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The present essay re-examines the scope of Sraffa’s critique of Marshall’s supply curves that the former developed in his 1925 and 1926 articles showing that neoclassical supply curves derived from non-proportional returns are not robust both in the short and in the long run. After examining what a short-run and a long-run equilibrium means both for the original Sraffa’s articles and for Marshall’s pioneer contribution, the chapter discusses the common procedure in conventional economics to introduce the limitations to the growth of the firm. The argument of the chapter will be based on the 1920s articles as well as on the ‘Lectures on Advanced Theory of Value’ delivered in 1928–1931 by Sraffa at Cambridge University, now publicly available online by the Wren library, Trinity College, Cambridge. For short-run analysis, it must be assumed that the number of firms is fixed. This assumption entails serious problems with regards to the notions of competition and competitive behaviour. For long-run analysis, the sources of increasing costs are problems of management and control. However, this idea is untenable both on logical and empirical grounds. We argue that contemporary mainstream microeconomic treatment of costs and supply in the context of perfect competition still presents several problems. These problems, rather than being superficial, lie at the root of the supply and demand approach of value and distribution.

Outlines previous research on the efficiency of financial institutions and builds on an earlier study of the relative efficiency of 190 UK bank branches by the authors to determine their size efficiency relationship and their determinants of relative inefficiency. Explains the data envelopment (DEA) method used, the data set and the input/output configuration; and summarizes the results of the previous study. Shows that size is related to efficiency and suggests that the pattern is an asymmetric U‐shaped average cost curve, with an optimum branch size of ine staff and a lending range of £3.0‐£5.25 million. Analyses the sources of scale and technical inefficiency in an individual branch and across the sample to show that diversification reduces efficiency while use of technology and management control improves it. Concludes that DEA can provide the means to raise efficiency, reduce cost income ratios and increase profitability.

Scholars in the areas of economics and educational administration have in recent years examined the relationship between educational cost and school size. One distinguishing characteristic of such studies has been the choice of a school or a school district as the unit of analysis. Another is the overwhelming choice of a parabolic function to describe the cost‐size relationship. This study examines the question whether the unit of analysis should be a specific program of study (such as mathematics or social studies), utilizing data collected from Michigan secondary schools for the school year 1971–1972. The data are also used to check whether a hyperbolic relationship between school size and costs provides a better statistical fit to the data. The Michigan data encompass both secondary academic and vocational programs.

We revisit economies of scale starting with Adam Smith and continuing through Armen Alchian. In spite of detail and depth of analysis, the application of economies of scale is still confused. As Robinson points out, large scale processes can be jobbed out. The Coasian limits of the problem are explored.

Recently, theoretical economics has recognized something which the business person has known for a long time, that is “the world of single product firms with U‐shaped average cost curves is simply not the world of reality.” Key to this newly emerging multiproduct framework is the concept of economies of scope.

The paper published below was prepared by Taylor Ostrander for Frank Knight’s course, Economic Theory, Economics 301, during the Fall 1933 quarter.