Specialization, Search Costs, and the Degree of Resource Utilization

Abstract

In most contexts, an economy’s rate of output is said to be determined by its resource endowment, technology, tastes, the distribution of resource ownership, and so on. Although most items on such a list occasion no disagreement, there is one prominent exception: to suggest that the degree to which productive resources are utilized materially influences an economy’s level of output will immediately provoke a dispute with those who consider that departures from full utilization are transitory or even illusory.

Edward Lazear, Robert Lucas and Kevin Murphy have all found errors in a first draft and suggested important ways to improve the exposition. None of them is in any way responsible for such errors as remain.