The producer of no more than average capacity is therefore making out of you a surplus profit, which would be quite unnecessary in any well-arranged society.”  Such an argument is a gross caricature of the marginal conception.  The half-witted incompetent will, as we know well enough, speedily disappear under the stress of competition, and his place will be taken by more efficient men.  There is an essential difference between him and the “marginal coal mine” of which we spoke above.  For the probabilities are that of the coal resources, whose existence is clearly known, the more fertile and better situated parts will already be in process of exploitation; and there is not likely, therefore, to be a supply of substantially better seams which can be substituted for the worst of those in actual use.  There is likely, on the other hand, to be available a supply of decent business capacity which can be substituted for the most inefficient of existing business men.  The marginal concern, in other words, must be conceived as that working under the least advantageous conditions in respect of the assistance it derives from the strictly limited resources of nature, but under average conditions as regards managerial capacity and human qualities in general.  Thus in agriculture we can speak of a marginal farm, which we should conceive as the least fertile and worst situated farm which it is just worth while to cultivate (of which more will be said when we come to the phenomenon of rent), but we must assume it to be cultivated by a farmer of average ability.

Sec.5. Some Consequences of a Higher Price Level.  The foregoing controversy will be of service to us, if it makes clear the manner and the spirit in which the marginal conception should be handled.  It should be regarded not as a rigid formula which we can apply to diverse problems without considering the special features they present, but rather as a signpost which will enable us to find our way, a compass by which we may steer between the shoals of triviality and sophistry to the crux of any problem with which we have to deal.  Let us illustrate its practical uses by an example which is of great interest and far-reaching practical importance at the present day.  As has been already observed, the war has left behind it in all countries a great and almost certainly permanent increase in nominal purchasing power.  Since the armistice prices have moved upwards and downwards with unprecedented violence; and it would be very rash to prophesy the precise level at which they will ultimately settle (using that word with considerable relativity).  But, for reasons for which the reader is referred to Volume II in this series, it is safe enough to say that the general level of post-war will greatly exceed that of pre-war prices.  Now this will apply not only to consumers’ goods like milk and clothes, or to raw materials like pig-iron and cotton, but in very much the same degree to things like factories