Sec.5. Capital and Labor.  Cases in which it is impracticable to make any variation in the proportions in which different things are used together are, however, the exception rather than the rule.  Where variation is possible, we are confronted with an uncertainty as to the way in which an increased supply of one thing will react on the demand for another, similar to our uncertainty as to whether an increased demand for mutton would augment or diminish the supply of wool.  It is, for instance, of the highest importance to give a clear answer, if we can, to the question whether an increased supply of capital will increase the demand for labor.  The chief effect of an increased supply of capital is to facilitate the extended use of expensive machines:  to some extent these machines will increase the demand for labor; to some extent they will be substituted for it.  Which of these two tendencies will outweigh the other we cannot be absolutely sure.  But fortunately we can be far more nearly sure than was possible in the analogous case of wool and mutton.  An increase in the supply of capital increases the demand for the commodities, from which the demand for labor is derived, in both the senses discussed in Chapter II.  First it makes them cheaper to buy, and thus increases the quantity that will be bought.  It is this that is parallel to the effect of an increased demand for mutton in making it more profitable to breed sheep.  But it also serves to increase the purchasing power with which to buy commodities, because it increases the aggregate real wealth of the community, and it thus serves to raise the whole demand curve.  This last consideration is so important as to make it overwhelmingly probable, apart from the evidence of history, that an increase in the supply of capital (and the same may be said of an increase in the supply of the other agents of production) will on balance increase the demand for labor.  The evidence of history points to the same conclusion.  The history of the last hundred years displays an unprecedented accumulation of capital, and an unprecedented extension of machinery, associated with an unprecedented improvement in the standard of living throughout the whole community.  This is powerful testimony in favor of the view that an increase in the supply of capital and the use of machinery will usually enhance on balance the demand for labor.  Moreover, though this is not conclusive, there is little room for doubt that an obstructive attitude towards the extension of machinery in a particular country, or a particular district, is misguided.  For its effect must be to make production more costly there than it is elsewhere, and to lead, slowly perhaps, but very surely, to the transference of the industry to other regions.

Sec.6. Conclusions as to Joint Supply and Joint Demand.  Here, however, we are beginning to digress.  Let us sum up in a general form our conclusions as to the way in which changes in the supply or demand of a commodity react upon the demand or supply of the other things with which it is jointly demanded or supplied.  Everything turns, as we have seen, on the possibility of variation in the proportions in which the things are used or produced together; and this, it is also clear, is a matter of degree.  Our conclusions, therefore, had best take the following form:—­