Investment, Scale and Growth
Posted: 30 Aug 2012
Date Written: 1971
There are many economic activities where the cost function can be approximated by a fixed initial cost and a constant (sometimes zero) marginal cost as with book publishing, public utilities, and innovations. In the absence of technical advance, an economy that grows in scale could nevertheless exhibit growth in per capita income by taking advantage of the economies of scale afforded. To the extent, however, that these production processes are in the public domain, overinvestment, manifested either in premature entry or in duplication of resources, will occur, and the growth potential, to a large extent, will be lost.
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