Custom «Diminishing Returns vs. Diseconomy of Scale» Essay Paper Sample

Diminishing Returns vs. Diseconomy of Scale

The interrelationship between trade and industrial development has been a key issue in economic research and development studies in the post-World War II era. Industrialization has played a crucial role in the national modernization policies of all developing countries. World trade has become a source of opportunities for many nations and at the same time the medium for the spread and the spill-over effects of economic growth in the field of output, and of disturbances caused by national policies, imbalances, or changes in competitive positions. Industrialization and trade have also been important factors in social and industrial changes. Many developing countries have gone through different stages of industrial development during the past decades. With the increasing role of industry in their economies, trade in manufacturing has also become an important channel for strengthening their position in the world economy. But then again, it cannot be denied that even if the economy is good it is still important to take into consideration the diminishing returns and the diseconomy of scale.

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Diminishing returns is defined by the economist as the process wherein there is a decrease in the output of the production as caused by the many factors in the society and in the trend of the economy. At first, the bulk of these manufactured exports originated from a very small number of developing countries, most famously Korea, Taiwan, Hong Kong and Singapore. Thereafter, however, many more developing economies entered into successful manufacturing for export and even more are seeking to emulate them. Experience in the successful East Asian countries has attracted a great deal of recent research attention. But then again, it can be seen that increasing competitiveness is as important as the choice of the manufacturing decision.

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Many observers have called the slow growth of the American economy in 2002

and 2003 a “jobless recovery.” In other words, as the economy began expanding again, it did so without adding new jobs. Indeed, companies kept laying-off people, or simply did not feel a need to hire in order to handle increased volumes of business. The single most frequently cited reason by reporters, economists, and government officials for why new jobs were not added was due to the investments made by companies in computing in the 1990s. These investments in automation

reduced the amount of labor content of work, thereby increasing the capacity of existing people, factories, and firms to handle more business. Those remarking on the “jobless recovery” got it all wrong, however. Recovery was due not to investments made in computers in the 1990s but to investments made in computing and telecommunications over a much longer period of time—in fact, over more than a half century (Keith, 112).

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On the other hand, the diseconomy of scale is the process wherein the businessmen in the market place are being forced to produce many goods at a larger rate. For example, in the case of Ford Motors; Ford Motor has invested great amount of money in order to manufacture and produce quality cars that will surely pass the high standards of its consumers. The company never fails to plan and predicts what is going to happen next. Unfortunately, things did not happen the way they expect it to be. The cars they manufactured were not able to sell in the market. The models they released for Europe were flop as per records of sales is concerned. The same thing happened in Australia. The Mondeo model of Ford Motor Company did not even took the interests of the Australian people because the latter prefer a different style and model under the local model known as Falcon. Hence, the model has been dropped by the country. The same thing went with the Japanese. The Ford Taurus made specifically to be released and sold in Japan did not make it as well (Kerin, 55).

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