MIT 11.481J, 1.284J, ESD.192J
Karen R. Polenske
AGGLOMERATION ECONOMIES AND ECONOMIES OF SCOPE
Internal economies (diseconomies), also called scale economies:
to a given firm in the internal production of a given facility as its scale of output
As output expands, economic theorists show that the average cost of
production first declines and then generally begins to rise beyond a given level of
External economies (diseconomies):
"Externalities are variously known as
external effects, external economies and diseconomies, spillovers, and
neighborhood effects . . . [they] involve an interdependence of utility and/or
The Dictionary of Modern Economics
, p. 148.
Localization economies (diseconomies):
these accrue to all firms in a single
industry at a single location.
Urbanization economies (diseconomies):
these accrue to all activities at a
single location as the size (population, output, income, and wealth) of the area
Isard also refers to them as economies of urban concentration.
Spatial-Juxtaposition economies (diseconomies):
than size) factors, such as quality-control, training, and social-welfare economies
(diseconomies), that result when an industrial complex is located at only one site.
For additional details on these agglomeration economy concepts, refer to Walter Isard,
Introduction to Regional Science
, Englewood Cliffs, NJ: Prentice-Hall, Inc., pp.
Internal and external economies (diseconomies) are referred to jointly as
The agglomeration and deglomeration that occurs as
cities (regions) change lead to “
and deconcentration or dispersal
of industrial and other activity
” (Isard, 1975, p. 113).
Economies of scope:
economies that accrue by distributing some of the firm's fixed
costs over a number of related product lines.
According to Lazonick (p. 230),
"How many scope economies any one
product division contributes to the company's cost performance depends on
the extent of the market for its product--which, like the economies of scale that
it achieves on the basis of its own divisional assets, in turn, depends on its
ability to plan and coordinate its specialized division of labor."
For additional details, see William Lazonick, 1991,
Business Orientation and the
Myth of the Market Economy
, Cambridge, England: Cambridge University Press,
and Alfred D. Chandler, Jr., 1990,
Scale and Scope: The Dynamics of Industrial
, Cambridge, MA: The Belknap Press of Harvard University Press.