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164 economies of scale
Greece. Tourism has been a rapidly growing
activity in this region, but many environmental
pressures have been generated as a result of this. In
order to better understand the complexities of the
problem, the author developed a simulation
model that allowed investigation of how various
approaches to management of the environment
might affect tourism, employment and environmental
outcomes.
References
van den Bergh, J.C.J.M. �1995) `Dynamics analysis
of economic development and natural environment
on the Greek Sporades Islands', in J.W.
Milon and J.F. Shogren �eds), Integrating Economic
and Ecological Indicators, Westport, CT: Praeger.
�Contains many articles which are relevant to
the theme of ecological economics.)
Further reading
Costanza, R. �ed.) �1991) Ecological Economics:The
Science and Management of Sustainability, New York:
Columbia University Press. �Contains thirty-two
articles that capture the essence of early thinking
by modern ecological economists.)
economies of scale
JOHN A.J. WOLFENDEN, AUSTRALIA
The concept of economies of scale refers to
productivity increases �or diminishing average
costs) derived in certain cases from equal proportional
increases in all the production inputs
�Samuelson and Nordhaus 1993). Within a given
technological environment, the economies of
scale can be pecuniary, real, and external. First,
increases in the production level allow for lesser
monetary costs in productive inputs, financing,
transportation or distribution. There are wellestablished
cases of pecuniary economies of scale in
tourism distribution systems and in hospitality.
Second, because of the limits to divisibility in
tourism production and the economies of specialisation,
there is also a real physical reduction in the
inputs used per unit of output and thus in the
average cost. Large tourism attractions, such as
theme parks or marinas, are good examples of
real economies of scale. Third, with technological
changes, there is also the possibility of external
economies of scale. In this case, the general
increase of production of the industry as a whole
allows for greater specialisation of individual
productive units and lower average costs; there is
even the possibility of negative slope supply curves.
In the business paradigm of the Fordian age of
tourism, characterised by mass production and
consumption of such services, the economies of
scale were the basis of profitability and competitiveness
in enterprises. All pecuniary, real and
external economies of scale were used, mimicking
industrial policy strategies. However, this source of
profitability has encountered shortcomings with
the supersegmentation of demand characteristic
of the new business paradigm in tourism and
efficiency problems derived from excess overheads
and bureaucracy in large productive units. Additionally,
the use of economies of scale in tourism
has produced considerable negative social and
environmental impacts in destinations, even to
the point of drastically reducing their market
competitiveness. Today, economies of scale are still
important; large concerns such as airlines or
hospitality giants use them in many areas of their
business processes, and even small companies
integrated in tourism clusters benefit from external
economies of scale. However, the sustainable
profitability of companies and destinations nowadays
demands other methods, responding better to
the rapidly changing environment of tourism
markets.
Further reading
Bull, A. �1994) The Economics of Travel and Tourism,
London: Pitman.
Fayos-SolaÁ, E. �1996) `La nueva polõÂtica turõÂstica',
in Arquitectura y Turismo, Barcelona: Universidad
PoliteÂcnica de Catalunya.
Graselli, P. �1992) Economia e polõÂtica del turismo,
Milan: Centro Italiano di Studi Superiori sul
Turismo, Assissi, Franco Angeli.
Poon, A. �1993) Tourism Technology and Competitive
Strategies, CA International.