9
fairly uniform wage and interest rates and all methods developed
will be aimed at fitting the prevailing market conditions of
the region, so that they will by no means differ much; only
in different countries on a different level of economic and
technical development will there be very different combinatiozis
of production|ingredients in use. To be realistic this picture
has only to be modified in one respect: The opportunity cost
of capital - the ruling profit rate - differs in one and the
sane country for risk capital of different sizes. Thus there
is good reason for the simultaneous existence and application
of different methods of production, in so far as these different
methods are used by firms of different size. Among the methods
existing at one and the same time there is often one which is
more efficient on all counts. That it does not immediately ruée
out all others is explained by its scale: Not everybody can
afford to use it, since ¿he risk capital of a firm limits
its investment.
If a situation continuously prevails in which ¿here are unused
possibilities of applying such efficient (in terms of labour
and capital) methods, then this will explain why rarely anybody
is tempted to use methods which will Increase the capital-
output ratio. In other words, when increasing returns to
capital are available in quite a number of fields, nobody will
force capital-intensification in fields where it brings
diminishing returns, /mother explanation is that the profit
margin in big business is so large that an increase in the