chapter  7
19 Pages

External Economies

Marshallian external economies are not the bucolic ones of the bee-orchard-honey type3 but are all closely connected with the development of the economy. They are said to depend on "the general development of industry," on "the growth of correlated branches of industry," on "the general progress of industrial environment," and on the increase of the size of the market in general.4 External econo-

EXTERNAL ECONOMIES • 145 mies include "the many various economies of specialized skill and specialized machinery, of localized industries and production on a large scale," the "increased facilities of communication of all kinds," trade knowledge, skilled labor force, etc.5 The pervading theme in the discussion of external economies is their interaction with the growth of the economy. Marshall also points out that many of these economies are irreversible, so that the gains derived from increased production are not lost if output returns to its former level.6