RE: [OPE] constant returns to scale

> Measuring marginal costs is impractical centrally or in a de-centralized fashion,
> because they vary with level of output. You can assume this away and then
> assume constant returns to scale, so that MC = Average Cost, but this then has
> none of the efficiency advantages of MC pricing. This is quite independent of the
> incentive problems to which you refer.
 
Hi Michael W:
 
Yes, but don't most Marxian models also assume constant returns to scale?
 
I suppose this would be legitimate in a static model, but surely any
truly dynamic model of growth and capital accumulation must not assume
this. This must be the case since technological change in means
of production and the processes of the centralization and concentration
of capital require (and, indeed, express) economies of scale.
 
In solidarity, Jerry
 
 
 
 

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Received on Wed Oct 1 11:18:42 2008