Full text: Small and Big Business

5 
structure etc.). There is, however, another explanation: 
Ol/ 
The comparison of firms in.cross section and the develop- 
&V€-t is h 
ment time not the some thing. Over time, the real 
wage increases^and with it the value of output in terms 
of labour input decreases. This will counteract the 
cheapening of capital equipment du to scale effects; In 
other words, the differential profit margin of the large 
jhihnv 
ipale will he reduced as the large scale methods spread, 
and the value of output will fall relatively to a given 
capital equipment with given labour cost.'The impression 
is that a race between the cheapening of equipment and the 
cheapening of output is continuously on and neither is 
getting too far ahead of the other. 
/k 
of 
So much for the interpetation’~ data. What about the 
theoretical discussion of Chapter III? Ky analysis there 
shows under what conditions an increase in capital co 
efficient will be profitable and this analysis may be 
applied also outside the context of the problem of 
economies of scale. The conditions are these: The pro 
portionate reduction in cost divided by the proportional& 
increase in capital-coefficient must not be smaller than 
the profit margin from which we start (that is ( the profit 
margin obtained with alternative or usual methods) } other 
wise the profit rate will be lower than at the outset 
(that is } with alternative or usual methods). 
S) 
Capital is always measured at cost-value, inflated with 
a convenient price index to give a measure of reproduction 
cost.
	        

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