The theory of economies of scale might reach its end in the future

The theory of economies of scale might reach its end in the future. Nowadays, productivity improvement seems to reach its limit. The developed countries face a decline in labour productivity. Machinery can replace most of human workforce; therefore, a firm is not necessary to employ a large number of workers when supplying a lot of products. Therefore, we need to replace our traditional idea about the theory economies of scale. I believe that a small group of people is actually more productive than a large group of people in terms of average outputs, because machines can replace many of humans' functions when intelligent robots are put into our production lines.

I think Apple's App Store is a model for the future market. App Store creates credit between the customers and the application developers, that allow them to sell and buy applications without facing any risk, such as a virus. The application developers are usually small firms with under a hundred employees; however, as long as their applications become popular, they can earn a lot of profits. Other industries can copy this model. For example, the financial industrial. The Standard & Poor is a large credit rating firm; however, it could make itself a platform that groups of people can make their credit rating reports and sell them on the Standard & Poor's platform while the Standard & Poor has to ensure these reports are credible in some terms. Moreover, in some large financial institutions, many teams can separate from the firms and become independent.

When a firm is growing, it will face more problems. For example, with more employees, the employers are more difficult to check their employees' productivity, then they have to create more job places to help them do so. In a small firm, workers are sometimes shareholders as well, they have more incentives to work hard and have loyalty to their companies.

In conclusion, I think the theory of economies of scale will die in the future. The possible best firm model is a firm with a very small number of employees but a sufficient number of machines.