n the problem of
economic freedom, and thus on the prospect of avoiding the alternative
of state socialism, we need to state the essential principles in the
theory of railway transportation.

The fact that makes a vast amount of carrying necessary is that
agriculture is subject to a law of diminishing returns, while
manufacture obeys an opposite law. In tilling the soil labor and
capital yield less and less as more and more of them are used in a
given area; and therefore both of these agents need to extend
themselves widely over the land in order to use it economically. In
the production of staple crops which can be freely carried across sea
and continent, the natural tendency is to scatter a rural population
with some approach to evenness over all the land available for such
crops. Market gardening requires less land per man and the areas
devoted to it are much more densely peopled; but even within this
department of agriculture the law holds true that too much labor and
capital must not be bestowed upon an acre of ground. In a general way
agriculture diffuses population, while manufacturing concentrates it.
This latter work is done most economically in great establishments.

_The Law of Diminishing Returns from Land not restricted to that used
in Agriculture._--It is commonly said that manufacturing is unlike
agriculture in that it is subject to a law of increasing returns; but
this statement is true only when its terms are carefully interpreted.
The diminishing returns from agriculture and the increasing returns
from manufacturing are not two opposite effects from the same cause.
There is, indeed, a logical anomaly in contrasting them with each
other. In agriculture we get smaller and smaller results per unit of
labor and capital when we overwork a piece of ground of a given size
by putting more and more labor and capital on it. The trouble here is
that land, on the one hand, and labor and capital, on the other, are
not combined in advantageous proportions; and exactly the same effect
is produced by the same cause in manufacturing. One can overtax a mill
site by confining larger and larger amounts of capital within a given
area. If the site is so small that the building has to be carried far
into the air and supplied with walls strong enough to resist the jar
of machinery on many floors, manufacturing becomes a far less
economical operation than it would be if the site were larger and the
mill lower. The gain from