Edited by Giacomo Becattini, Marco Bellandi and Lisa De Propis
Chapter 8: External and Internal Economies
Neil Hart 1. introduction Much of the recent literature on industry location and industrial districts (IDs) has been premised on what has been termed a ‘rediscovery’ of Marshall’s con cepualization of economies of scale, and external economies in particular. An t examination of aspects of Marshall’s analysis of economies of scale therefore represents a logical starting point in establishing the theoretical perspective from which these issues are currently being investigated. A consideration of the representation of economies of scale within mainstream economic theory sub sequent to Marshall helps to explain why this ‘rediscovery’ of his contribution has been important in shaping the more recent investigations into forms of in ustrial organization such as the ID. A discussion of these themes also helps d to delineate more clearly the forces that promote, sustain and threaten the viability of IDs as a variety of industrial organization. Marshall’s treatment of economies of scale must be placed in its intended setting if its inferences are to be fully appreciated. Despite the pivotal role accorded to Marshall among pioneering equilibrium economists, the approach Marshall brought to economics was, as described by Becattini (2003b, p.24), ‘mainly evolutionary’, but also permitting ‘considerable scope for idealities and human consciousness’. Marshall’s representation of industrial organization and change combines aspects of Adam Smith’s depiction of increasing returns based on the division of labour, extended to encompass more directly the growth of knowledge, with a blend of Spencerian and Darwinian notions of evolutionary change. In Book IV of Marshall’s Principles, as...
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