Demands for Factors Are Interdependent

Production is a team effort, A chain saw by itself is useless for cutting down a tree. A worker with empty hands is equally worthless. Together, the worker and the saw can cut the tree very nicely; In other words, the productivity of one factor, such as labor, depends upon the amount of other factors available to work with.

Therefore, it is generally impossible to say how much output has been created by a single input taken by itself. The different inputs interact with one another. Sir William Petty put the matter in this striking way: Labor is the father of product and land the mother. We cannot say which is more essential in producing a baby-a mother ‘or a father. So, too, it is generally impossible to say how, much output has been created by anyone of the different inputs taken by itself.

It is this interdependence of productivity of land, labor, and capital goods that makes the distribution of income a complex topic. Suppose we had to distribute at one time the entire output of a nation. If  land had by itself produced so much, and labor had alone produced so much, and machinery had by itself produced the rest, distribution” might be easy. Under supply and demand, if each factor produced a certain amount by itself, it could enjoy the undivided fruits of its own work.

But reread .the above paragraph and underline such words as “by itself produced” and “had alone produced.” They refer to a fantasy world of independent productivity which simply does not exist in reality. When an omelette is produced by chef’s
labor and chicken’s eggs and cow’s butter and land’s natural gas. how can you unscramble the separate contributions of each input?

To find the answer, we must look to the interaction of marginal productivity (which affect demand) and factor supplies-both of which determine the competitive price and quantity.

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