Full text: Small and Big Business

5 
where x denotes capacity, a. a constant and b the so-called 
scale factor which according to the above reasoning should 
be around 2/5; in practice it takes different values for 
different kind of plant, in most cases rather lower than 
one, the difference indicating the amount of the economies 
of scale. The scale factor^ (bj a**© much used in practice 
by engineers making estimates of the cost of equipment. 
According to the engineering data,automation also decreases the 
capital coefficient, increasing at the same time the scale 
of production. This is partly explained by continuous 
running in three shifts, but more basically by the con 
tinuity of utilisation inherent in the technique itself. 
All this is not to say that the capital-coefficient never 
increases with size. In fact, there are cases when it must 
so increase: for example large units (of presses etc.) are 
used even though they increase the capital coefficient 
and yield a lower return on most ordinary jobs^because 
certain jobs cannot be performed at all without the very 
large equipment. Again, the capital-coefficient will depend 
inter alia on prices of equipment and wages. In development 
countries where modern large scale equipment is imported 
the price relations may cause the capital coefficient to be 
quite different from what has been quoted above i In ad- 
0 i) 
' This may partly explain data given by A.K.Sen; Choice of 
Techniques. Oxford i960 (Appendix C) and G.K. Boon: Eco 
nomic Choice of Human and Physical Factors in Production. 
Amsterdam 1964
	        

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