Full text: Small and Big Business

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 combinations 
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 
same 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 rule 
out all others is explained by its scale: Not everybody can 
afford to use it, since the risk capital of a firm limits 
its investment. 
If a situation continuously prevails in which there 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. Another explanation is that the profit 
margin in big business is so large that an increase in the

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