42 THE GENERAL THEORY OF EMPLOYMENT BK. II

if the remuneration of the workers is proportional totheir efficiency, the differences are dealt with by ourhaving regarded individuals as contributing to thesupply of labour in proportion to their remuneration;whilst if, as output increases, a given firm has to bringin labour which is less and less efficient for its specialpurposes per wage-unit paid to it, this is merely onefactor among others leading to a diminishing returnfrom the capital equipment in terms of output as morelabour is employed on it. We subsume, so to speak,the non-homogeneity of equally remunerated labourunits in the equipment, which we regard as less andless adapted to employ the available labour units asoutput increases, instead of regarding the availablelabour units as less and less adapted to use a homo-geneous capital equipment. Thus if there is no surplusof specialised or practised labour and the use of lesssuitable labour involves a higher labour cost per unitof output, this means that the rate at which the returnfrom the equipment diminishes as employment in-creases is more rapid than it would be if there weresuch a surplus .1 Even in the limiting case wheredifferent labour units were so highly specialised as tobe altogether incapable of being substituted for oneanother, there is no awkwardness; for this merelymeans that the elasticity of supply of output from aparticular type of capital equipment falls suddenly tozero when all the available labour specialised to its useis already employed .2 Thus our assumption of a homo-

1 This is the main reason why the supply price of output rises with increas-ing demand even when there is still a surplus of equipment identical in typewith the equipment in use. If we suppose that the surplus supply of labourforms a pool equally available to all entrepreneurs and that labour employedfor a given purpose is rewarded, in part at least, per unit of effort and notwith strict regard to its efficiency in its actual particular employment(which is in most cases the realistic assumption to make), the diminishingefficiency of the labour employed is an outstanding example of rising supplyprice with increasing output, not due to internal diseconomies.

2 How the supply curve in ordinary use is supposed to deal with theabove difficulty I cannot say, since those who use this curve have not madetheir assumptions very clear. Probably they are assuming that labour