Constant return to scale

Economic Concept

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Return to scale Also called Return to scale (returns to scale): refers to the technical level and Factor price The state in which output (income) changes when all elements change in the same proportion under constant conditions.

The proportion of production increase is equal to various production factors The increased proportion is called constant return to scale. For example, the factor input of the manufacturer increases by 100%, and the output Increase Also 100%

Chinese name: Constant return to scale
Foreign name: constant returns to scale

Signified: Status of output (income) change
Discipline: economics

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one Theoretical principles
two Famous cases

Theoretical principles

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Constant return to scale

Western economists pointed out that, generally speaking Return to scale The change of is as follows: When the enterprise starts to grow rapidly from the initial stage of small enterprise entrepreneurship Increasing returns to scale Phase. Driven by the pursuit of profits, the enterprise will continue to expand its production scale after tasting the benefits of production scale expansion. At this time, the income of the enterprise slowly enters the stage of constant scale. If we pursue the market excessively Dominance and Market share , continue to expand Enterprise scale , it is possible to enter the stage of diminishing returns to scale.

Return to scale Invariance principle yes Neoclassical economics The core content of the theory. This is also because of its good mathematical properties, which essentially means that Macro production function Has some linear property, and Competitive equilibrium (competitive equilibrium) and "existence of an aggregate production function" Equivalence It has also been established, which greatly simplifies the complex model. Because of this, most production functions in macroeconomics have CRS properties, such as Cobb Douglas.

Famous cases

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From the perspective of physical laws, if we think that production is the transformation of many tangible or intangible substances into one Final product Constant returns to scale is a very intuitive assumption. The assumption of constant returns to scale essentially means Production process Can be copied（ replicable )。 For example, one factory building+3 machines+10 workers can produce one industrial product per day. If two factories+6 machines+20 workers, they can produce two industrial products per day.

tradition western economics It is believed that the return to scale does not change Universality 。 and Diminishing returns to scale , because we are production function It ignores important elements. In the above example, if we find that two factories, six machines and twenty workers can only produce 1.5 pieces of industrial products every day, we have not taken into account some important factors, such as the manufacturer's Management ability , is not copied in this process.

On the other hand, for example, from Macroeconomy From a perspective, the whole may be universal Increasing returns to scale Phenomenon. In essence, this indicates that some elements are being reused. The most famous example is "knowledge". In addition, the production function of factor accumulation, such as human capital There will also be a phenomenon of increasing returns to scale in the process of accumulation.

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