By: Kevin Carson

Kevin Carson — Thu, 29 Sep 2011 08:08:56 +0000

In fact so-called “economies of scale” are vastly overrated. The economies of large-scale production occur entirely at the point of production. The unit costs of production, taken alone, no doubt are lower for factory-produced goods than for home-produced. The thing is, though — as Ralph Borsodi observed — production costs are only the first of a long series of costs for factory-made goods. They’re followed by warehousing, shipping, wholesaling and retailing, and marketing costs — not to mention all the internal costs like administrative overhead and bureaucratic irrationality that are absent from home production. On the other hand, the production cost of home-made goods is the final cost. And as stated in Borsodi’s Law, for a large class of goods the diseconomies of large-scale distribution more than offset the economies of large-scale production.

What’s more centralized mass-production industry is highly inefficient, compared to the Emilia-Romagna or Shenzhen model of lean manufacturing using general-purpose tools for craft production and frequently switching between small batches of different products on a demand-pull basis. Mass-production industry uses extremely expensive, product-specific machinery in large batches, which drastically lowers unit costs per machine. But the enormous overhead from capital outlays mandates fully utilizing capacity to amortize those outlays — which in turn mandates all the diseconomies of supply-push distribution to ensure the full output is consumed whether people want it or not. That includes in-process inventory between machines on the assembly line, a warehouse full of finished goods there’s no order for, enormous costs of high-pressure mass advertising, and landfills full of stuff built to fall apart so people will buy more and keep the wheels turning.

Comments on: Why do it yourself is also green

By: Kevin Carson