Posts discussing increasing return to scale
Most of my blog posts at the moment are dedicated to an exploration of increasing returns to scale in economics. It is not commonly known that non-increasing returns to scale is one of the fundamental assumptions of both economic research and economic teaching. This series attempts to illustrate just how many standard results are invalid if increasing returns to scale exist. Many of these posts contain some math, but typically only introductory calculus is used.
Supply and Demand: reasons for scepticism In this post I discuss reasons to be sceptical of the standard supply and demand model taught in undergraduate economics classes
The math behind supply curves Here I discuss the math behind supply curves, showing how supply curves do not exist if a firm’s costs are not increasing
Increasing returns and decreasing costs This post is clarifying the relationship between increasing returns and decreasing costs. The two concepts are related but not exactly the same. On its own the post does not contain many interesting economic insights but clarifying the relationship between the two concepts is important for future posts.
Theoretical arguments against decreasing returns to scale Here I discuss an argument that decreasing returns to scale should never exist. An implication of that argument is that perfect competition will almost never exist. I also outline how fundamental the assumption of non-increasing returns to scale is to even higher level economics.
Competition with increasing returns to scale In this post I discuss one of the most common arguments against increasing returns to scale, and illustrate how competitive behaviour is different when they are present.
S=I: The most misunderstood equation in economics is by far my most viewed post. In it I discuss the saving=investment identity, and why the way it is portrayed in introductory textbooks is simply wrong
Two Misconceptions about Supply Curves This post further clarifies a common misunderstanding: that supply and demand curves exist for firms that are not in perfect competition.