Production process and economic analysis of technical change

The purpose of this book is to present a consistent scheme capable of unifying the economic analysis of the production process in order to understand the effects of technical change. The investigation can be seen from two different points of view: either as a scheme of relations between the economic variables of production, open to changes in ‘environment’ factors (influenced by expectations, industrial relations, institutional aspects), or as a methodology useful for studying the economic effects of changes in techniques, and hence for empirical research.

The economic problem of production is far more complex than choosing the combination of inputs: inputs combinations are for the most part technically determined, by their indivisibility characteristics and by their complementarity relations. Consequently economic choice in production mainly concerns combining processes or single phases. This choice involves a host of organizational, temporal and qualitative aspects: harmonizing the productive capacities of the different production phases so as to minimize waste in the use of machinery; trying to exploit possible economies of scale at different operational levels; deciding the volume of production batches and the degree of production flexibility; evaluating transaction costs and on that basis choosing whether to produce components in house or have them produced outside; working out policies for collaboration with other firms; deciding on forms of organization, product differentiation, innovative policies and investments in equipment and human resources. These are just a few of the most important problems related to the economic decisions which lead to the harmonizing and balancing of different processes.