The passage to an industrial mode of production which began in the eighteenth century involved exploiting the presence of a zone of increasing returns to scale which exists in most industrial processes. The improved methods of communications (roads, canals, and subsequently railroads) increased the size of the markets to such an extent that large-scale production processes could profitably be employed. The early recognition of the importance of increasing returns to scale did not however make it easier to incorporate this phenomenon into the main body of economic theory, and in particular into the theory of value. The abstract treatment of the theory of value was given a new impetus in the late 1950s when the Arrow-Debreu theory of a competitive economy was developed. This book explores increasing returns to scale, focusing on the general equilibrium version of the marginal cost principle, marginal cost pricing equilibrium, and resource allocation in an economy with increasing returns based on the concept of the core.
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