If we’re going to understand why construction has so few economies of scale, it’s useful to know what causes economies of scale to occur in the first place. Economies of scale are the result of several different mechanisms.
More business focused, but a great text that goes deep into this is Economics of Strategy by Besanko et al. Please see below for the notes I took on the book. This topic begins on page 12:
No problem. I enjoy your writing. The pithy way I think about this: anything with a large physical labor component (i.e. construction) is not conducive to scale! As someone undergoing a home renovation, labor is what makes it expensive. What makes certain fruits produce expensive? The labor to pick them!
Great article! I think the dis-economies of scale is a great topic for you to expand upon. You mentioned the risk of component failure as a source of statistical dis-economy. In my opinion, the risk of a coordination failure is far more likely / relevant to construction and this increases as you add systems and size to prefab assemblies.
Meant to include this link (added now) - it's "Technology Change and the Rise of New Industries" - https://www.sup.org/books/title/?id=21867 He also has a few papers that cover the same basic ideas.
More business focused, but a great text that goes deep into this is Economics of Strategy by Besanko et al. Please see below for the notes I took on the book. This topic begins on page 12:
https://antonzitz.com/wp-content/uploads/2020/07/Economics-of-Strategy_f.pdf
Oh, this is really great, thanks.
No problem. I enjoy your writing. The pithy way I think about this: anything with a large physical labor component (i.e. construction) is not conducive to scale! As someone undergoing a home renovation, labor is what makes it expensive. What makes certain fruits produce expensive? The labor to pick them!
This is fabulous. As an economist who works in supply chain and operations, this nails so many points I wish I could drive into people's heads :)
Great article! I think the dis-economies of scale is a great topic for you to expand upon. You mentioned the risk of component failure as a source of statistical dis-economy. In my opinion, the risk of a coordination failure is far more likely / relevant to construction and this increases as you add systems and size to prefab assemblies.
What book is the Funk 2013 page from?
Meant to include this link (added now) - it's "Technology Change and the Rise of New Industries" - https://www.sup.org/books/title/?id=21867 He also has a few papers that cover the same basic ideas.
Thank you so much for the link. :) I know you are very busy. Thanks again.