Talk:Diseconomies of scale/Archives/2013

Regarding Research

The most obvious theory basis is standard microeconomic welfare functions. Optima occur where different variables maximize, but they're tied to each other. Each variable function has a unique shape (input costs might go lower and lower until they hit a bottleneck and skyrocket; productivity might arc smoothly.) So there's trade-offs at the overall optima (inputs cost a bit more, productivity is a bit off center). Where there's trade-offs, there can be diseconomies of scale.

Sure, there are results below optima where more inputs, or more equipment, or more employees improves results. But results beyond optima improve with less of these variables. Most organizations experience these conditions. Unfortunately, pricing the welfare function variables usually gets subjective or lacks research. But problem is with price "theory" more generally, so this article shouldn't be singled out.

Another research basis involves decision-making. There's lots of evidence that independence is critical when summing or combining decisions. Where people access information and make decisions without knowing each others' opinions, and all independent decisions get averaged or summed, the results outperform individual expert decisions. But scale impedes independence. The idea goes back to David Hume, at least. As decision networks increase, communication leaks.

It's easier to ensure communication barriers between decision makers when they're monitored and lack motivation to form factions. It costs more for large units to monitor, because people don't know each other across larger organizations. There's more motivation to form factions, as levels of authority increase.

Finally, there's a large body of research into democracy and scale. Although the old assumption was that smaller nations democratize more easily, and exhibit more democratic government, this no longer seems accepted. Instead, although smaller nations may have an easier time becoming democratic, larger ones may solidify democratic institutions better.

--Brian Coyle (talk)

Missing point(s)

Although my english isn't good I tryto explain to you, what I think is missing in the "Causes" section and what I think would be most imprtant: The indivisibility of ressources in not mentioned. But if you have a company and one truckto deliver your good to your customers and this one is 100% occupied, you only have to get a marginal incrase in your sales and you'll need a new truck. But just for this marginal increase the new truck doesn't pay off. So you have a discontinuous producton function - and at the jump discontinuit you incorporaute hughe diseconomies of scale. Could someone pls. include this or explain why it's not includes? TIA!! --141.3.166.109 11:19, 2 March 2006 (UTC)

Surely the indivisibility of resources is an economy of scale? If a truck carries 100 units, costs $10,000 (for example) and my firm produces 50 units (1 truck) I spend $200 per unit. If another firm produces 50,050 units (501 trucks) (although they still have the same empty space as me on a truck) they spend $100.10 per unit, an economy of scale. --81.152.177.154 17:42, 9 October 2006 (UTC)

I agree, it should be added to the economies of scale article. StuRat 04:08, 18 October 2006 (UTC)

Dubious Quality

This part..."A firm with five employees might employ one as a manager and the other four as workers. If that manager does nothing other than manage the workers under them, then the productivity of the firm has been reduced by 20%" is questionable. The role a manager is to ensure the staff remain productive/working practices are productive. Therefore 5 employees without a manager may well have lower productivity levels than 4 and a manager.

As a result I do not believe that section is particulary good as it stands. There are quesitons of large-firms having too many managers which could reduce productivity, but the article suggest that managers bring nothing to productivity when in reality they often increase productivity through good management.

Of course these are questions of the theory, not the way the theory is presented!ny156uk 10:59, 19 November 2006 (UTC)

I see managers as a necessary evil. Ideally, all employees would be able to work autonomously. In a company with one employee, that had better be the case. A company with only 2 or 3 employees probably can't afford to have a manager, either. With such a small number of employees, the performance of each employee directly bears on the success or failure of the company, and thus "peer pressure" would be applied to any employee who wasn't pulling his weight. However, as a company becomes larger, the actions of each employee become less significant in the total success or failure of the company, so peer pressure is no longer adequate, and managers must be brought in to get the employees to do their work. Of course, as I had said, these managers then become "overhead" that must be carried. I don't agree that managers can improve efficiency over what well-motivated employees could accomplish on their own. At best, a good manager can get unmotivated employees to match the performance of those "self-starters", less the time each employee must now spend filling out status reports, etc., to satisfy the requirements of the manager. StuRat 01:01, 7 March 2007 (UTC)

Employees can hinder each other and a task of a manager is to minimise this hindrance and align the actions of the employees in the same direction, for this reason (good) managers do have their purpose and they increase the productivity of a firm. --Toon Macharis 16:33, 15 May 2007 (UTC)

Agreed, and this is why I call them a "necessary evil". That is, with fewer employees, there are fewer opportunities for them to sabotage one another, and thus less time and money needs to be spent on managers working to reduce that. StuRat (talk) 02:15, 26 January 2012 (UTC)

In public education, the economy of scale idea is often a basis for unifying smaller districts. The primary argument is that one administrator can govern many staff, and small schools don't have enough staff per administrator. In business, replace manager for administrator and it's the same idea.

Research that I've seen does not support this, for several reasons. First, it is easier for small organizations to reduce administrative/staff ratios. One less administrator has more impact in a small group. The smaller the school, at least, the more possibility for administrators to share staff duties, or target specific staff lacks. In businesses this depends on relationships and expectations.

Second, what is the output measured? If test scores alone matter, then it's a wash. But if measures of resiliency, ethics, civics, health, bullying, drug use, and so on matter, smaller units outperform larger ones. Business outputs measured solely as revenue tends to find little benefit from economies of scale in many sectors (some manufacturing excepted). But if measures of quality, employee satisfaction, longevity, community involvement, and so on matter, then smaller businesses may well outperform their large peers.

I don't have the needed research at my fingers, but neither do critics of diseconomy. --Brian Coyle — Preceding unsigned comment added by 208.80.117.214 (talk) 06:21, 25 March 2013 (UTC)

EL moved here

The following EL is inappropriate for the EL section but could be a good source for the articvle content.

• Do diseconomies of scale impact firm size and performance: A theoretical and empirical overview

Jojalozzo 01:22, 28 November 2013 (UTC)