Full text: Small and Big Business

developed at all, and diminishing returns to capital-intensifi 
cation exist only theoretically beyond the point at which 
actually developed methods end. This point is, however, shifted 
further on in the course of technical progress. This avoidance 
of the range of increasing capital-output ratios may result 
from the above stated influence of high profit margins. 
What can be the relevance of this analysis to the question 
of scale ? In Chapter III I used it to explain why the highest 
size groups of corporations show signs of diminishing profit 
rate, for which I could find no technical reasons (dis 
economies or scale I assumed to be unimportant). But if the 
capital coefficient does not rise with Increasing scale, the 
whole argument falls to tiie ground. There is an even more 
direct objection against it: Why, one might ask, do the big 
concerns apply such methods of production, if they yield them 
a smaller profit rate than less capital-using methods would ? 
In fact, the analysis of Chapter III is much more suitable 
for explaining why the large firms do not increase the capital 
I thought for some time that Chapter III is altogether out of 
place in this book. But this is not true. In feet the analysis 
is relevant for the whole relation of capital intensity, 
technical progress, economies of scale and the distribution 
of income

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