How increasing returns leads to non-neutrality of money

In 1980 an economist called Yew-Kwang Ng published a paper called Macroeconomics with Non-perfect Competition to little acclaim. The paper was cited a few times, and someone wrote a response that entirely missed the point of his argument. The main argument of his paper was largely ignored. Yew-Kwang Ng has written essentially the same paperContinue reading “How increasing returns leads to non-neutrality of money”

Competition with increasing returns to scale

When I criticize mainstream economics for neglecting increasing returns to scale there is one argument that is always brought up. In its most basic form the argument goes: an industry with increasing returns to scale is a natural monopoly. Since most companies are not monopolies, increasing returns to scale must not be common. I haveContinue reading “Competition with increasing returns to scale”

Two Misconceptions about Supply Curves

Often people who go on to study economics are unaware of the misconceptions that Economics 101 leaves them with. In fact, when discussing the problems with introductory economics a few of the defenders of the curriculum will without fail demonstrate these misconceptions. Having recently encountered a few of these misconceptions in the wild I decidedContinue reading “Two Misconceptions about Supply Curves”

Increasing returns and decreasing costs

Before discussing evidence for the shape of cost functions it is useful to go over the relationship between cost functions and production functions. The concepts of increasing returns and increasing costs are often confused in these discussions. Empirical studies do not usually attempt to measure cost functions but instead measure properties of production functions, andContinue reading “Increasing returns and decreasing costs”