SCISSORS OR HORIZON - NEOCLASSICAL DEBATES ABOUT RETURNS TO SCALE, COSTS, AND LONG-RUN SUPPLY, 1926-1942

Modern treatment of long-run (U-shaped) cost curves developed from rea ctions to Sraffa's criticisms of Marshall. He argued that internal (di s)economies were incompatible with partial-equilibrium analysis under perfect competition. Pigou concurred and drew L-shaped cost curves; Vi ner realized that this made firm size indeterminate and industry outpu t volatile. Using Austin and Joan Robinson's analyses, Stigler justifi ed rising costs/supply, determinacy, and stability by irrational entre preneurs enduring coordination failure and by factor price changes. We conclude that consistency requires constant costs but firm employment , output, and factor incomes remain theoretically indeterminate. It be comes likely that large firms will undermine perfect competition.