for him.
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It is a self-renewing time for the instrument. Its accumulated earnings take the shape of a successor m the definite series of instruments that, in its entirety, constitutes a bit of permanent capital. The only thing the owner looks forward to with anticipation of enjoyment is the unending series of other earnings that come to him, not from this machine only, but from the whole series; and that succession of earnings constitutes permanent in- terest.
In our formulas this is saying that the owner looks only for perpetual products from permanent capital. The length of the period before the self-renewing time of a particular instrument is, to him, of no consequence. The men who replace the loom get their rewards daily, as their work proceeds.
Indirectly, they are making some of the cloth on which the loom that is in use is spending and exhausting itself. In a true sense, though not in a literal one, the machine makes a new machine; and in a true sense the builders of the new machine make cloth. The actions and their fruits are synchronous. Would a lengthening of the period mean a greater out- put of consumers' goods?
Tools and machines differ in the frequency with which they require renewal, without differing in net productive power. Side by side may be seen a mill driven by water power and another driven by a steam-engine. The dam, race, wheel-pit, etc. If they are both in use, it is clear that, as a commercial fact, they must both pay interest on the permanent capital that they represent.
If each has coat a hundred thousand dollars, and if in each case the investment is a judicious one, then each pays to its owner a net amount of about five thousand dollars a year. The hydraulic plant does not need to earn a gross sum that much exceeds this. The complete renewal of the plant is a necessity too remote to figure largely in the calculation. The steam plant must yield, besides the interest, about four per cent.
It creates a twenty- fifth of Its own monetary value every year, in addition to the five per cent. Now, it would be possible to substitute dams and reservoirs for engines without changing the productivity of industry; but the change would greatly lengthen the periods of production. An engine will ripen into woollen cloth within twenty years after it is set running; while the darn will not so ripen within any period of which we take account.
In making this change, we alter neither the amount of the returns that the industry yields nor the dates at which the returns are received. In both cases the rewards come day by day, as the work proceeds. In the case of the dam there is little waste of what we have called the tissue of capital, and there is little labor spent in restoring the waste. The dam does not wear out with any rapidity. In the case of the engine there is much waste of tissue, and much industry is spent in renewing it.
The engine creates more consumers' goods than does the dam; and this excess, coming as it does day by day, pays the men who are in the meanwhile building a new engine. The engine-builders are daily creating woollen cloth indirectly, by replenishing the tissue of the plant that is wearing itself out. Substitute a dam for the engine, and you release most of these men from the making of instruments, and allow them to create directly the cloth that they formerly made by the indirect process.
In both cases they get it daily, as they work. Formerly they got it as they themselves worked day by day in the machine shop, while the engine worked for them in the mill. Now they get it as they directly work in the mill. This illustration could be elaborated, and made to resemble the complicated facts of life. What is clear is that the periods of production marked by the ripening time of particular capital goods may be lengthened or shortened without affecting the productivity of industry.
One thing only will produce the effects that in Professor v. It is the creation of an instrument that does not replace another, but constitutes a net addition to the capital of society. Build an altogether new engine. That is creating capital. Renewing an old one is only preserving capital. Does the making of the new engine lengthen a period of production? It is rather the beginning of an entirely new series of periods.
It does not affect the periods that are measured by the duration of other engines, etc. Does it lengthen the average of all the periods? That depends on the question whether the duration of an engine is greater or less than the average duration of all other instruments. It is possible to add to the total capital of society by making a short-time tool, which will wear itself out in a week. It will of course create its own successor within that time, in the indirect way that we have noted; and the creation of this series of short-time tools has the effect of permanently reducing the average of all the periods of production.
Is the creation of such a series equivalent to the selection of a roundabout mode of production? Does it divert industry from a direct line? With careful qualifications we may say yes. This latter work contributes indirectly to the entrepreneur's product. Among which are the Declaration of independence, Constitution of the United States Constitution of the United States, with amendments, state seals, with descriptions, etc By: John Gaylord , Published: Tools Cite this Export citation file. The Grange illustrated, or, Patron's hand-book: Wells ; approved by and under the direct supervision of William Saunders, T.
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