Table Of ContentCLASSICS IN THE HISTORY AND DEVELOPMENT OF ECONOMICS
General Editor: Michio Morishima, Emeritus Professor of Economics,
London School of Economics
In the postwar years the discipline of economics has become highly
advanced by focusing upon issues which can be expressed in mathematical
terms and ignoring issues upon which it is difficult to make axiomatic
analysis. This series aims to make available in English texts which might
well have played a major role in the development of a more balanced -
not exclusively mathematical - economic theory but for the fact that they
were written in a language other than English. However, the series'
interest will also embrace mathematical and English-language works
where these appear to have been unduly neglected. The series will also
seek to make available in English important works that present the
experiences of non-English-speaking economies; it is hoped that these
will contribute greatly to making economics more comprehensive and
more widely applicable to a range of world economies in the future.
Titles include:
Marco Fanno
A CONTRIBUTION TO THE THEORY OF SUPPLY AT JOINT COST
THE MONEY MARKET
Hiroshi Hazama
THE HISTORY OF LABOUR MANAGEMENT IN JAPAN
Alfonso de Pietro-Tonelli and Georges H. Bousquet
VILFREDO PARETO: Neoclassical Synthesis of Economics and
Sociology
Joseph A. Schumpeter and Yasuma Takata
POWER OR PURE ECONOMICS?
Yasuma Takata
POWER THEORY OF ECONOMICS
Giulio La Volpe
STUDIES ON THE THEORY OF GENERAL DYNAMIC ECONOMIC
EQUILIBRIUM
Classics in the History and Development of Economics
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A Contribution to the
Theory of Supply at
Joint Cost
Marco Fanno
Translated by Cyprian Blamires
Forewords by
Lionello F. Punzo and Michio Morishima
in association with the
Pal grave Macmillan
First published in Oreat Britain 1999 by
MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire R021 6XS and London
Companies and representatives throughout the world
A catalogue record for this book is available from the British Library.
ISBN 978-1-349-27428-4 ISBN 978-1-349-27426-0 (eBook)
DOI 10.1007/978-1-349-27426-0
First published in the United States of America 1999 by
ST. MARTIN'S PRESS, INC.,
Scholarly and Reference Division,
175 Fifth Avenue, New York, N.Y. 10010
ISBN 978-0-312-21698-6
Library of Congress Cataloging-in-Publication Data
Fanno, Marco.
[Contributo alia teoria dell'offerta a costi congiunti. English]
A contribution to the theory of supply at joint cost / Marco Fanno
; translated by Cyprian Blamires.
p. cm. - (Classics in the history and development of
economics)
Includes bibliographical references and index.
ISBN 978-0-312-21698-6 (cloth)
1. Supply and demand. 2. Costs, Industrial. 3. Business cycles.
1. Title. II. Series.
HB801.F3613 1998
338.514-dc21 98-21472
CIP
--------._----
Italian text © Marco Fanno 1974
English translation © Cyprian P. Blamires 1999
Forewords © Lionello F. Punzo and Michio Morishima 1999
Softcover reprint of the hardcover I st edition 1999
First published as a supplement to the Giornale degli Economisti e Rivista di Statistica,
entitled 'Contributo alla teoria dell'offerta a costi congiunti' by Marco Fanno in 1974
All rights reserved. No reproduction, copy or transmission of this publication may be made
without written permission.
No paragraph of this publication may be reproduced, copied or transmitted save with
written permission or in accordance with the provisions of the Copyright, Designs and
Patents Act 1988, or under the terms of any licence permitting limited copying issued by
the Copyright Licensing Agency, 90 Tottenham Court Road, London WIP OLP.
Any person who does any unauthorised act in relation to this publication may be liable to
criminal prosecution and civil claims for damages.
The author and translator have asserted their rights to be identified as the authors of this
work in accordance with the Copyright, Designs and Patents Act 1988.
This book is printed on paper suitable for recycling and made from fully managed and
sustained forest sources.
109876543 2 I
09 07 06 05 04 03 02 01 00 99
Contents
General Editor's Introduction Vll
Foreword: Joint Production in Perspective
by Lionello F Punzo ix
Foreword: Joint Production and Joint Consumption
by Michio Morishima xxvii
Introduction 1
1 Preliminary Observations on Supply at Joint Cost 11
2 The Theory of Supply at Joint Cost: The Case of a
Closed Market 17
I In a free market 17
II Under a monopoly regime 38
3 The Theory of Supply at Joint Cost: The Case of
Linked Markets 57
I A theory of the marginal utility of money 57
II Supply at joint cost in the case of linked markets
under a regime of free competition 62
III Supply at joint cost in the case of linked markets
under a monopoly regime 77
4 Conclusion 95
I Free competition in a closed market 95
II A monopoly regime in a closed market 96
III Free competition in open markets 96
IV A monopoly regime in open markets 98
Appendices 99
Notes and References 106
Bibliography 125
Index 129
v
General Editor's
Introduction
This series, with its designation 'history at development of economics'
has at least four areas of focus, though it would be too restrictive to
call them aims.
Since the last war economics has become 'mathematicised' to what
could be deemed an excessive degree, so much so that mathematical
models are incorporated into the analysis even of questions where
there is no need for mathematical argument. As a result, those issues
which cannot be expressed in mathematical terms have been all but
forgotten. Moreover it has become almost impossible to establish
links between economics and other social sciences, in which mathe
matics are little used. This increasing use of mathematics has thus
meant that economics has become isolated; the isolation has in its
turn promoted mathematical inbreeding.
The net result is that the discipline of economics has lost many of
the capabilities which it formerly possessed. Moreover, since such
capabilities have been dispensed with in the selection of specialists,
it has become more and more difficult to shift economics away from
the path along which it is now proceeding.
One effective means of correcting this tendency, and of giving
the contents of economics a better balance, is to dig out some of the
economics of the past, and to learn again from those who have
gone before us. In the earlier decades of this century economics was
not the overwhelmingly English-language-dominated discipline that it
has become in the postwar period. There were top-class economics
achievements in French, German, Italian and other languages as well.
My intention, therefore, is to select from the papers and books written
in other languages some which I consider to contain useful knowledge
and suggestions, which may help to promote a more balanced economic
theory. By translating these works into English, they will be made
available to all. This is the first point we will take account of. Secondly,
I will try to annex to the series wherever possible critical biographies of
scholars active in a wide variety of fields, apart from mathematical
economics, in order better to learn from them.
This series is not, however, necessarily 'anti-mathematical'. It is also
the intention to include in the series works which might well have
Vll
Vlll General Editor's Introduction
played a major role in the mainstream development of economics in
the postwar years but the misfortune that they were written in a
language other than English has caused them to remain unknown.
This, therefore, is the third point we have in mind.
Finally, modern national economies have not all evolved in an
identical fashion. In Japan, for example, and in some other non
English-speaking economies, there have developed perfectly viable
and, indeed, efficient economic systems. Work to clarify the structures
of these kinds of economic system has been accumulating, but mostly
in the language of the country itself. I am also anxious, therefore, to
incorporate into the series translations of works in this area, and also
research on the historical experience of these economies.
Given the four areas of focus which I have outlined above, the
series as a whole will inevitably have a somewhat 'motley' character.
While the works may be somewhat disparate, though, I want to build
up a series in which all the volumes will prove enjoyable and inter
esting to read. The endeavour involves a great deal of translation
work, meaning that publication at regular intervals is likely to be
impossible. In addition, there are many candidates whose work must
be considered for inclusion. This, of course, makes a great deal of
work for a single editor, and therefore it will take time for him to put
the project into orbit. My fervent hope, however, is that this series,
which, among other things, expresses my own philosophy on the need
for a more balanced economics, will succeed in arousing the interest
of both students and specialists in a wider economics, and educating
them in that economics.
MICHIO MORISHIMA
Foreword: Joint
Production in Perspective
Lionello F. Punzo
It is fair to say that Joint Supply or Supply at joint cost belongs to the
Neo-classical terminology and reflects its non- linear treatment of
production functions, while Joint Production is typically associated
with the Classical approach and its modern version, the linear produc
tion model. In this presentation, however, for simplicity, the two terms
will often be interchanged. Until recently, the topic has been confined
to article sections and book chapters, often to appendixes, dedicated
to the applications and extensions of models without it. This short
tract by Marco Fanno, available in English for the first time over 80
years after its original publication as a supplement to the Giomale
degli Economisti, is one of the few instances, and the only contempor
ary one, of a whole monograph devoted to the topic. From the title, it
is a treatise in the Neo-classical tradition. Joint Production, on the
other hand, has aroused a renewed interest in the 1970s and 1980s in
a quite different context, in connection with the examination of von
Neumann, Sraffa and neo-Austrian models of prices, capital and
growth, with a 'spillover' on the treatment of Marxian theory of labour
values and prices. Fanno's treatise reminds us that the history of the
subject is much longer, and is well documented as a sequel of some
time hot disputes between adherents of classical and Neo-classical
schools (but also among members of the same school).
As the recent debate pointed out, the mere presence of joint produc
tion (even to a limited extent) changes some of the basic properties of
prices and equilibrium as described in the Classical models. The issue
becomes, then, to assess its relevance. Is this 'empirical relevance' - i.e.
does it lie in the fact that joint production is the general empirical
property of observed production processes? Or is it, rather, in the fact
that joint production provides an analytical method? Answers to these
questions reflect different conceptions, for a 'method' is not the same as
a 'description'. This issue presented itself in much the same terms at the
turn of this century, and Fanno gives us a refreshing perspective on it.
The history of the periodically reviving interest for joint production
has something special to offer. I surmise that the series of debates never
ix
x
Foreword
reached a generally agreed solution because too many, not purely analy
tical, questions are at stake. However, though themes are cyclically the
same, perspectives are changing, and that of Joint Production is a case
study for comparing modelling strategies and appraising theoretical
motivations. One may not wish to go as far as to say that the difficulties
encountered in its treatment played a significant role in the abandon
ment of the Classical approach to the theory of value and distribution.
Nevertheless, its treatment reveals aspects of method and heuristics that
'simpler' production models leave in the shadows. This is the main
motivation for undertaking the present edition of Fanno's work.
The theoretical investigation in A Contribution is motivated by the
desire to arrive at prescriptions of industrial and fiscal policies, as they
would be called by modern names: taxation, monopoly and its regula
tion, pricing in different market structures are some of the topics
discussed at length, sometimes laboriously. It is this underlying moti
vation that justifies, at least partially, the relatively little attention paid
to the analysis of 'existence of equilibrium solutions', an attention very
limited even by the standards of mathematical economics at Fanno's
times. One perceives that, in the time that has since elapsed, econom
ics - and in particular the theory of prices - have developed into a
purely theoretical exercise, where reference to immediate empirical
cases for motivation has been reduced or altogether abandoned. Such
an approach, though born in the modern general equilibrium eco
nomics (Arrow-Debreu-style), seems to have spread to the most
distant lines of thought.
Section 1 sums up Fanno's motivations and interests in writing
A Contribution and relates them to his research project as well as to
the background of his times. Section 2 discusses Fanno's definition of
'supply at joint cost' in relation to other definitions used in contem
porary literature. Section 3 elaborates on the analytical method in
A Contribution, and suggests a relationship with some features of
Hicks' approach in value and Capital (1939). In the final section 4,
discussion of the issues of determinateness and existence of equili
brium prices will bring us back to themes that have surfaced and
captured the attention in the modern debate.
1 ON FANNO AND HIS TIME
At the time Fanno wrote this essay, the school of Italian economic
thought, once on the frontier with such thinkers as Salimbeni, Galiani
