Economics Dictionary of ArgumentsHome
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| Returns to Scale: In economics, returns to scale refer to the changes in output resulting from a proportional increase in all inputs. If output increases more than the increase in inputs, it is increasing returns to scale. If output increases less, it is decreasing returns to scale. Constant returns to scale occur when output increases in direct proportion to input increases. See also Input-Output Analysis._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Returns to Scale - Dictionary of Arguments
Rothbard III 467 Returns to Scale/Rothbard: If the supply of the factor in the process is increased by one unit, other factors remaining the same, then the MPP (marginal physical product) of the supply becomes the additional physical product that can be gained from the addition of the unit. The supply of the factor that is relevant for the MPP schedules is not the total supply in the society, but the supply in each process, since the MPP schedules are established for each process separately. Law of returns/Rothbard: According to the law of returns, an eternal truth of human action, if the quantity of one factor varies, and the quantities of other factors remain constant, there is a point at which the physical product per factor is at a maximum. Physical product per factor may be termed the average physical product (APP). The law further states that with either a lesser or a greater supply of the factor the APP must be lower. Rothbard III 479 The price of the unit service of every factor (…) is equal to its discounted marginal value product (DMVP). >Marginal product/Rothbard. This is true of all factors, whether they be “original” (land and labor) or “produced” (capital goods). >Capital goods/Rothbard. However (…) there is no net income to the owners of capital goods, since their prices contain the prices of the various factors that co-operate in their production. Essentially, then, net income accrues only to owners of land and labor factors and to capitalists for their “time” services. It is still true, however, that the pricing principle - equality to discounted MVP (marginal value product) applies whatever the factor, whether capital good or any other. Rothbard III 480 Each capital-goods factor must be produced and must continue to be produced in the ERE (Evenly Rotating Economy). >Evenly Rotating Economy/Rothbard. Since this is so, we see that the capital-goods factor, though obtaining its DMVP, does not earn it net, for its owner, in turn, must pay money to the factors that produce it. Ultimately, only land, labor, and time factors earn net incomes. >Land/Rothbard, >Labour/Rothbard, >Factors of Production/Rothbard._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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