The role of pecuniary external economies and increasing returns of scale in the theory of increasing returns

Research output: Contribution to conferencePaper

Abstract

This paper investigates some issues relating to the phenomenon of increasing returns: (1) What is the role of economies of scale in the theory of increasing returns? (2) Do pecuniary external economies lead to market failure and justify intervention in the market mechanism? (3) Are increasing returns sector-specific or generalised, and if they are sector specific, is it possible to identify and promote these sectors from a policy point of view? We argue that economies of scale are incidental to the broader phenomenon of increasing returns and therefore cannot adequately explain their existence. On the second question, we argue that the presence of pecuniary external economies is characteristic of a well-functioning market system rather than an indication of its failure. Finally, increasing returns are generalised, so that policies intended to identify and promote specific sectors will tend to distort intersectoral relationships. Sector-specific polices should not be based on the logic of increasing returns, but should aim to correct sector-specific handicaps.
LanguageEnglish
Publication statusPublished - Apr 2006
EventESHET Conference - Porto
Duration: 1 Apr 2006 → …

Conference

ConferenceESHET Conference
CityPorto
Period1/04/06 → …

Fingerprint

External economies
Increasing returns
Economies of scale
Market failure
Market mechanism
Logic
Police
Functioning
Handicap

Keywords

  • increasing returns
  • pecuniary external economies

Cite this

@conference{cea61905b1fe425da5fe7cb44eb13042,
title = "The role of pecuniary external economies and increasing returns of scale in the theory of increasing returns",
abstract = "This paper investigates some issues relating to the phenomenon of increasing returns: (1) What is the role of economies of scale in the theory of increasing returns? (2) Do pecuniary external economies lead to market failure and justify intervention in the market mechanism? (3) Are increasing returns sector-specific or generalised, and if they are sector specific, is it possible to identify and promote these sectors from a policy point of view? We argue that economies of scale are incidental to the broader phenomenon of increasing returns and therefore cannot adequately explain their existence. On the second question, we argue that the presence of pecuniary external economies is characteristic of a well-functioning market system rather than an indication of its failure. Finally, increasing returns are generalised, so that policies intended to identify and promote specific sectors will tend to distort intersectoral relationships. Sector-specific polices should not be based on the logic of increasing returns, but should aim to correct sector-specific handicaps.",
keywords = "increasing returns, pecuniary external economies",
author = "R.J. Sandilands",
note = "Also published in Review of Political Economy, v. 18, n. 2, 2006. DOI: 10.1080/09538250600571361; ESHET Conference ; Conference date: 01-04-2006",
year = "2006",
month = "4",
language = "English",

}

The role of pecuniary external economies and increasing returns of scale in the theory of increasing returns. / Sandilands, R.J.

2006. Paper presented at ESHET Conference, Porto, .

Research output: Contribution to conferencePaper

TY - CONF

T1 - The role of pecuniary external economies and increasing returns of scale in the theory of increasing returns

AU - Sandilands, R.J.

N1 - Also published in Review of Political Economy, v. 18, n. 2, 2006. DOI: 10.1080/09538250600571361

PY - 2006/4

Y1 - 2006/4

N2 - This paper investigates some issues relating to the phenomenon of increasing returns: (1) What is the role of economies of scale in the theory of increasing returns? (2) Do pecuniary external economies lead to market failure and justify intervention in the market mechanism? (3) Are increasing returns sector-specific or generalised, and if they are sector specific, is it possible to identify and promote these sectors from a policy point of view? We argue that economies of scale are incidental to the broader phenomenon of increasing returns and therefore cannot adequately explain their existence. On the second question, we argue that the presence of pecuniary external economies is characteristic of a well-functioning market system rather than an indication of its failure. Finally, increasing returns are generalised, so that policies intended to identify and promote specific sectors will tend to distort intersectoral relationships. Sector-specific polices should not be based on the logic of increasing returns, but should aim to correct sector-specific handicaps.

AB - This paper investigates some issues relating to the phenomenon of increasing returns: (1) What is the role of economies of scale in the theory of increasing returns? (2) Do pecuniary external economies lead to market failure and justify intervention in the market mechanism? (3) Are increasing returns sector-specific or generalised, and if they are sector specific, is it possible to identify and promote these sectors from a policy point of view? We argue that economies of scale are incidental to the broader phenomenon of increasing returns and therefore cannot adequately explain their existence. On the second question, we argue that the presence of pecuniary external economies is characteristic of a well-functioning market system rather than an indication of its failure. Finally, increasing returns are generalised, so that policies intended to identify and promote specific sectors will tend to distort intersectoral relationships. Sector-specific polices should not be based on the logic of increasing returns, but should aim to correct sector-specific handicaps.

KW - increasing returns

KW - pecuniary external economies

UR - http://www.eshet.net/

M3 - Paper

ER -