A Political Economy Approach
- New Horizons in Law and Economics series
Edited by Alain Marciano and Jean-Michel Josselin
Chapter 15: Living it off or living it down: the economics of disinvestments
15. Living it oﬀ or living it down: the economics of disinvestments Jürgen Backhaus 1 DESCRIBING THE PHENOMENON Are costs decreasing with scale? And if the costs do not give, let us increase the scale. In 1989, shortly before the Berlin wall came down, heavy equipment stood ready to demolish the Andreas quarter in Erfurt, the historic centre of the free state of Thuringia. Earlier, an entire baroque quarter had been erased, making room for a set of pre-assembled skyscraper units, of which the Erfurt production unit was proud, as their purpose in the COMECON production eﬀort was to erect as many living quarters in all the comrade socialist countries as possible. Hence, engineering skills combined the gravel of Thuringia and other necessary ingredients, and transported and reconstructed the resulting units throughout the former COMECON empire. We can see exactly the same units in Bucharest, Kiev and many points east and the prototypes in Erfurt, of course. In Erfurt, after the razing of the historic quarters and the erection of those towers, poor air circulation prevented the smoke from the many brown coal-heated households from leaving the valley, creating a highly polluted atmosphere. It is here where my tale begins. 1.1 A Point of Theory After the enormous eﬀort that had gone into organizing an unprepared for war after 1914, those who had organized it (not those who fought it) thought in terms of economies of scale. In the process it was discovered that mediumsized companies could...
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