Diminishing Returns from Investment

Abstract

ly similar considerations, though concretely very different, apply to the laborer and the capacities which make him a productive agent. Clearly, to begin with, even birth rates are, in fact (in individualistic society), largely dependent on the economic opportunities which will be open to the offspring, i.e., on the income which they will be able to earn for their parents and later for themselves. In a slave economy the connection would presumably be close. For an integrated Crusonia, any definite assumption as to the distribution of investment between this and other fields would have to rest on a prior arbitrary assumption as to the social structure. However, our purpose is limited to analysis at a very abstract level, and any principle of distribution of burdens and benefits among individuals, applied to the equalization of investment, will lead to the same general conclusion. The production of human infants indubitably involves costs in the only final meaning-a sacrifice of desirable alternatives (of increased satisfaction or decreased dissatisfaction). The balance here presents special complications, but, if we assume rational behavior, some "economic" value must be assumed as a balancing item against every cost, and vice versa. Of course, there are ultimate limits to the multiplication of human beings, and declining returns must result from continued investment in this 9 These facts mean that the relation between return and cost in any particular case, and even on the whole, is affected by some mixture of error and the factors involved in the genesis of new knowledge, which are in part dealt with by probability reasoning. This aspect of the situation will call for consideration later. This content downloaded from 157.55.39.138 on Sun, 26 Jun 2016 07:23:16 UTC All use subject to http://about.jstor.org/terms DIMINISHING RETURNS FROM INVESTMENT 35 field; but this is true of any distinct species of capital goods. In the production of laborers the matter of "quality" is far more important than that of quantity in the crude sense of numbers. A human being in the "raw" state would obviously be a liability, not an asset, and his economic value in later life must be imputed to expenditure (again on balance) in rearing and training. These facts mean that, in terms of economic realities, the "laborer" of any type is essentially a capital good; the (social) sacrifice of consumption invested in producing labor-capacity could have been used to create productive capacity