- 6 - 
income. (It should immediately be noted that this ruling 
profit margin will be different for different size classes 
of firms.) 
We now turn to the relation of capital intensity and productivity. 
It can be shown that the growth rate of the capital-output 
ratio equals the growth rate of capital per man minus the growth 
rate of output per man. On p. 33 I used somewhat different 
concepts: Instead of capital per man I used the capital-cost 
ratio, and instead of output per man the sales-cost ratio. If 
we take the wage as constant, the analysis of p. 33 will come 
to the same as the present analysis, but it should be noted 
that in fact real wages can differ between firms (e.g. of 
different sizes), and especially over time. 
In the light of the engineering data it seems that the growth 
in productivity will outweigh the growth of capital intensity 
over a wide range of output: In consequence the capital-output 
ratio will decline over this range. This is indeed apparently 
the course of much of the technical progress. It might be 
that beyond a point the relation will be reversed, the capital 
growth will outweigh the productivity growth, so that the 
capital-output ratio will increase; there will be diminishing 
marginal returns to capital which on p. 33 I still regarded 
as plausible. Today I doubt whether the range of diminishing 
returns of capital-intensification is actually entered in 
the ordinary course of events; such techniques are perhaps not