VI. The Duration of the Process of Production and the Durability of Goods: Some Definitions

CHAPTER VI THE DURATION OF THE PROCESS OF PRODUCTION AND THE DURABILITY OF GOODS: SOME DEFINITIONS WE must now begin to consider the process of investment in its more concrete manifestations. There are two main ways in which the productivity of investment shows itself, and although the distinction is not fundamental, it is well to keep them clearly apart. The difference is due to the fact that the investment of any group of services of the permanent resources can be combined into one single " process" of production in two ways. In the one case it is the duration of the actual process of production where the time factor enters, and in the other case it is the durability of the product (or of the nonpermanent resources used in production). In the first case the essential point is that resources will have to be applied some time before, and frequently throughout a considerable period before, any consumable services are produced. In the second case the essential point is that it will not be worth while to make the investment unless it results in a stream of useful services that will continue to accrue for some time to come.

The " flow of services from the permanent resources " which becomes available during any given period of time (or, in the limiting case, at a moment of time) we shall henceforth describe, following a suggestion of Dr. Haw trey's,l as the amount of pure input of that period (or 1 Hawtrey, 1937, p. 15: "We may apply to the operation-of the original factors of production in any interval of time the convenient term 'input'. When we treat capital as a factor of production, we shall ca.ll the operations of the original factors in conjunction with capital 'mixed input', and if we want to distinguish input in the fonner sense from mixed input we shall call it ' pure input '~" It will 65 66 Introductory PT. I moment). It should be specially noted, however, that the term input will not be confined to that part of the services of the permanent resources which is " invested" Definltlon of ''In-in the ordinary sense of the word but will put" and" output" comprise all the pure input that is used at all, including that part which is used to produce current output .. The term investment (or" an investment ") will correspondingly describe the act of applying a unit of input in any process of production. Since: as we shall see later, it is not only pure input in the strict sen-se of services of the permanent resources which can be invested for varying periods, but also the services of nonpermanent resources, we shall also adopt Dr. Ha wtrey' s expression mixed input when we want to emphasise that the latter kind of input is also included.

The term output will be used to describe the stream of final services to the consumer. The distinction mentioned in the opening paragraph of this chapter amounts to a difference in the way in which aggregates of input are connected with aggregates The" continuous In-of output. In the real world the two cases put - point output" are of course never completely separate. and the " point input - continuous out-But it is useful to construct ideal limiting put" cases cases which show their peculiarities in the purest form. The first case is best represented if we con ceive of a continuous application of input through a period of time, leading to an output all of which matures at a moment of time at the end of the period. This has been described as the" continuous input - point output" case.1 The second case is ideally represented if we imagine a durable good which is produced at a moment of time and be noticed that the definition of pure input used in the text, in con formity with the terminology used throughout this book, substitutes " permanent resources" for Dr. Hawtrey's "original factors". The term" input" itself had been devised earlier, probably by Professor R. Frisch in connection with the distinction to which the next footnote refers.

1 These terms were, I believe, first suggested by Professor Ragnar Frisch.

CII. VI Production and Durability oj Goods 67 then renders services continuously over a period of time. This case has correspondingly been described as the " point input - continuous output" case. As we proceed we shall have to devote a good deal of attention to the relationships ideally described by those extreme cases. Before going on to discuss the way in which the productivity of investment manifests itself in each of these two cases, we must mention another way of describing them which seems to bring out the Th il ey are spec a cases relevant peculiarities even more clearly, of joint demand and and to ha ve the further advantage of joint supply stating them in a way which is more in accordance with the concepts used in other branches of economic· theory. The first case, where the actual process of production takes time, may be regarded as a case where the final services wanted at a particular moment of time give rise to a joint demand for factors to be applied at different moments of time. The second case, where it is a question of the durability of the good, may be regarded as a case where the investment made at a moment of time gives rise to a joint supply of services over a period of time. 1 As has already been observed, it is almost impossible in real life to find cases where time elapses between the application of the factors and the enjoyment of the results in only one of these ways. It is only Combination of the under comparatively primitive conditions two aspects in the complete process or that we can conceive of cases which will production correspond perfectly to either of the two extreme types.

If we could assume that fireworks were made without the use of any durable tools or machinery, the work of our hands over a period of tiIne would lead to a display lasting little more than a moment; and this would there fore correspond fairly closely to the " continuous input point output" case. If on the other hand we cut a 1 Cf. Wicksell, Lectures, vol. i, p. 260: "The annual uses [of a capital good] successively following one another constitute a kind of joint supply (to use Marshall's terminology) ".

68 Introductory PT. I straight branch from a tree and used it for years as a walking-stick, we should have a fairly good instance of the "point input - continuous output" case. But as a rule the two sets of relationships are so completely inter twined that it is extremely difficult to disentangle them. 'This means that in practice we shall almost always have to deal with cases of a stream of consumption services accruing at successive moments of time which are the joint product of a process which also involves a joint demand for factors applied at successive moments of time. But this only makes it so much the more necessary to try to isolate conceptually the way in which each of these two kinds of investment increases the output from given resources. For purposes of theoretical analysis it is necessary to isolate the connection between individual units of input and individuaL units of output, and at the same time we have to recognise that in real life production is as a rule continuous. Experience has shown that it is sometimes difficult to keep the right balance between these two aspects. It is important always to remember that the continuity of the actual process of production is due not so much to the fact that the same sort of process is con tinuously being repeated as to the fact that most of the investments which form part of the continuous process are made with a view to obtaining a stream of returns over a period of time, and that almost all returns are due not to a particular investment but to a range of invest ments over a period of time. l It requires a high degree 1 Even Professor Knight, who in general is so thoroughly un sympathetic towards the whole investment period analysis, appears to admit the necessity of distinguishing between the· investment periods of various units of input - although on other occasions he appears to deny the possibility of such a distinction. This;. at all events, is the only meaning I can make of the following passage from one of his more recent articles (1938, p. 447): .. Because the process of invest ment must be spread over time and because, in general, there is more or less disinvestment in connection with the yield of any particular capital good, it is necessary to recognise the separate periods of investCK. VI Production and Durability of Goods 69 of abstraction to arrive at the idea of separate individual processes which consist of separate and clearly dis tinguishable J inputs and outputs and which will yield a continuous stream of output only if they are continu ally repeated in an unchanged manner. But it is only by means of such abstraction that it is possible to isolate the relevant relationships between the different parts of the continuous process.

The fact that a series of successive investments is usually combined in order to produce any kind of com modity, and that the same productive operation results in a stream of final services extending over Investment periods a period of time, is the source of another and "periods of production" or the serious difficulty when we come to con- "Ienlth of the sider the changes in investment periods prooess ,. involved in changes in technique. The fundamental fact with which we are concerned is the change in the periods for which particular units of input are invested, that is, in the interval between the application of a unit of input and the maturing of the quantity of output due to that input. This interval of time we shall describe as the investment period of that unit of input. If the variation in the technique of production used always either affected the investment period of only one unit of the input or else affected the investment periods of all units in the same direction, there would be no problem, and we should be able to speak of changes in the " period of production ", or the " length of the process as a whole", as a short way of referring to changes in the investment periods of the various factors used. In fact, however, most of the changes in productive tech nique are likely to involve changes in the investment ment, from zero to infinity, of each infinitesimal increment of capital invested in any source or capital good. Only in this way can different investments be made at the same rate and the maximum yield obtained on the whole capital, which is possible under the given economic conditions. "

1 That is, distinguishable on technological grounds.

70 Introductory PT. I periods of different units of input to a different degree and perhaps in different directions. This raises all kinds of difficulties which we shall have to consider later. In particular it makes it impossible to use the terms" changes in investment periods" and" changes in the length of the process" or "changes in the period of production" synonymously. It must indeed appear doubtful whether the second and third of these concepts, which necessarily refer to aggregates of investment periods, have any clear meaning. It is rather unfortunate that the time aspect of production should have been first introduced into theo retical analysis in this form, for it has led to much ,unnecessary confusion. But since the use of the expression " changes in the length of the process" is a convenient way of describing the type of change in a whole process where the changes in the investment periods are pre dominantly in one direction, there is probably something to be said for retaining it, provided it is used cautiously, until we are ready to give a fuller explanation of what is meant by one process as a whole involving more waiting than another.

It is necessary, however, to define somewhat more exactly than has been done so far what is meant by one process of production. In general the expression refers to Tbe meaning or a the series of operations which lead up to "single process" the production of a particular kind of good. But this still leaves some ambiguity of meaning. The term process may be used to describe the whole series of operations which lead up to the production of a definite quantity of the product at a particular moment of time. The work of a potter who makes a clay vessel under primitive conditions, and bakes the clay on a fire made for the occasion, would represent a single process in this sense. The term may, however, also refer to the whole chain of continuously repeated operations which lead to a continuous output of pottery. If the term process is used without a qualifying adjective it will here refer to CR. VI Production and Durability of Goods 71 the first concept, and the "continuous process" will be described either as such or as a "line of production".

It will soon be seen that the concept of a process in the first sense involves a considerable amount of abstraction and in most instances does not refer to anything which can be clearly isolated in the real world. The advantages of time-consuming processes of pro duction are closely connected with the advantages of the division of labour. If the process which leads up to a certain final service to the consumer is Investment and changes broken up into a number of separate In the technique of prot · 't b 'bl t dUCtiOD opera IOnS, 1 ecomes POSSI e 0 use certain capacities, materials, and tools which could not have been used if all the labour had to be applied in the way that would give the final result by the shortest possible route. But we must not be deceived here by a further ambiguity of the term "one process", i.e. the reference to a particular technique of production which it occasionally implies. If the advantages of the division of labour consisted solely in the fact that the same series of operations as were previously performed by one man were divided between a number of men, and in consequence each of them became more efficient at his special task, the effect would probably be to shorten the duration of the process instead of lengthening it. But in many cases the division of the process which leads up to the satisfac tion of any particular need will be a division among a greater number of co-operating factors, including some that before were not used at all. It will mean a change in the method of production, and in the materials, tools, and human capacities used. And the resulting product may be technically a very different one from what it was previously. If the needs which it serves,· however, are the same, these needs will now be provided for by a different and longer process. 1 In fact the greater pro ductivity of this longer process will frequently express 1 Cf., however, F. X. Weiss, 1921.

72 Introductory PT. 1 itself in the circumstance that the new product serves the same ends more effectively, or perhaps serves other ends at the same time. In all cases the greater output derived from the inputs which are now invested for ,longer periods will be due to their combination with forces which could not be put to any use during the shorter period. It may be that, as with natural processes of growth or fermentation, the natural forces will exercise their effect to the desired extent only if they are left to operate for a considerable period of time. Or the materials, tools, or accessories which it is advantageous to use may themselves be obtain able only as the result of a process which takes time. In short, the increase in output will always be due to a change in the method of production used, a technical improvement. The term improvement, however, although it is quite appropriate and is frequently used in this connection, is yet another source of possible misunderstanding which should be guarded against from the outOnly those more productive methods set. The term has often been understood, which are known but when used in this connection, to refer to not used at any given moment will Involve inventions or discoveries. The argument more waiting would then seem to imply that technical progress in this sense, the advancement of knowledge"

tends necessarily to increase the duration of the productive process. Against this it has been rightly argued that the discovery of new, hitherto unknown, ways of producing a thing will be just as likely - or perhaps even more likely - to shorten the duration of the process as to 'lengthen it. The considerations advanced above - and it is important to remember this throughout the discussion -- have nothing to do with technological progress in this sense. On the contrary, they refer to changes under conditions where knowledge is stationary. All that is assumed is that at any moment there are known possible ways of using the available resources which would yield a greater return CB. VI Production and Durability of Goods 73 than those actually adopted, but would not yield this return until a later date, and for this reason are not actually used. Among the wide range of possible methods of produc tion known at anyone time there will be some which will yield their product after shorter periods of time and some which will not yield it until after longer periods. From among each group of methods involving the same " amount of waiting" - if we may make provisional use of this vague term - the one that will be chosen will be the one which yields the greatest return from a given investment of factors. But so long as there is any limita tion on the" amount of waiting" for which people are prepared, processes that take more time will evidently not be adopted unless they yield a greater return than those that take less time.

We must return now to the relation of these changes in productive technique to the division of labour. The important thing about the transition to processes which on the whole involve investments for longer d h Investment an t e periods is that it is always undertaken in division of the process order to make use of additional forces of Into stages nature, and that in consequence it will as a rule involve a greater number of successive applications of distinct factors of production. Once this is understood it is easy to see how the transition to these processes will tend to give rise to the phenomenon which has been described as the vertical or successive division of labour as distinguished from the horizontal or simultaneous division of labour (i.e. the type of division which is due to the fact that people specialise in the production of different final pro ducts). The vertical or successive division of labour means that the process leading up to anyone product is broken up into distinct" stages", or, that is, into a number of separate operations which in the modern organisation of society will be performed by different firms. But although the number of these separate " stages j" in any 74 Introductory PT. I one line of production will often tend to increase. with the lengthening of the process, we must not expect any strict proportionality between the time a process will take and the number of stages into which it will be divided.

In this sense, as the part of a complete process which is under the control of a particular firm, the concept of a "stage" of production is of little theoretical interest. The term, however, can be conveniently used for a group ing of the various kinds of capital goods according to their remoteness from ultimate consumption. In this sense it serves simply as a means of a further and very necessary subdivision beyond the usual rough division of goods into consumers' goods and capital goods. It has the advantage that it takes better account of the fact that we have to deal with a continuous range of various kinds of goods, and that wherever we draw the line between consumers' goods and capital goods by far the greater proportion of the goods existing at any moment will always fall into the latter category. Here the con cept of stages -and the distinction between earlier and later stages provides the distinction which will prove very necessary later on. When in the further course of this discussion the term stage is used, it will always be in this abstract sense and will not imply any reference to a division of the process between different firms or persons. 1 It would be a mistake, however, to concentrate too much attention on this vertical division of labour. It would be quite wrong to suppose that the lengthening of the investment periods will always mean an increase in the number of separate operations which follow each other in linear succession. What is no less important is that, in the course of the lengthening of the process, the stream of operations leading up to a given product 1 For a characteristic misunderstanding of the sense in which the concept of "stages of production " is used in theoretical analysis, cf.

Ellis, 1935.

CR. VI Production and Durability of Goods 75 "rill as a rule be split up into many branches and sub branches. And it may be that, long before the first move is made to produce the actual material from which the product is to be made, work is being taken in hand to provide some auxiliary material or tool which will be needed later to convert the raw material into the final product. At {jach stage of the process from the raw material to the finished product the main stream will be joined by tributaries which in some cases may already have run through a much longer course than the main stream itself. But all these activities, many of which may be carried on at the same time at different places, have to be regarded as part of the same process, and have to be taken into account when we talk about its length. The series of operations which are required in order to provide the fuel or lubricant, and the tools or machines which are needed for turning the raw material into the finished product, are just as much part of the process of production of the good as the operations performed on the raw material.

There is some difficulty about introducing tools, and still more machinery, into the picture at this stage, because they raise the problem of durability which still awaits discussion. This is in fact one of the The complete process main instances of the way in which the of production Includes the provision of tools problems of the duration of the process of which are usually production and the durability of goods are durable SO inextricably mixed up. Now, although tools are usually durable, they are not always so. The moulds needed in many kinds of casting processes, or the dynamite used for blasting, probably have to be regarded as tools although they can only be used once. They are examples of how extensive preparations, resulting in elaborate tools or auxiliary materials, may be necessary in order to make use of certain laws of nature in the transformation of any raw material into a useful form. The significance of the circumstance that tools and machines are as a rule durable 76 Introductory PT. I will be discussed presently along with the general pro blem connected with the durability of goods.

Before we can pass on to this problem it is necessary to return for a moment to the, difficulty of talking about changes in the length of the process of production. It The concept of the period of Investment, as applled to a process as a whole, has no will probably be fairly obvious by now that as the complete processes of production with which we have to deal become indefinite meaning creasingly complex it becomes more and more difficult, and may in some cases be impossible, to say in any general way which of several ,alternative processes under consideration is as a whole the shortest or the longest. The total length of time which elapses between the very beginning of the process and the com pletion of the product may be shorter in one process than in another, and yet by far the greater part of the input used may be applied very early in the first process and very late in the second process. Which of these two processes is to be regarded as the longer 1 It is impossible to answer this question at the present stage, and there is in fact no general answer to it. It is only mentioned at this point in order to warn the reader against any attempt to provide himself with an answer by introducing some concept of an "average period" of prod'Q,ction.

Such a concept, as we shall see, is not only unnecessary but is also highly misleading. For our present purposes we do not need to know whether a whole process as such is longer or shorter than another. The only points· that are relevant here are, The relevant time first, the periods for which units of input Intenals are the are invested, and, secondly, the fact that periods for which the £ Individual units or In-they will not be invested or longer periods put are Invested unless the return due to them will be greater in consequence. 1 The reader will save himself a 1 An exception to this rule, which may be disregarded at this stage, occurs when in the course of a thorough change in the technique of production employed which leads to an increase of the total output, the product due to particular kinds of input may possibly decrease.

OR. VI Production and Durability of Goods 77 good deal of trouble if he accustoms himself from the start to the habit of regarding the periods for which particular units of input are invested as the primary factor and of regarding the length of the whole process of production from which a particular product results as only a secondary phenomenon. The distinction between the periods for which we have to wait for the product of a unit of input and the period for which we have to wait for a unit of output will occupy us yet a good deal. At this point, however, one par ticular misunderstanding of the theor~m that round about processes of production are more productive may be mentioned, as it is due to a confusion between these two concepts. It has sometimes been argued that an in crease of capital is more likely to shorten than to lengthen the time during which we have to wait for the product.

And this is quite true when we speak of the time interval which will elapse before a given quantity of output will emerge. But this is quite compatible with a simultaneous increase in the periods for which we have to wait for the product of particular units of input. The use of elaborate machinery may not only very much shorten the time it .takes to turn the raw material into a finished product but even make the time between the moment when the first input is invested in the machinery and the moment when the first output emerges shorter than the period during which we 'had before to wait for the product. Yet this has been made possible only by investing some of the input used in producing the machinery for a much longer period than any had been invested before. l This way of looking at the concept of the period of investment also prevents us from falling into another common error. It is frequently supposed that all in1 Cf. A. A. Young, 1929, p. 796: "The use of capital saves time, in the sense that a larger product can be had with a given amount of labour. But it increases the average interval of time which elapses before the products of a given day's labour reach their final form and pass into the hands of consumers."

78 Introductory PT. I creases in the quantity of capital per head (at least when they do not involve changes in the quantities of durable goods) must, mean that some commodities will now be Investment periods of particular units of Input may change without any change In the technique 01 producilon used in any particular in dustry produced by longer processes than before. But so long as the processes used in different industries are of different lengths, this is by no means a necessary consequence of a change in the investment periods of partic ular units of input. If input is transferred from industries using shorter processes to industries using longer processes, there will be no change in the length of the period of production in any industry, nor any change in the methods of production of any particular commodity, but merely an increase in the periods for which particular units of input are invested. The significance of these changes in the investment periods of particular units of input will, however, be exactly the same as it would be if they were the consequence of a change in the length of particular processes of production.

In referring to tools and machinery we have already had occasion to mention one of the most important groups of durable goods. These instances also show the sense The slgnlftcanee olthe in which the word durable is used in the durability of goods present context. It may be not altogether unnecessary to point out that the word is not used here merely to indicate that a good will not soon perish, like meat or fruit, by the mere lapse of time. 1 It is used here to describe goods that are not destroyed in a moment by a single act of use but can be used repeatedly 1 The use of " durable" in the sense of merely storable is fairly widespread in the English literature on the subject (cf. for instance J. M. Keynes, 1936, p. 222) and is probably one of the reasons why the term " capital good" is so widely used by English writers to describe durable goods in the sense in which this term is used in the text. It seems, however, preferable, and more in conformity with the usage by the classical economists, to distinguish between perishable, non-perish able, durable, and permanent goods and to reserve the term capital goods as a description of all the first three types, that is all nonpermanent goods.

CR. VI Production and Durability of Goods 79 or continuously over a period of time. Durability in the first, more restricted sense may also give rise to investment, as when it is possible to produce a commodity at a season when it is cheapest to produce, and then to store it. But this would not be durability of the kind with which we are here concerned. Otherwise indistinguishable commodities which are available at different times of the year (e.g. ice in January and ice in July) must, for the purpose of eco nomic analysis, be regarded as different commodities, and storage (transformation in time) as part of one possible technique of production. This case is therefore more properly to be regarded as an instance where a longer process of production gives a larger product. Changes in the use made of durable goods may affect the quantity of capital used in two different ways. Either the quantity of durable goods used in a Th r d bl e use 0 ura e given process may change, or the durability goods and the quanof the goods may change . We shall first tlty of capital consider the effect of changes in the durability of the goods used.

Even within the category of durable goods in the narrower sense in which the term is here used some further distinction has to be made with regard to the way in which the durability of a particular good Factors determining is determined. It is possible to conceive durablllty of a durable good which will last for a predetermined period of time irrespective of the amount of use to which it is subjected. During that given period it may be used more -or less intensively and will accordingly give a greater or smaller amount of services. But once it is made its durability is finally determined, and we can speak 'of variability in its durability only in so far as we have the choice of producing otherwise similar goods of greater or lesser durability. Most buildings probably belong to this class. The other extreme will be represented by a good which embodies ft definite quantity of services which can be used up at will either over a shorter or over a longer 80 Introductory PT. I interval of time. In this case the time the good will last is determined not by the way in which it is made but by the way in which it is used. The obvious example here is machinery of most kinds, e.g. a motor-car. Neither of these types of durable goods is ever likely to be encountered in its pure form. In actual life we have to deal with various combinations of the two elements, though it will sometimes be useful to group them according as they approach more closely to the one or the other of the two extreme types.

More important, however, than this distinction is a similar one which is connected with the reasons why durable goods a:ce used. It may happen that a particular The l'NIons for 1111111 instrument can only be made in a form in darable roods which it will last, and that the costs of ' making it are such that it is only profitable to produce it provided it will be used repeatedly or for a certain period of time. Or it may be that although a particular instru ment could be made so as to serve for a single time only, its services are provided more cheaply if it is made in a durable form. The first case is the rule where an instrument does not give off part of its substance or energy in the process of being used, but serves merely" as a tool". A hammer or a Sometlmesthutrenglh derrick which would break while it was required of an Indru-being used would be no good at all and ment makes It Incl- , dentally durable there are an almost infinite number of cases where a tool, in order to be useful, has to be made so strong that it will last - and in most cases remain useful-for a considerable period of time. But once it is known to last, it will be produced in such quantities, and the value of its services will fall to such a level, that if each tool were used only a single time it would not repay its cost: i.e. input will deliberately be invested in order to obtain a stream of services spread over a period of time. The question of what share of the input invested in such a durable good has to be regarded as invested for particular periods of time ClIo VI Production and Durability of Goods 81 presents difficulties with which we cannot attempt to deal until later. For the present all that we need to consider is the fact that in many instances advantage cannot be taken of the help that instruments will render unless input which will repay its costs only over a considerable period of time is actually applied before the results begin to mature.

But this case where a particular instrument can be made only of a certain durability or not at all is but one of a much wider group of cases where the use of durable equipment enables us to obtain a greater In moll cases, how return from given quantities of input. The ever, durability Is aimed at because It more frequent case is associated with the gives additional services for a less tban fact that as a rule the additional expertdi-proportional Increase ture involved in making equipment more In costs durable so that it will give a greater amount of service, is much less than proportional to this added service. Even if it were possible to build a house which would last only for a month but would serve its purpose properly during this time, it would hardly be worth while to do so because such a house would probably cost little less than one which lasts for years. And although there will generally be some additional expenditure involved in making a good more durable, this additional expenditure will usually be very much smaller than the expenditure that is re quired to obtain the same amount of service during the early life of the good.

The effect of this can be best seen if we assume for a moment that a fix.ed amount of input is set aside in a society for the provision of particular durable goods. This input may be used to produce these ERects of variations durable goods in their cheapest and least In durability on tbe amounts of services durable form. In this case a large number obtained at dillerent of the durable goods will soon be available, periods and for some time the total amount of services obtained from them will contiilue to increase. But fairly soon a maximum will be reached: as soon as the goods which 7 82 Introductory PT. T were produced first begin to wear out, all the available input will be needed for replacing them and no further increase in services will take place. Compare this with the case where the input set aside for making durable goods is used to make fewer goods but more durable ones. At first the amount of services available will be smaller than in the first case. But since the durability of the individual good will increase more than in proportion to the increase in the expenditure on it, the total number of such goods which will have been created before the ones that were produced first begin to wear out (i.e. before it becomes necessary to devote the a vaila ble resources to mere replacement purposes) will be greater than in the first case. The effect of using a given quantity of input for making more durable goods will thus be to provide a smaller quantity of services for Some time at the beginning, but ultimately and permanently to provide a larger quantity.

As has already been suggested, what is called a transi tion to the use of " more durable goods" may mean two very different things, which, although the effect is very Ch I th much the same for our purpose, must be anges n e quantity of durable goods clearly distinguished. First, it may mean used a change towards the use of goods of greater durability; that is, it may refer to the phenomenon we hav;) just discussed. But although this is probably the case most commonly referred to under this heading, it is not the only case and probably not even the more important case. "More durable goods" may also mean that a greater quantity of goods of a given durability (or of durable goods in general) will be used, compared with the amount of pure input which is invested in circulating capital. In this way the amount of capital may be increased by the use of " more durable goods", although every individual durable good used now may be actually less durable than was the case before, because the quantity of such durable goods used in proportion to the pure input • CR. VI Production and Durability of Goods 83 employed has increased more than the durability of the individual durable goods has decreased.

In practice a change to the use of more goods of a given durability (as distinguished from a change to the use of goods which are more durable) will as a rule mean that a different, more expensive, and more labourThis will usually In saving type of equipment will be used in a given process of production. Professor G. Akerman, who has devoted a special study to this phenomenon, has proposed to de volve a change io wards more or Jess I abo u r - s a vi n g (" automatic ") typo of equipment scribe this difference between different instruments of the same durability which are designed to co-operate with a proportionately larger or smaller amount of "labour" (pure input) as the degree of automatism of these differ ent kinds of capital goods.! They can also be described as more or less labour-saving types. In certain contexts these terms are convenient and we shall occasionally use them. But it is important to remember that the use of more" automatic" or more" labour-saving" machinery is only a special instance of a change towards the use of more durable instruments a?-d that, whether a greater quantity of durable goods (in the sense of durable goods possessing a greater value and probably of a different kind) or durable goods of greater durability are being used, comes for our purposes to very much the same thing. In both cases part of the total pure input used in the process of production will now be invested for longer periods.

The only important difference is that in the first case input which has already been invested in durable goods will now (together with some additional quantities of pure input) be invested in still more durable goods, while in the second case input invested in durable goods is substituted for input invested in goods il~ process. Nor should the question why it should become profitable to 1 See G. Akennan, 1923, chap. iiij4 and chap. vjI, pp. 27, 39 et seq., and 1924, p. 284; also Wicksell, Lectures, vol. i, appendix, and Lindahl, 1925, p. 81.

84 Introductory PT. I use a greater quantity of durable goods require any further explanation beyond that already given for why durable goods should be used at all. The fact is simply that of the various tools, etc., that can be used some will be more efficient than others; that among the tools of equal costs and equal durability the most efficient will always be chosen; that consequently the adoption of still more efficient instruments will require more capital because these more efficient instruments will be either more durable or more costly for some other reason; and tpat, therefore, if capital is supplied more amply and cheaply, this will lead either to the use of tools of greater durability, or to the use of more costly tools of given durability, or both. 1 1 It is also possible that the increase in the supply of capital may bring about one of these effects to which an extent would more than offset the consequences of the other effect going in the opposite direction.