Full Industry Equilibrium: A Theory of the Industrial Long Run

234 Pages·2015·1 MB·English

by  Arrigo Opocher

Full Industry Equilibrium
This highly original book develops a systematic zero-net-profit compar-
ative statics theory of the firm that challenges many widely held views
in microeconomics. It builds a bridge between the marginalist long-run
theoryofthefirmandSraffiantheorytocreateaunifiedtheoreticalframe-
workthatexplainshowfirmsreacttoexogenousshocksresultinginnew
equilibrium positions of the whole economy. The central message of the
book is that too often economists expect more from the microeconomic
laws of input demand and output supply than they can really give. The
authors show that the zero-net-profit condition requires a more articu-
lated analysis that sometimes yields qualitative results contrary to those
offamiliareconomiclaws.Writtenforacademicresearchersandgraduate
students, the book will be of particular interest to those working on the
microeconomicsofindustryequilibrium,comparativestaticsandSraffian
economics.
arrigo opocher is Full Professor of Economics at the University of
Padua. He has published in leading economics journals on the topics of
economictheoryanditshistoryandhaswrittenbooksonlong-rungrowth
andtradetheory.Heisco-editorofthejournalMetroeconomica.
ian steedman is Emeritus Professor of Economics at Manchester
MetropolitanUniversity.Heisthe(co-)authororeditorof14booksand
over140articles.Untilhisretirementhewasveryactiveineditorialwork
for the Cambridge Journal of Economics, the European Journal of the
HistoryofEconomicThoughtandMetroeconomica.

Full Industry Equilibrium
A Theory of the Industrial Long Run
arrigo opocher and ian steedman
UniversityPrintingHouse,CambridgeCB28BS,UnitedKingdom
CambridgeUniversityPressispartoftheUniversityofCambridge.
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www.cambridge.org
Informationonthistitle:www.cambridge.org/9781107097797
(cid:2)C ArrigoOpocherandIanSteedman2015
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Contents
Listoffigures page xi
Listoftables xiii
Preface xv
Introduction 1
Anoutlineofthebook 4
1 Takingseriouslythetendencytozeronetprofits 8
1.1 Thelong-runtheoryofthefirm,theindustryand
theeconomy 10
1.2 Thelong-periodtheoryofproduction,theindustryand
thefirm 13
1.3 Fullindustryequilibrium 17
1.4 Comparingfullindustryequilibria 19
1.5 Concludingremarks 21
2 Anisolatedindustry 22
2.1 Fullindustryequilibrium 23
2.2 Anexample 26
2.3 ThecomparativestaticsofFIE 30
2.4 Ontherelationshipbetweeninputuseandinputprice 33
2.5 Onasupposedrelationshipbetweenlong-runoutput
andprice 35
2.6 Producedinputuse.Averysimplecase 35
2.7 Afallingrealpriceofcomputingpower.Theroleof
complementarity 39
2.8 Beyondtwice-differentiableaveragecostfunctions.
On/offinputs 40
2.9 Concludingremarks 43
Appendix1 OnHicksiansubstitution 43
A1.1 InputsubstitutioninValueandCapitalandbeyond 43
A1.2 Hicksiansubstitutionandon/offinputs 47
vii
viii Contents
Appendix2 Asmallopeneconomy 49
A2.1 ThestandardHOSmodelasanexampleofFIE 49
A2.2 Tradeandindustry-specificfactors 52
A2.3 TheHOSmodelwithintermediateproducts 54
A2.4 Conclusion 57
3∗ Multiproductfirms 58
3.1 FIEwithmanyoutputsandoneinput 59
3.2 ThecomparativestaticsofFIE 65
3.3 FIEwithmanyoutputsandmanyinputs 68
3.4 ThecomparativestaticsofFIE.Thegeneralcase 69
3.5 Alternativeconceptsofsubstitution.Ageneralformulation 74
3.6 Concludingremarks 76
4 Interdependentindustries 78
4.1 TheFIEinputpriceswithinterdependentindustries:
anintroduction 79
4.2 TheFIEinputpricefrontier 81
4.3 ThecomparativestaticsofFIE 83
4.4 Anexample 86
4.5∗ Moregeneral 87
4.6 Introducingapositiverateofinterest 89
4.7 Aone-industryeconomyonceagain 90
4.8 Twoindustries 91
4.9∗ ManyindustrieswithCEScostfunctions 94
4.10 Concludingremarks 97
5 Industry-levelinputuse.Someaftershocksfrom
capitaltheory 100
5.1 Labourandcapitalperunitofoutputinaparticular
industry 101
5.2 Thedirectuseofprimaryinputsinaparticularindustry;
previousliterature 104
5.3 AWickselliantwo-periodcase 105
5.4 ANuti-modelcase 110
5.5 Thecorn-tractor(Samuelson–Surrogate)case 112
5.6 Aninput–outputcase 115
5.7 Recurrenceofthecompleteinput–outputmatrix 116
5.8 Concludingremarks 118