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18 showing disproportionately increasing output with any increase in input ( cost, or employment ). In fact, however, we often find that it is not so amd that both regression coefficients are smaller than one, decreasing cost and decreasing returns apparently coexisting. How is this possible? It can only occur with wide dispersion round the regression line, The exceptionally efficient plant will tend to be counted as small plant in the input dimension while the unusually inefficient ones ?;ill be counted as large. In c nsequence there will be a bias in fav ur of decreasing returns as measured in the input dimension ( regression of output on cost or employment ), The inversi n bf the regression corresponds t the fact that the rati % of the two standard deviations is recipr cal in the two regress! n c efficients If it is 9/11 in the regression f input n >utput, it is to/9 in the other re ressi n But unless the correl ti n c efficient is sufficiently high, the regression coefficients will both have values be law unity. The same mechanism must also be at work ir.tfc the wealth-income distribution: Those with high return for a given wealth will be classified among large incomes, those with low returns with the same we 1th among small incomes, which tends to counteract the natural tendency of wealth to increase with income. ;'his may have contributed to the flatness of the wealth-income regression in the lower income rage, although the chief reason for that is no doubt the truncation of the wealth distribution. The preceding example of plant size, in which only one underlying theoretical relation is presumed to exist, shows that while it is logical to expect in this case, if one regression reflects the underlying relation, that the other should as it were represent the inverse of it, yet in reality this will not be true because t e sec nd regress! n will be m re or less distorted by the dispersi n of values round the first regression line. If we have two underlying relati-ns then each f the regress! n lines will be influenced by b th f them, either directly r indirectly, because each will be t sme