JP Smit from South Africa, who has commented in the past, sent me a link to a very interesting journal article that I have started reading. The URL is as follows:
http://efiko.org/material/Do%20Diseconomies%20of%20Scale%20Impact%20Firm%20Size%20and%20Performance-%20A%20Theoretical%20and%20Empirical%20Overview%20Staffan%20Canb%C3%A4ck%20et.%20al.pdf
The article discusses the large literature devoted to explaining why firms do NOT just continue to get bigger and bigger.
It would appear there is a very great deal I do not know about contemporary discussions in Economics. Who would have thought?
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3 comments:
I appreciate Marx's point and the point(s) made in this article. I didn't devote too much time to it, but it seems like what is interesting in this piece are the proposed mechanisms through which diseconomies of scale occur.
How diseconomies of scale occur is an interesting question, but that they occur has always seemed to me (and I would think to Marx as well) fairly obvious. They impose a practical limit on the size of a firm, but not obviously a necessary limit. WIth innovations in technology and management I would think it possible to continue to increase the size of a firm while minimizing diseconomies of scale.
I always assumed there is nothing in Marx (or proposition 2) that contradicts any of this. The fact that capital tends to accumulate doesn't mean it will be smooth sailing all along the way. Am I wrong in seeing this idea as utterly compatible with Marx?
I don't think so. Remember, Marx was first and foremost a social scientist who grounded his analysis in the data he gathered from the British Museum. I think that faced with new data he would have adjusted his analysis to suit. The central point, however,k remains un challenged -- capitalism rests on the exploitation of the working class. To put it in modern jargon, it is the workers who asre the makers and the capitalists who are the takers.
I thought the linked article was very interesting, so thank you for highlighting it. Two broader points come to mind:
1. the so-called "New Institutional Economics" based on economists such as Coase, Williamson, North (all cited in the article) is an increasingly important approach in empirical economic and economic-history research.
http://www.coase.org/newinstitutionaleconomics.htm
2. The food retail sector is an example of the persistent coexistence (Stigler's survivor principle) of small and large companies. In the UK, I would guess that there has been some expansion of the major chains' market share at the expense of small single-shop retailers (the latter often notorious for selling food past expiry dates.) One of these expanding major chains is Waitrose, a big division within the John Lewis Partership (JLP). JLP is an employee-owned partnership, all of whom receive a profit-sharing bonus typically worth a month or two of base salary. The JLP CEO is paid much, much less than his conventional UK retail chain counterparts. I believe that Waitrose is also gaining market share from the conventional chains. Who precisely is JLP exploiting? (Polly Toynbee of the Guardian would say the outsourced cleaners, but these account even on her figures for less than 5% of the total direct labor input to run Waitrose.)
Samuel Bowles discusses worker-owned coops in his 2004 microeconomics book.
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