Chapter 67 Appendix Eleven Several Remaining

The total actual cost of any branch of production is less than its corresponding marginal costs in several ways, each of which may be regarded as a surplus from a particular point of view.But only those remaining discussed in the text need to be carefully studied. Next we must do some research on the mutual relation of the various surpluses and their relation to the national income.Such research is difficult and of little practical interest; but from an academic point of view it has a certain charm. When the national income is distributed to its owner in its entirety at the marginal prices of the various factors of production, it generally also furnishes him with a surplus which has two distinct, though not independent, aspects.The surplus it affords him as a consumer consists of the excess of the total utility of the commodity over the actual value he has paid for it.The two are equal for those marginal purchases that just induce him to buy.But those parts of the purchase for which he would rather pay a higher price than not buy, provide him with a surplus of satisfaction: a convenience afforded to him by him as a consumer from his circumstances or circumstances. the real net benefit derived from it.

If his circumstances change so that he can no longer obtain the commodity, and force him to divert the funds spent in buying it to other commodities (of which he will not buy more) at their respective prices (a commodity that may be comfort-enhancing), he loses this surplus. If a person accumulates (that is, acquires and saves) through direct labor or own possession Another aspect of the surplus he receives from his environment becomes clearer if he is regarded as a producer of material goods.As a labourer, he receives a labourer's surplus, because all his labor is paid at that rate at which he is willing to furnish the last part of it; though perhaps the greater part of it goes to him great joy.As a capitalist (or in general as any kind of accumulating wealth owner), he receives a saver's surplus, since all his saving (that is, waiting) is paid at such a rate of interest that exactly can induce him to contribute a portion of his savings.Even though he may save some more, he is generally paid at that rate, and if he is obliged to pay a deposit, he receives negative interest on these savings.

These two residues are not independent of each other.It is easy to count the same remainder twice in calculating them.For when we calculate the producer's surplus at the value of the general purchasing power which he derives from his labor or savings, we implicitly calculate his consumer's surplus, if his tastes and his circumstances are given. .Analytically this difficulty may perhaps be avoided.But in practice it is absolutely impossible to estimate and add up the two surpluses.The consumer's surplus, worker's surplus, and saver's surplus that any individual can obtain from his environment depends on his personal preferences.They depend partly on his general feeling of satisfaction and dissatisfaction which consumption, labor and saving respectively give him, and partly also on his elasticity of feeling, that is to say, on the rate at which , which vary with increases in consumption, labor, and saving, respectively.The consumer's surplus is first of all concerned with individual commodities, each part of which is directly responsive to changes in the circumstances affecting the conditions of their acquisition: and both producers' surpluses are always of the general kind which the circumstances give to a definite amount of purchasing power. Indicated by income.The surpluses of these two kinds of producers are independent, cumulative, and appear different where one labors for oneself and saves for oneself.The close relation between these two kinds of producer's surplus and consumer's surplus may be illustrated by the following facts.That is, when estimating the joys and sorrows of Robinson Crusoe's life, it is easiest to calculate the surplus of his two producers in such a way as to include the surplus of all his consumers.

The greater part of the worker's wages is in nature a deferred payment for the care and expense of training him to work; it is therefore difficult to estimate his surplus.Perhaps almost all his work is pleasant; for all his work, he may be well paid. But in weighing man's joys and sorrows we must also add the sacrifices and labors of his parents and his past.But we can't say exactly how many.In the case of a few there may be more suffering than in pleasure, but there is reason to think that in the case of the majority there is more pleasure than in pain, and in the case of some the pleasure outweighs the pain.The problem is both economic and philosophical; it is further complicated by the fact that human activity is itself both an end and a means of production, and that a clear distinction is made between the direct (or principal) cost of human labor and its total cost. Difficult; the problem must be left without being fully resolved.

The problem is in some respects simpler when we come to the income from the material means of production.Labor and waiting, which furnish the material means of production, yield a surplus of the worker and of the waiter of the kind mentioned above, and, moreover, a surplus (or quasi-rent), that is, the excess of the total money return over the direct cost, if we Just speaking for a short time.But in the long run, in all the more important problems of economic science, and especially in the problems discussed in this chapter, there is no distinction between direct and total costs.In the long run, the earnings of the factors of production are only sufficient, according to their marginal rates, to remunerate the sum of the labor and sacrifice required for their production.If these marginal rates are less than, the supply must be reduced; so that, on the whole, there is generally no extra surplus in this respect.

The last argument above applies, in a sense, to newly cleared land; and if we can trace its origins, it probably holds true of many lands in the early developing countries.However, this approach raises issues of historical, ethical and economic debate; and the purpose of our current research is to look to the future, not to the past; to look forward, not backward, and without regard to existing land Whether the appropriate scope and fairness of private rights, we know that the part of the national income that is the land reward is a surplus in the sense that the rewards of other factors of production are not counted as surplus.

From the point of view of this chapter, the theory discussed at the end of Part V, Chapters 8-10, is illustrated.All means of production, whether machinery, factories and their building grounds, or farms, alike afford to the person who possesses and uses them a large surplus above the prime cost of a particular act of production; Provides a special surplus (with no special surplus opposed to the surplus of his laborers in general and those of the waiter) that exceeds the labor and sacrifice and expense at which he has acquired and used them.But land differs from the other factors of production in this way: from the point of view of society, land provides a permanent surplus, whereas man-made perishables do not.The more reward is required to keep any factor of production supplied, the more must its supply be varied so that the share it can extract from the national income corresponds to the cost of maintaining that supply.In an earlier developed country land is an exception, since its remuneration is not affected by this cause.The difference between land and other durable instruments, however, is chiefly one of degree.And the study of ground rent is of chief interest because it illustrates a great principle running through economics.