7
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
coefficient!
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