e reason for it will be that the workmen have capital
placed in their hands in unparalleled profusion.

_The Product of the Second Unit of Labor._--We will now introduce a
second unit of labor, by doubling the number of workers, without
changing the amount of the capital. We must, of course, change the
forms of the capital, or it cannot be advantageously used by the
larger working force. The buildings will have to be larger, and if
they are to be erected with about the same amount of capital as was
formerly used, they must be built in a cheaper way. Tools of every
sort must be more numerous, and this larger number of tools, if it is
to represent the same investment of capital that the former number
embodied, must also be simpler and cheaper. The whole equipment of
_capital goods_ will have to undergo a complete transmutation; but the
essential thing is that the amount of the capital should not be
changed.

_A Provisional Mode of Measuring Capital._--In measuring the amount of
the capital we are obliged to use a unit of cost, and in the
illustration we have assumed that the cost can be measured in dollars.
The productive fund consisted at the outset of a certain number of
dollars invested in productive operations. This is only a provisional
mode of measuring it. The money spent really represents sacrifice
incurred, and we shall find that the only kind of sacrifice that is
available for measuring the cost of goods of any kind is that which is
incurred by labor. Ultimate measurements of wealth in all its forms
have to be made in terms of labor. Such measurements have presented
difficulties, and the attempt to make them has led to serious
fallacies. We shall see, in due time, how these fallacies can be
avoided.

_The Law of Diminishing Productivity._--Under these conditions the
second unit of labor will add something to the amount that was
produced by the first unit, but it will not cause the product to
become double what it was. It could not do that unless the capital
also were doubled. Each unit of labor is now cooeperating with one half
of the original capital, and the total product is less than it would
have been if the new labor, on entering the field, had brought with it
as full an equipment of productive instruments as was possessed by
the labor that preceded it. Adding to the industry a second unit of
labor without adding anything to the capital makes the total product
somewhat larger, but falls short of doublin