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This paper analyses a multi-sector market economy where preferences are non-homothetic and satiable. Capital and labour are the production factors. Food and manufactured goods are produced with a constant-returns-to-scale technology and an increasing-returns-to-scale technology, respectively. Results include: an original capital accumulation process is required for manufacturing industrialization to take place, a minimum market size is needed for the economy to operate, and capital property concentration diminishes aggregate demand. Full general equilibrium is possible for intermediate degrees of capital concentration, but the price system collapses under high degrees as an economy regulator, labour unemployment is unavoidable, and a minimum wage is justified to enhance economic activity. JEL: D31; D33; D51; E25; O11. RESUMEN Este artículo analiza una economía de mercado multisectorial, donde las preferencias no son homotéticas y saciables. El capital y el trabajo son los factores de producción. Los alimentos y los productos manufacturados se producen con una tecnología de rendimiento constante y una tecnología de rendimiento creciente a escala. Los resultados incluyen: se requiere un proceso original de acumulación de capital para que tenga lugar la industrialización manufacturera, se necesita un tamaño de mercado mínimo para que la economía funcione y la concentración de propiedades de capital disminuya la demanda agregada. Es posible un equilibrio general completo para los grados intermedios de concentración de capital, pero el sistema de precios colapsa bajo altos grados como un regulador de la economía, el desempleo es inevitable y se justifica un salario mínimo para mejorar la actividad económica. JEL: D31; D33; D51; E25; O11. RESUMO Este artigo analisa uma economia de mercado multissetorial, na que as preferências não são homotéticas e saciáveis. O capital e o trabalho são os fatores de produção. Os alimentos, e os produtos manufaturados se produzem com uma tecnologia de rendimento constante e um tecnologia de rendimento crescente à escala. Os resultados incluem: requer-se um processo original de acumulação de capital para que faça jus à industrialização manufatureira, se necessita um tamanho de mercado mínimo para que a economia funcione e a concentração de propriedades de capital diminua a demanda agregada. É possível um equilíbrio geral completo para os graus intermediários de concentração de capital, mas o sistema de preços colapsa com os altos graus como um regulador da economia, o desemprego é inevitável e justifica um salário mínimo para melhorar a atividade económica. JEL: D31; D33; D51; E25; O11.

This paper provides supportive evidence to the notion that the division of labour is limited by the extent of the (local) market. We first propose a theoretical model. Its main prediction is that scarce specialists occupations are over-represented in large cities. Using census data for French cities, we find strong empirical support for this prediction.

Richard Langlois, Tony Yu & Paul Robertson (LYR) (2003) have assembled a collection of previously published papers that move beyond textbook production theory. This essay discusses work by Frank Knight and Hendrik Houthakker not reproduced in LYR in relation to the capability theory of economic organization. Knight identified the problem of organization as the search for and the coordination of different dispersed capabilities. Houthakker helps us to see more clearly that the benefits of specialization are not brought at zero cost; whatever is the governance structure employed, there will inevitably be coordination costs due to differences in capabilities.

This paper constructs a model of growth based on Adam Smith's notions of specialization and extent of the market. We seek to explain the following stylized facts. 1) The share of household production in total output has fallen over time as the economy has grown. 2) Services as a percent of GDP have risen at the same time. In this paper growth depends on specialization of labor according to comparative advantage in production and learning-by-doing in transactions services. It is a model of sustained, but not infinite, growth. Indeed, the main point of the paper is that it is possible to build growth models that match the historic experience without relying in unbounded growth. The model can replicate the above stylized facts for reasonable annual GDP growth rates. Simulations show that inequality over the growth episode is characterized by an inverted U-shaped curve.

The value of accurate weather forecast information is substantial. In this paper we examine competition among forecast providers and its implications for the quality of forecasts. A simple economic model shows that an economic bias geographical inequality in forecast accuracy arises due to the extent of the market. Using the unique data on daily high temperature forecasts for 704 U.S. cities, we find that forecast accuracy increases with population and income. Furthermore, the economic bias gets larger when the day of forecasting is closer to the target day; i.e. when people are more concerned about the quality of forecasts. The results hold even after we control for location-specific heterogeneity and difficulty of forecasting.

The article turns to classical economic insights on the division of labor and to institutional reasoning to identify some costs and benefits of Open Source Software (OSS) and proprietary software production. It suggests that, thanks to its licenses, OSS favors market expansion more than proprietary software does by tapping into spontaneous work input. The spontaneous tapping leads to a division of labor that exhibits what the article calls redundant economies. By generating a circle of knowledge growth, reuse, and sharing, redundant economies lead to increasing returns, which are crucial for economic growth.

Richard Langlois, Tony Yu & Paul Robertson have assembled a collection of previously published papers that move beyond textbook production theory. This essay discusses work by Frank Knight and Hendrik Houthakker not reproduced in LYR in relation to the capability theory of economic organization. Knight identified the problem of organization as the search for and the coordination of different dispersed capabilities. Houthakker helps us to see more clearly that the benefits of specialization are not brought at zero cost; whatever is the governance structure employed, there will inevitably be coordination costs due to differences in capabilities.

We find that trade and domestic market size are robust determinants of economic growth over the 1960-1996 period when trade openness is measured as the US dollar value of imports and exports relative to GDP in PPP US$ ('real openness'). When trade openness is measured as the US dollar value of imports and exports relative to GDP in exchange rate US$ ('nominal openness') however, trade and the size of domestic markets are often non-robust determinants of growth. We argue that real openness is the more appropriate measure of trade and that our empirical results should be seen as evidence in favor of the extent-of-the-market hypothesis.