If the student will recall the law of diminishing returns, he will remember that with a given supply of land and capital and organizing skill the application of ten units of labor might result in a product of, let us say, fifty bushels, and with an application of eleven units of labor of exactly the same quality and with no changes in the methods of cultivation the product might be not fifty-five but fiftyfour bushels. And with an application of twelve units of labor and without any changes in the other elements the amount produced might be fifty-seven bushels. At first sight it might look as though the product of the eleventh unit of labor was four bushels and the product of the twelfth unit was three bushels. This, however, is not the fact. The twelve units are, by hypothesis, all equally efficient and therefore one produces just as much as another. We may, however, say that the marginal product of the twelfth unit of labor is three bushels. By this expression we do not mean that the actual physical product of a unit of labor is three bushels, but merely that under the conditions of production which are normal for the enterprise when a unit of the labor is withdrawn from the enterprise we suffer a loss of three bushels in total product. If all of the units of labor are equally efficient, then the marginal product of each unit is three bushels for the reason that it does not make any difference which unit of labor is withdrawn from the productive process. In any case, the result will be a diminution of the total product by three bushels. If the units of labor are of different efficiencies, then the marginal product of any particular unit is ascertained by removing that particular unit from the productive process. When marginal productivity is understood in this technical sense, the statement that the laborer tends to get his marginal product will be subjected to less criticism than it otherwise is.

Or, consider the law of diminishing returns as it applies where the amounts of capital and labor and organizing skill remain constant and where the amount of land is changed. Suppose that normally with a given supply of capital and labor and managing ability and with five hundred acres of land, the resulting product is five thousand bushels, or at the rate of ten bushels to the acre. Suppose, now, that without changing the capital and labor and managing skill, one acre of land is added to the business enterprise. Let us say that the product is now not five thousand and ten bushels but five thousand and nine bushels. And suppose that when we add still another acre, making five hundred and two acres, and do not change any of the other factors, the total product is five thousand and seventeen bushels, although the last acre added is, by hypothesis, just as good as any other acre. If the working presence of the five hundred and second acre in the business enterprise has added only eight bushels, we may say that its marginal product is eight bushels. But when there are five hundred and two acres cultivated in this form the marginal product of any one of the acres is eight bushels, provided that they are equally productive. The removal of any one of the acres would result in a decrease of eight bushels. The same kind of reasoning may be applied where capital is the changing factor. Thus the law of diminishing returns will be found to furnish the key to the meaning of marginal productivity.