1. _The phrase diminishing returns is sometimes taken as meaning merely a decrease in prosperity._ Many ideas are connected with this phrase. It is not self-explanatory. It suggests various thoughts according to context and these have not failed to give rise to different uses. The student must be cautious if he is to think clearly about it. If population declines, or industry changes from one place to another, or from one kind of goods to another, it is sometimes said that returns are diminishing in the deserted district. [Sidenote: Nor exhaustion of the soil] 2. _A more common misuse of the term is to apply it to the exhaustion of the soil._ If the soil of a district has been robbed of its fertile qualities and smaller crops are raised than was the case fifty years before, it is said to be a case of of the increased difficulty in the extraction of natural stores in mining. The veins near the surface being mined first, later the galleries must be cut deeper and greater expense incurred to get the stores. But the conditions here are very different from those we have considered under diminishing returns. Mines are used not under the renting contract, but under the royalty contract, which permits and contemplates a progressive using up of the limited stores of natural resources. [Sidenote: Fallacious contract between manufacture and agriculture] [Sidenote: All industries if limited as to one factor, as area, show diminishing returns] 3. _Manufactures are often said to show increasing returns in contrast with agriculture as an industry of decreasing returns._ There is here an inconsistent shifting of thought. Agriculture is thought of as limited to a certain area of ground, whereon evidently diminishing returns will take place. But the fixed limit of ground-space is not thought of in connection with manufactures. Taking the same view of manufactures, commerce, education, etc., that is, assuming each industry to be confined to limited area of ground, each is seen to be subject to diminishing returns. Some ground-space is one of the essentials to carry on any business. If the attempt is made to accumulate a large library in one small room, a point is reached where much energy is wasted in trying to find the books. In a university the psychical product, education, may be limited by the need of space. The school-room, laboratory, or college class-room could be used at midnight, it is true, but not conveniently; and as students increase, buildings must be added. The same is true of any industry. We cannot conveniently increase the business of a lumber-yard without a larger yard-space, or of a factory without a larger floor-space. But the added space may be gotten by spreading horizontally or piling up perpendicularly. A ten-story building on an acre lot represents ten acres of floor-space. Putting up higher buildings is an expansion in area by the more intensive utilization of the land. Devices like elevators, and more compact appliances, make