Introduction

Steindl, Josef

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Document type:: Works

Collection:: Josef Steindl Collection

Title:: Introduction: A revised introduction to "Small and Big Business"

Author:: Steindl, Josef

Scope:: Typoskript, 20 Blätter

Year of publication:: 1972

Source material date:: [04.1972]

Language:: English

Description:: Twenty five years after the first publication of this little book I do not find myself in full agreement with everything it contains... My chief amendment concerns an error in interpreting the statistics of U.S. corporations which show that fixed capital in relation to turnover increases with the size of the firm (chapter III, Table IX, p.24). (Auszug S. 1)

Note:: Beim Typoskript handelt es sich um eine neu verfasste Einleitung zum Buch "Small and Big Business" (1945) vermutlich zwecks der italienischen, spanischen oder portugiesischen Ausgabe des Buches.

Related work:: Steindl, Josef (Hrsg.): Economic Papers 1941-88. London: Macmillan, 1990 Steindl, Josef: Small and Big Business. Economic Problems of the Size of Firms. Oxford: Blackwell, 1945

Topic:: Firm and market structure

JEL Classification:: D24 [Production, Cost, Capital, Capital, Total Factor, and Multifactor Productivity, Capacity] D43 [Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection] L11 [Production, Pricing, and Market Structure, Size Distribution of Firms]

Shelfmark:: S/M.3.7

Access:: Free access

3. part by governments, although to some extent large concerns do provide such infra structure investment (for example, power stations, etc.) themselves. This tentative picture of the proglem can now be related to the historical development of the capital coefficient as it appears to most economists nowadays: The impression is that the capital-output ratio for society as a whole has remained roughly the same over the decades. From the comparison of scale one might have expected it to decline since large firms have tended to replace small ones with the advance of technology. Insofar as it did not, this might be partly due to the above mentioned factor (increasing infra-structure, etc.). There is, however, another explanation: The comparison of firms in a cross section and the develop ment over time is not the same thing. Over time, the real wage increases, and with it the value of a given output in terms of labour input decreases. This will counter act the cheapening of capital equipment due to scale effects; in other words, the differential profit margin of the large firm will be reduced as the large scale methods spread, and the value of output will fall relatively to a given capital (2) equipment with given labour cost. The impression is that a race between the cheapening of equipment and the cheapening of output is continuously on and neither is getting too far ahead of the other. So much for the interpretation of data. What about the theoretical discussion of Chapter III? My analysis there shows under what conditions an increase in capital coefficient will be profitable and this analysis may be applied also outside the context of the problem of economies of scale. The conditions are these: The proportionate reduction in cost divided by the proportionate increase in capital- coefficient must not be smaller than the profit margin from which we start (that is, the profit margin obtained with alternative or usual methods), otherwise the profit rate will be lower than at the outset (that is, with alternative or usual methods). ^ Simon Kuznets, Capital in the American Economy, Princeton 1961. Table 6, p. 80. (2) Capital is always measured at cost-value, inflated with a convenient price index to give a measure of reproduction cost.

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