General Systems Research Research Articles

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—Editorial by Martin Kenneth Starr, Columbia University —Adoption of the Metric System (Editorial by Science) —Letter to the Editor—Free-for-All by Robert T. Livingston, Professor Emeritus of Industrial and Management Engineering, Columbia University —Letter to Allied Organizations by Martin Kenneth Starr, Columbia University —Letter to the Editor—Free-for-All by Milton D. Rubin, Secretary-Treasurer, Society for General Systems Research, Massachusetts

A Review of “General Systems, Yearbook of the Society for General Systems Research, Volume I V.” By LuDWio VON BKKTALA.NF.FY and ANATOL RAPOPOHT. (Michigan : Society for General Systems Research,.1.959.) [Pp. 247-fxxiii.] $7.50

Abstract

The Economies of Scale

THE theory of the economies of scale is the theory of the relationship between the scale of use of a properly chosen combination of all productive services and the rate of output of the enterprise. In its broadest formulation this theory is a crucial element of the economic theory of social organization, for it underlies every question of market organization and the role (and locus) of governmental control over economic life. Let one ask himself how an economy would be organized if every economic activity were prohibitively inefficient upon alternately a small scale and a large scale, and the answer will convince him that here lies a basic element of the theory of economic organization. The theory has limped along for a century, collecting large pieces of good reasoning and small chunks of empirical evidence but never achieving scientific prosperity. A large cause of its poverty is that the central concept of the theory-the firm of optimum size-has eluded confident measurement. We have been dangerously close to denying Lincoln, for all economists have been ignorant of the optimum size of firm in almost every industry all of the time, and this ignorance has been an insurmountable barrier between us and the understanding of the forces which govern optimum size. It is almost as if one were trying to measure the nutritive values of goods without knowing whether the consumers who ate them continued to live.