Full text: Small and Big Business

12 
old fashioned firms (who could not exist if it would decline). 
Moreover, these series of historically successive techniques 
are also the ones which can he regarded as being simultaneously 
available to a prospective investor in the field. Whether we 
find in the range of these available methods all three stages 
represented cannot be ascertained with confidence. It appears 
0" / 
likely, however, that this economists conviction about the 
importance of diminishing returns rests on prejudice, and that 
we hardly ever enter the range of diminishing returns, ^beceuae- 
do not even usually oator-the- gaagr-^a increasing capital- 
output ratios* tha»diminishing returns play then role only 
potentially. They never become actual. 
It is conceivable that the relation of profit margin and 
profit rate expounded in Chapter III at least partly explain^ 
why this should be so; If the capital-output ratio is in 
creased, the profit margin must increase, else the method 
or 
could be rejected because of the implied decline in profit 
/ 
rate. As the prc£Lt margin increases, a further increase in 
capital-output ratio is less likely to yield constant profit 
rate. Thus the increase in capital coefficient would tend to 
limil^itself sooner or later. Whether this is in fact the ex 
planation of the apparent constancIfa of capital-output ratios 
in history, or their decline with size and advancedness of 
technique (in a cross section), and the limited range of
	        

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