The law of diminishing returns also operates in the use of other forms of land, such as mines and building sites. In mining, as well as in agriculture, there is a point of diminishing returns. Likewise, there are intensive and extensive margins of operation. Every mine owner knows that successive additions of miners and machinery will for a time increase the output of ore at an ever-increasing rate of speed. He knows also that a point will be reached eventually where this rate begins to decline.

Owners of building sites, like the owners of farms and mines, face the problem of determining just how much labor and capital they should apply to their land. Obviously, one would apply more on a piece of land in lower New York City than on an equal-sized piece of land in an Iowa county-seat town. But how much more ? Shall the building have one floor, or shall it be a skyscraper? The piece of land will support one as easily as the other. Moreover, we may say, speaking roughly, that the same foundation and the same roof will suffice whatever the height of the building. Here, as it was in the case of agricultural land, the guide is the relation of the value of the labor and capital expended to the value of the product. The addition of a second floor to a store building in small towns, and a third or fourth in moderate-sized cities, usually increases the rate of returns to the land. There will come a point, however, when the return from another floor will show a decline, which indicates that the point of diminishing returns was reached with the addition of the preceding floor.

It will readily be seen that the application of the law of diminishing returns to building sites is intensely practical not only in the matter of stores and shops, but also in the matter of residences. All of us have seen costly houses on cheap lots; and, conversely, cheap houses occupying costly sites. In the first case the use of the land was intensive; in the second, extensive. The importance of these truths will become more evident when we take up the question of rent.