Production - Economics and Ecology: United for a Sustainable World - page 74

factor of production, it must be accorded a proportional increase in the other
factors of production.
Imagine a simple situation that will exemplify all this. A farmer owns some
land that he wants cultivated. He needs workers (labor) and shovels (capital)
to accomplish this. Initially, he hires one worker and buys one shovel, and a
certain amount of work gets done per hour or per day. If he considers hiring
another worker but only has the one shovel, daily output will presumably
increase somewhat, because one worker can work furiously and then rest
for half the time while the other intensively operates the shovel. The shovel
is never idle. Again, output may rise due to the second worker, but it will
certainly not double, because they only have one shovel between them. The
value to the farmer, in terms of willingness to pay the second worker, is thus
less than that of the first worker.
On the other hand, suppose the farmer considers buying a second shovel
but hiring no more workers. The initial impression would be that the mar-
ginal product of the second shovel is zero, because shovels cannot operate
themselves. However, there may be some argument for a small positive ben-
efit for the second shovel—the first one might break, and the second as a
spare would allow production to continue without a work stoppage.
Translating this back into the practical world of the farmer, he or she
clearly needs an appropriate mix of all resources. Financially, the farmer
will readily pay for the first worker and the first shovel, because any pro-
duction depends on having some of each. If the farmer considers increasing
the amount of one of the inputs without increasing the other (i.e., becom-
ing more labor intensive, or more capital intensive), the farmer will not be
willing to pay as much for the next unit of that resource, because its con-
tribution to total production will be visibly less than that for the first input
employed. In fact, what history tells us a “growth-oriented” farmer might
do is hire five more workers, buy five more shovels, and seek to expand the
whole operation. Then the constraining input might become the availability
of land.
As a conclusion to this chapter, we combine all these points of standard
economic analysis to construct a Capitalist Scenario, which serves to point
out a core systemic irrationality that follows from the incorrect application of
the economics of production in the corporate real world. This scenario is best
depicted in straightforward bullet points:
Capitalist Scenario
• A resource must be paid more if it becomes more productive.
• A resource becomes more productive if it is given relatively more of
the other resources to work with.
• In their quest for higher output, owners of capital seek consciously
to automate—that is, to increase the proportion of mechanical labor
to human labor.