Full text: Small and Big Business

To return for a moment to the discussion of capital-intensity: 
It is also connected with the question of the ’’correct" 
measure of size of an establishment or firm. I have shown in 
another place that the pattern of relation of size and 
output per man is quite different according to whether size 
is measured by output or employment. (In the first case a 
monotonous increasing relation obtains, whereas in the second 
case the output per head first increases, then falls with size.) 
I also showed that the difference between the two patterns 
is due to the stochastic character of the data - the disper 
sions of the individual values of output per head round the 
What the "correct" measure of size is can not be decided 
by statistical arguments. We are free to choose our definitions 
on grounds of convenience of language, and simplicity of de 
scription. On these grounds I choose the criterion of output 
capacity? tiie relations of technical progress, capital-intensity 
and scale which were pictured earlier on could not in principle 
be changed by a different terminology but they would become 
unnecessary complicated because the size of plant in terms 
of man power historically first increases, and then in the 
age of automation decreases. If one chose men per plant as the 
criterion of size, as Mr. Johnstone ' proposed, the automated 
11) Maturity and Stagnation in American Capitalism, Chapter IV, 
Oxford 1952t 
12) J.Johnstone. Statistical Cost Analysis, London 1960

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