One of the most common phenomena to be observed in business at the present time is large-scale production. Almost every line of industry has felt its influence. Rapidly our factories have been enlarged; and our railway lines lengthened and consolidated into great systems. Even in retailing, the advantages of large scale production have been demonstrated. Agriculture alone seems to stand unaffected, with the result that the average size of farms in the United States is less than it was a half century ago.

The adaptation of the principle of large-scale production to American industry has created several distinct and highly important problems. Obviously, the first result is an increased output, and the distribution of this increase among the various factors of production (labor, including the enterpriser, land, and capital) creates problems both social and economic. Large-scale production causes the concentration of workers, and this concentration raises problems of housing, of government, and of social development. Furthermore, large-scale production permits of a decreased unit-cost production, with the result that small industries are driven out of business, while the large ones tend to become monopolies. Such a development has actually taken place in the United States, where many lines of production have fallen into the hands of the so-called trusts.

We have seen how large-scale production increases the output at a decreased cost, and we may now properly inquire why such is the case.

The factors that contribute to the efficiency of large-scale production are five in number. (1) Division of labor, which always accompanies large-scale production, permits the use of varied talents and aptitudes, whereby each worker can confine his attention and efforts to the particular operation in which he is the most proficient. (2) The latest and most improved machinery can be utilized, something which is usually impossible in small-scale production. In the Chicago plant of the International Harvester Company is a machine costing several thousand dollars which performs a simple operation on wagon and other tongues at a saving over old methods of a few cents each. Obviously, such a saving, which mounts high in the aggregate, is possible only when the volume of output is enormous. (3) Large-scale production also permits of economies in buying raw materials and in selling finished products. It is a well-known fact that large purchasers can buy at a cheaper price than small ones; and equally as well known that large producers are able to economize in the matter of advertising, and of getting their products in the hands of retailers through traveling salesmen. (4) Large-scale industries are better able to utilize their by-products. In the slaughtering industry, for example, a large plant can make use of hair, blood, and other by-products which the local butcher allows to go to waste. (5) The large-scale producer can better afford to carry on expensive experiments with the idea of improving his product and of lessening unit cost. So well recognized is this advantage that such large concerns as the United States Steel Corporation maintain extensive laboratories and employ a great many trained experimenters.