and his urgent appeal to Athens to increase her revenues by systematic exploitation of the mines, and by the encouragement of industry and commerce, reveal a mind awake to economic advantage. Though at times he seems almost to make war and agriculture the only true means of production, it is evident that he has a live interest in all means of acquisition.404
Toward the theory of production, however, his contribution is not large. In the Economics, he recognizes the importance of labor and natural resources in production, and in the Revenues, he sees the necessity of capital.405
But naturally, like Aristotle and the southern planter, he confuses capital with labor, in the person of the slave.406
The fable of the dog and the sheep reveals a knowledge of the machinery of production, and some insight into the proper relation between the employer and the laborer.407
Xenophon’s distinct contribution to future economic thought, however, consists in his appreciation of the fact that economic production has its definite limits; that the same ratio of profits cannot be increased indefinitely by the constant addition of more labor and capital, but that these must be proportioned to the greatest possible return.408
To be sure, he does not appreciate the scientific significance of the principle. His purpose is rather to emphasize the danger of overproduction, and he even fails to grasp the necessary application of this danger to the silver mines. However, as the enunciator of the principle, he may be called the forerunner of the doctrine of diminishing returns.
As seen above, special emphasis was laid by Xenophon upon natural resources as an element in production, both in land and in the mines.