Marginal Productivity of Labor

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    I thank you for all of your effort in giving me substantive and informative answers.

    I’m wondering how it is that service sectors do marginal productivity of labor calculations.

    How specifically, do firms determine how much more revenue an individual will bring in?

    Thank you


    Economists tend not to go beyond the general claim that entrepreneurs can use the technique of either withdrawing or augmenting some of the labor service and then note the decrease or increase in overall revenue. Of course, the entrepreneur does not have to actually conduct such an experiment, he can anticipate what would occur and then compare the result to the wage he must pay to hire that labor service in deciding whether or not to hire.

    You might take a look at Book 3, Chapter 10 of Eugen von Bohm-Bawerk’s book, The Positive Theory of Capital:


    Thank you so much for all of your answers! They are so informative. My subscription is almost up, but I’m going to save up and renew when I can afford it.

    Due mostly to you, its been worth far more than the price! I’ve always wanted to go to Mises U and get a chance to talk to people and learn from them, but have never been able to afford it, so this was a real treat.


    You’re most welcome. I hope to meet you at MU some day. They do have low cost housing and scholarships:

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