176 The Political Economy of Resource Use 



firm embraces a number of processes it is quite possible that expan- 

 sion of output in one will involve economies or diseconomies for the 

 others. As McKean points out, the Wednesday night sales of a depart- 

 ment store may increase the inputs per unit of its daytime sales.^i But 

 the inclusion of these operations within one "decision-making" unit 

 offers at least the possibility of taking the interdependencies into ac- 

 count. It has been suggested that the recognition of interdependencies 

 among firms is one of the important reasons for combination and in- 

 tegration in manufacture. And it has been emphasized that difficulties 

 of combination and integration in the natural resource field, together 

 with the impossibility under certain circumstances of subjecting econo- 

 mies and diseconomies to market evaluation, may be important rea- 

 sons why static external economies are peculiarly important in the 

 natural resource area. 



But it does not follow, either in manufacture or the natural resource 

 area, that the persistence of external economies or diseconomies neces- 

 sarily represents a failure of the price system. An attempt to eliminate 

 them by increasing, either through public or private action, the size 

 of the decision-making unit may bring more-than-compensating dis- 

 advantages. As we have seen, problems of interdependence exist even 

 within an organization and they tend to increase in complexity, and at 

 a high rate, as the number of distinguishable operations increases. The 

 detection and measurement of such interdependencies is a task for 

 operations research and, as one of the practitioners in this field has 

 remarked, ". . . the best medicine for the well-meaning central plan- 

 ner is, perhaps, a stiff dose of down-to-earth operations research on 

 complex problems of the Federal Government; such an experience 

 would lay bare, more vividly than does meditation alone, the awesome 

 difficulties that would be encountered (and the grim mistakes and the 

 concentration of power that would surely occur) in detailed central 

 direction of the economy." ^^ 



Operations research, in other words, is no substitute for the price 

 system; nor is indefinite concentration in a single decision-making 

 unit of more or less interdependent economic processes an answer to 



21 Roland N. McKean, "Cost-Benefit Analysis and Efficiency in Govern- 

 ment," an unpublished manuscript of RAND Corporation. 



22 McKean, op. cit., p. 9. 



