Source of increasing remuneration

Author: Theodore W. Schultz
Publisher:
Publish Date: 2001-09-01
Features: The effort by economists to discover the origin of increasing returns is not in vain. This has led to the advancement of knowledge, and the advancement of knowledge has brought about income growth. Equally true is that every progress, as a process, is ultimately subject to diminishing returns. This means that there is no known, unique, and persistent process of income growth.
My collection particularly emphasizes Adam Smith's famous theorem—the labor division is limited by the scope of the market.1 Smith largely asserts that the great increase in labor productivity comes from labor division, saying, "The greatest improvements in labor productivity, the greater dexterity, skill, and judgment with which labor is directed, seem to arise from the division of labor." Here, Smith points out different components of human capital. Clearly, market expansion is important, but Smith did not provide an understanding of market expansion, its origins, and the conditions and analysis of additional income brought by expansion.
The first paper in this collection starts with Alan Young's "Increasing Returns and Economic Progress."2 During my graduate studies, I did not encounter Young's economic thought. It was decades later that I suddenly discovered it.
In 1930, when I entered Iowa State University, economics was bound by secular diminishing returns, and this constraint was even more extreme in my field of study, agricultural economics. My first paper discusses "Diminishing Returns in the Progress of Agricultural Production."3 I encountered forty years of powerful data, and these num...