Full text: Small and Big Business

reasons that it will rise again or that it would if such 
methods were ever used. This increasing application of more 
units of capital per unit of labour is, however, constrained 
to a path of increasing scale of output capacity; A reasonable 
capital-intensification is in general not possible without 
an increase in output capacity* This is because the intro 
duction of machines, apparatus etc. immediately brings into 
sight dimensional economies which make the smaller scale 
inefficient. (It may nevertheless have to be chosen by firms 
without sufficient funds.) Further, the use of continuous 
processes increases the technically possible utilization and 
therefore output scale (broad strip mill, continuous versus 
batch processes). 
This phth of capital intensification can be regarded as a 
historical path - perhaps we might say a historically necessary 
path - because the development has really proceeded like that. 
In so far as the techniques of the past are preserved in 
existing equipment, the path, however, is also mirrored to a 
degree in a cross-section of present plant, albeit with some 
modifications: In the course of evolution, price-cost relations 
are brought down so that the capital-output ratio for the 
advanced methods is increased. At the same time the old 
fashioned methods keep alive only by changing their output 
(special dimensions and qualities made in small batches, for 
example); this will prevent the output-capital relation from 
declining for the more old fashdoned firms (who could not 
exist if it would decline).

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