The Return to Increasing Returns

James M. Buchanan and Yong J. Yoon, Editors
Makes available important articles on increasing returns as related to the size of the economy


The wealth of a nation depends on the division of labor, and the division of labor depends on the extent of the market. Adam Smith advanced this proposition in 1776, but neoclassical economists, in particular, have had difficulty incorporating it into conversational models. Increasing returns, as related to the size of the market nexus, have never found a secure place in economic theory, despite early efforts by Adam Smith, Alfred Marshall, and Allyn Young.
The neoclassical theory of distribution, developed in the last decades of the nineteenth century, relies on the postulate that in equilibrium there exist constant returns to scale, not only in particular firms and industries, but in the economy as a whole. As general equilibrium theory developed, emphasis was sifted to the properties of equilibrium, to the proofs of its existence, and to the attributes of welfare. The possibility of increasing returns represented an analytical “monkey wrench” thrown in the whole neoclassical structure. Thus, the neglect of increasing returns may have been methodologically understandable – if scientifically scandalous. Only in recent years has the increasing returns postulate returned to the mainstream through analyses of endogenous growth, international trade, unemployment, and the economics of ethics.

Praise / Awards

  • ". . . an impressive collection of essays on increasing returns, ranging from classical origins of Adam Smith, Alfred Marshall, Allyn Young to more recent developments in trade, growth, macroeconomics and the economics of ethics by authors such as Paul Krugman, Martin L. Weitzman, Paul M. Romer, James M. Buchanan and others. The book is comprehensive and well-organized. It can be used as an excellent reference book and reading for researchers and graduate students in the above mentioned fields."
    Southern Economic Journal

Product Details

  • 6 x 9.
  • 392pp.
  • figures, tables.
Available for sale worldwide

  • Hardcover
  • 1994
  • Available
  • 978-0-472-10432-1

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  • $99.95 U.S.