Small and Big Business

Steindl, Josef

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Document type:: Works

Collection:: Josef Steindl Collection

Title:: Small and Big Business: Introduction [short revised version]

Author:: Steindl, Josef

Scope:: Typoskript, 1 Blatt

Year of publication:: 1978

Source material date:: [04.1978]

Language:: English

Note:: Das Typoskript stellt eine kurze Neufassung der Einleitung zu "Small and Big Business" (1945) vermutlich zwecks einer weiteren fremdsprachigen Ausgabe des Buches dar.

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.3.12

Rights of use:: Free access In Copyright

Access:: Free access

DOI:: https://doi.org/10.48671/nls.js.AC14446395

Introduction A great deal of dust has settled on this little book since it was published, and the subject has been covered by other books with more recent documentation, experience and insights. Some of my own opinions have changed and in part this reflects changes in the world. The booklet may thus be read like the excerpts from old newspapers which are reprinted in to-day’s press: It amuses us to see how people of another age experienced the world as it was then. While most of the text remains as it was I have been somewhat inconsistent in so far as I wrote a new version of chapter three which deals with capital intensity. In the old version I had misinterpreted certain data, and maintained that bigger firms had larger capital-output ratios. There is nothing to it. But the chapter also contained a theoretical analysis of the relation between size, capital-output ratio and profit rate. This showed that an increase in the capital-output ratio will not always be profitable, that it may reduce the rate of profit, and that in fact it is very likely to do so if the capital intensification is continued. My new version is built on this analysis and it uses it in order to show why in fact the larger firms apparently do not engage in "capital intensification". The new version thus uses the same analysis (in slightly improved form) as the old one but for a different purpose. Moreover, it extends the application of the theory to the historical development of the macro-economic capital-output ratio and tries to explain why this ratio on the whole did not tend to increase over time. That my view of the empirical facts is now the opposite of what it was in the old version has something to do with the paradigm, the prejudices current in economics. It was frequently believed that technical progress requires capital intensification and that the larger firms had the newer techniques. As to the first of these prejudices it went even farther, in so far as capital accumulation was seen as the driving force which caused productivity to rise. This indeed is the only explanation for the surprise which greeted the empirical demonstration of Abramovitz that the greatest part of the increase in productivity was in reality due to technical progress pure and simple and not to capital intensification. This tended to shift the paradigmatic view towards the opinion of Schumpeter for whom technical progress was the driving force. The aim of my analysis is to show that capital accumulation mostly takes the form of an increase in capacity rather than of capital intensity. The revised chapter stands in contrast to the rest of the book not only by the changed perception of capital and technical progress: The old text is untouched by environment, by "small is beautiful" and by the importance of organisational structures for the theory of the firm. These things, among others, were not anticipated by myself or by the bulk of the economic profession at the time when mass production by giant corporations was becoming the technological paradigm of the leading economic power.

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