Changes

A smart economist might observe that Shakespeare was expressing the undesirability of transaction costs caused by lawyers nearly 200 years before Adam Smith discovered the invisible hand, and over 350 years before Ronald Coase discovered and criticized transaction costs.  Perhaps Shakespeare understood economics before it was even recognized as a field of study!<ref>Believe it or not, lawyers claim that Shakespeare was actually ''complimenting'' them, because the line was spoken by an enemy of freedom.  See http://www.johnlocke.org/news_columns/display_story.html?id=962</ref>

A smart economist might observe that Shakespeare was expressing the undesirability of transaction costs caused by lawyers nearly 200 years before Adam Smith discovered the invisible hand, and over 350 years before Ronald Coase discovered and criticized transaction costs.  Perhaps Shakespeare understood economics before it was even recognized as a field of study!<ref>Believe it or not, lawyers claim that Shakespeare was actually ''complimenting'' them, because the line was spoken by an enemy of freedom.  See http://www.johnlocke.org/news_columns/display_story.html?id=962</ref>

But many careers in addition to lawyers create transaction costs.  Real estate brokers, stock brokers, accountants, waiters and waitresses, and countless other occupations live off of transaction costs.  One student who took this course in 2004 is paying her way through college by working as a waitress in a fancy Manhattan restaurant, where the tips can be very profitable!  Waiting on tables is a service, and some develop the skill much better than others.  (That student first learned how to wait on tables first in Hackettstown.)  There will always be restaurants, even when the economy is not doing well, and there is nothing wrong with developing a skill as a good waiter or waitress.  People are going to pay transaction costs in many different ways, and it is better to be successful at improving delivery of those services than unsuccessful at complaining about them!

But many careers in addition to lawyers create transaction costs.  Real estate brokers, stock brokers, accountants, waiters and waitresses, and countless other occupations live off of transaction costs.  One student who took this course in 2004 is paying her way through college by working as a waitress in a fancy Manhattan restaurant, where the tips can be very profitable!  Waiting on tables is a service, and some develop the skill much better than others.  (That student first learned how to wait on tables in Hackettstown.)  There will always be restaurants, even when the economy is not doing well, and there is nothing wrong with developing a skill as a good waiter or waitress.  People are going to pay transaction costs in many different ways, and it is better to be successful at improving delivery of those services than unsuccessful at complaining about them!

== The "Firm" ==

== The "Firm" ==

===The Long Run: Economies of Scale===

===The Long Run: Economies of Scale===

The "long run" is the period of a year or longer, depending on the issue.  In the Bible, Jesus looked for disciples who would stick with him for "long run."  After many followers left because the teaching was so harsh, Jesus turned to his apostles and said, “Will ye also go away?”  Simon Peter responded, “Lord, to whom shall we go? thou hast the words of eternal life.” John 6:68 (KJV). Peter was committed for the long run.  Over thirty years after Jesus’ crucifixion, Peter remained true to what he said and allowed himself to be crucified (upside down).  Jesus picked the Apostles for the long run.

The "long run" is the period of time long enough to build new factories.  Depending on the issue, the long run is usually more than a year.  In the Bible, Jesus looked for disciples who would stick with him for the long run:<ref>John 6:66-69 (KJV).</ref>

 

:From that time many of his disciples went back, and walked no more with him. Then said Jesus unto the twelve, Will ye also go away? Then Simon Peter answered him, Lord, to whom shall we go? thou hast the words of eternal life.  And we believe and are sure that thou art that Christ, the Son of the living God.

 

Peter was obviously dedicated for the long run.  Over thirty years after Jesus’ crucifixion, Peter remained true to what he said and allowed himself to be crucified (upside down).  Jesus picked the Apostles for the long run.

There is a "long run" in most businesses also.  When you are doing business with a supplier you want to be confident it will still be there a year or five years later.  You want to set up your firm so that it is efficient for the long run.  Quick fixes are typically short-lived and inefficient, and long run planning is crucial to long run success.  People who become doctors or lawyers go through more education, when they do not make money, in order to try to succeed in the long run afterward.

There is a "long run" in most businesses also.  When you are doing business with a supplier you want to be confident it will still be there a year or five years later.  You want to set up your firm so that it is efficient for the long run.  Quick fixes are typically short-lived and inefficient, and long run planning is crucial to long run success.  People who become doctors or lawyers go through more education, when they do not make money, in order to try to succeed in the long run afterward.

The changes you make to your company in the long run will be designed to maximize efficiency.  You want to reduce overtime, and you want loyal workers at a relatively low wages.  You want manufacturing facilities that are utilizing close to 100% of their capacity for production.  If demand is increasing, then that means building new facilities.  If demand is decreasing, then that means selling facilities that you already have.

The changes you make to your company in the long run will be designed to maximize efficiency.  You want to reduce overtime, and you want loyal workers at a relatively low wages.  You want manufacturing facilities that are utilizing close to 100% of their capacity for production.  If demand is increasing, then that means building new facilities.  If demand is decreasing, then that means selling facilities that you already have.

There is a concept for the long run known as “scale”.  '''''"Scale" refers to the total amount of inputs (workers, facilities, equipment, etc.) that a company has.'''''  The “large scale” means large facilities and number of workers.  The “small scale” means small facilities and number of workers.

There is a concept for the long run known as “scale”.  '''''"Scale" refers to the total amount of inputs (workers, facilities, equipment, etc.) that a company has.'''''  The “large scale” means large facilities and number of workers.  The “small scale” means small facilities and number of workers.