The Scale, RTS and EOS: A Critical View from Theoretical and Pedagogical Aspects

There are ambiguities and inconsistencies regarding the concepts of scale, returns to scale, economies of scale and the relationships between them in micro economics textbooks. In particular, it has been observed that sources are inadequate to accurately convey the idea of the scale, which underlies the concepts of returns to scale and economies of scale. Besides, some sources have confused the definitions of returns to scale and economies of scale with one another, and some have used them as synonymous. Further, the relation between returns to scale and economies of scale are not mentioned in most textbooks at all. This situation causes difficulties in the learning and teaching of related subject. This article critically analyses the subject from theoretical and pedagogical aspects. The aim of the present study is to reveal the concepts and the relationship between them accurately and thereby to eliminate pedagogical problems. The problems have been identified by analysing a sample consisting of about 90 micro economics textbooks at the introductory, intermediate and advanced level, and solutions have been suggested. In addition, a mathematical proof of equivalence of returns to scale and economies of scale has been presented.