Innledning til produksjonsteorien

373 Pages·1965·32.041 MB·English

by  Ragnar Frisch

THEORY OF PRODUCTION
RAGNAR FRISCH
THEOR Y OF PRODUCTION
Springer-Science+Business Media, B.V
Innledning til Produksjonsteorien
First published as
'Memorandum fra Universitetets Sosialekonomiske Institutt', Os/o, Norway
Trans/ated from the Norwegian by R. I. Christophersen
SOLE DISTRIBUTORS FOR U.S.A. AND CANADA
RAND McNALLY & COMPANY, CHICAGO
1965
All rights reserved
No part of this book may be reproduced in any form, by print, photoprint,
microfilm, or any other means without permission from the publisher
ISBN 978-94-017-5768-3 ISBN 978-94-017-6161-1 (eBook)
DOI 10.1007/978-94-017-6161-1
Softcover reprint of the hardcover Ist edition 1965
PREFACE
In this feverish world of ours, where one wants the economic analyses to
produce easily understandable results quickly and at the least possible cost,
some of us have fallen into the habit of assuming for simplicity that the
hundreds and sometimes thousands of variables that enter into the analyses
are linked together by very simple relationships. Frequently we even go so far
as to assume linear relationships. Only in this way have we been able to feed
our problems into the electronic computers and get mechanical answers
quickly and at low cost.
I would be the last to deny that there are instances where this is a most
useful and convenient procedure. I am myself interested in this type of work.
(I shall return to this point at the end of the preface.) But, in our enthusiasm
for the powerful, modern means of calculation, we have run the risk of
neglecting something essential which the good old 'traditional' ways of
reasoning brought home to us. These good old types of analyses we shall
however never be able to dispense with. We will in the end always need to
fall back on them.
The danger of losing something essential in this feverish world of ours is
particularly acute in the theory of production. The classical authorities on
this subject, Ricardo, von Thünen, Justus von Liebig, John Clark, Leon
Walras, Knut Wieksen and others devoted much of their time and energy to
discussions that were not centred around this or that simple type of mathe
matical relationship, but proceeded directly from thefundamentallogic ofthe
laws ofp roduction. lt is in the same spirit that the present work is conceived.
I began thinking about these problems long before the advent of electronic
computers. Tobe precise: Already in the fall term of 1926 I delivered lectures
in the Oslo University on the theory of production. Andin 1962 the ninth
edition ofmy Norwegian lectures on this subject was published.
I have retained my admiration for the classical ideas also after I started to
devote a good part of my time and energy to mathematical programming. I
have felt it a mission to safeguard the classical ideas, to systematise and devel
opthem, and to endeavour to present the whole in a coherent and logicalform.
VI PREFACE
This book is based in its substance on my Norwegian lectures. I had
neither the time nor the space in this book to go into the several specialised
subjects, which I had initially proposed to discuss. I can only hope that my
choice has been judicious, and will result in bringing to light that which
constitutes the essence of the classical thought and the modernized formula
tion of it.
I have had the good fortune, during my career, to be called upon to
lecture on certain aspects of the theory of production elsewhere than in Oslo
- at the Sorbonne, at Yale and at the University of Minnesota. The obliga
tion to expound my thoughts in these various quarters has, I hope, helped
to improve on the clarity of the presentation.
The fundamental concepts of product, production factor, marginal pro
ductivity, etc. apply, in their abstract sense, not only to the problems of a
concern producing and selling goods, but to practically every conceivable
sphere of human activity: to political action, to social reforms, to the speed
ing up of economic growth in an underdeveloped country, to improvement
of breeding stock, to games of chance, etc. In many cases, it would suffice to
change the names ofthe objects under consideration toreturn to an analytical
formula common to all.
This, clearly, is due to the fact that the fundamental concepts of the
theory of production which I have just mentioned - product, production
factor, marginal productivity, etc. are not derivatives of concrete objects,
but rather spring from the peculiar way in which the human brain functions.
This is also the reason why I have not considered it necessary to bring up to
date certain rather old data which I had used to illustrate my earlier lectures.
If it is true that the concepts themselves are extremely general as far as
applications are concerned, and that it is quite possible to deal with them in a
completely abstract jargon, it is much easier to follow the reasoning if we
use a more concrete terminology. And, on the other hand, nothing is really
gained in explicative power by using the abstract jargon. I have, therefore,
in this book, expressed myself most frequently in terms applicable to the
case of a concern producing and selling goods.
The need to take into account relationships that are very far from linear,
was amply brought home to me when in the last decades I was engaged in
developing the principles of macroeconomic planning and programming.
Therefore, I found it necessary to orient a large part of the activity of the
Institute of Economics of the University of Oslo towards the working out
of a method of mathematical programming where the preference function
may be non concave and the admissible region non convexe and where the
PREFACE VII
number of variables may be very large. Previously my multiplex method had
worked well in the case of a concave preference function and linear bounds,
and to begin with I tried to extend this method to the very general problems
with which we were now concerned. To day our programming work does not,
however, proceed along these lines, but is based on an entirely different
approach, using what I call the nonplex method. I hope to be able to report
on the results in the not too distant future.
Many are the students and associates of mine from the Institute of Econo
mics at the University of Oslo who, at different times and in different ways,
have stimulated my work and contributed to building up my theory of
production. Several of them have later been called upon to fulfil important
functions in the service of Norway's economic life. In a general way I am
greatly indebted to all of them, but it would be impossible to mention them
all by name here.
As far as the contents of the present book are concerned, I owe a particular
debt of gratitude to my colleagues at Norwegian universities, in particular to
professors Johan Einarsen, Trygve Haavelmo, Gunnar Boe (for some years
Minister for Prices and Wages), Preben Munthe and Oie Myrvoll. I must also
mention Mr. Petter Jakob Bjerve, director general ofthe Norwegian Central
Statistical Bureau (and former Minister for Finance).
I am particularly grateful to my friend and colleague, associate professor
Per Meinich, who has devoted so much of his precious time to the checking
and correcting of the 8th and 9th Norwegian editions, the English edition
and the French edition. (In the Spanish edition none of my associates were
able to help.)
On the technical side, Mr. Antonius Reidel and his collaborators, have
performed a most excellent job and have done all that is materially possible
to satisfy my wishes as regards typographical composition. I am particularly
grateful to them for their extreme patience with an author who, because of
many activities, has been nearly criminally slow in returning proof sheets.
Oslo, March 1965 RAGNAR FRISCH
CONTENTS
Preface V
PARTONE
BASIC CONCEPTS OF PRODUCTION
Chapter 1. What is Production? 3
1a. Production in the technical sense. Production factors and
products 3
1b . The distinction between a scientific statement and a value
judgment 5
1c. Production in the economic sense. Evaluation coefficients 8
1d. Single production, assorted production, and joint production 10
1e. The technical, financial, and political organisation ofproduction.
Horizontal and vertical concentration. State control 11
Chapter 2. Production Factors 14
2a. Specified and implied factors. Controllable and non-controllable,
economic and free factors 14
2b. Fixed and variable factors. Capacity. Short-term and long-term
factors 15
2c. Special and general factors. The problern of association between
given input elements and given output elements 17
2d. Definition of the term factor quantity and product quantity.
Elementary factors 18
2e. Factor complexes. Equivalence factors and aggregated factors.
Shadow factors 21
Chapter 3. Production Technique, Constant Technique and Variable
Technique 24
3a. Definition of constant technique 24
3b. Changes in the nature of factors 25
X CONTENTS
3c. Changes in the production function (changes in the production
table) 25
3d. Changes in the factor quantities under a constant production
function (production table) 26
Chapter 4. Various Types of Production Theory 29
4a. Momentary production and time-shaped production. Static and
dynamic theory of production 29
4b. Number of stagesandstage tempo. Input curves and step diagram 30
4c. The stage interval. Time-rigid and time-elastic production process 34
4d. Mean production period and average liquid capital in a closed
production process 35
4e. Risk and anticipation in the theory of production 38
PART TWO
MOMENTARY SINGLE PRODUCTION USING
ONLY CONTINUITY FACTORS
A. TECHNICAL SECTION
Chapter 5. Various Methods of Describing a Continuous Production Law 41
5a. Production function, product table, and isoquants 41
Sb. Marginal productivities 51
Sc. Product accelerations 58
5d. Average productivities 61
Se. Marginal elasticities 62
5f. The passus coefficient 65
5g. Further consideration on proportional factor variation 68
5h. Passus equation 73
Si. Furtherdetails conceming isoquants and isoclines 78
Chapter 6. The Technical Optimum Law when Considering Partial
Variation of a Factor or a Group of Factars 83
6a. History of some basic concepts 83
6b. Detailed analysis of the technical optimum law as it appears when
we consider the partial variation of a single factor 88
6c. The technical optimum law for variation of a partial factor
complex 98
CONTENTS XI
Chapter 7. The Pari-Passu Law 99
7a. Definition of a pari-passu law 99
7b. Special properties of the pari-passu law 102
7c. Furtherobservations on the pari-passu law in two factors 105
7d. The pari-passu law in three factors 113
7e. The substitution region in a pari-passu law in n factors 115
Chapter 8. The ultra-passum law. The regular ultra-passum law 120
B. ECONOMIC SECTION
Chapter 9. The Strategie Typesand the Aims of Economic Adjustment 135
9a. The necessity of taking into consideration other forms of market
than free competition and absolute monopoly 135
9b. Quantity adjustment 138
9c. Stochastic price adjustment 139
9d. Elasticity-in:tluenced price-quantity adjustment 140
9e. Optionfixation 140
9f. Option reception 140
9g. Aims and conditions for an adjustment process 141
Chapter 10. Economic Adjustment to Fixed Prices 144
10a. Introduction 144
lOb. Cost minimisation under a given product quantity 147
lOc. Product maximisation with given total cost 151
lOd. The in-every-respect economic substitution. The substitumal 154
10e. Co-variation between costs and product quantity along the
substitumal. The economic optimum law 164
lOf. Profit maximisation 175
lOg. Profit optimisation 186
lOh. The generat demand functions for the factors and the generat
supply function: for the product 186
lOi. The effect of a change in the product price 187
lOj. The effect of a change in one of the factor prices 190
lOk. Capacity adjustment 194
Chapter 11. Economic Adjustment under Elasticity-lnjluenced
Price-Quantity Adjustment 196
lla. Introduction 196