Abstract
The issue of increasing returns will be constantly raised because a neat general solution is lacking and many different outcomes are possible. Increasing returns are also prevalent in the real economy for a number of reasons discussed in Chapter 1. However, the introduction of increasing returns plays havoc to many basic tenets of traditional economic theory. This is probably an important reason why increasing returns have not been discussed more often, especially in the classroom. It is well known that the presence of increasing returns may no longer make the market equilibrium perfectly Pareto optimal. It is less well known that it also makes pecuniary external effects having efficiency implications and, together with the related imperfect competition, it makes money possibly non-neutral, as discussed in Chapter 2. However, productively efficient general equilibrium may exist in an economy with imperfectly competitive firms that price at average costs in equilibrium (Chapter 4). Nevertheless, encouraging the expansion of a sector with a higher degree of increasing returns is efficiency-improving (Chapter 5).
Keywords
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Copyright information
© 2009 Yew-Kwang Ng
About this chapter
Cite this chapter
Ng, YK. (2009). Conceptual and Policy Implications: Concluding Discussion. In: Increasing Returns and Economic Efficiency. Palgrave Macmillan, London. https://doi.org/10.1057/9780230236813_12
Download citation
DOI: https://doi.org/10.1057/9780230236813_12
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-30023-5
Online ISBN: 978-0-230-23681-3
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)