Reengineering The Theory Of Scale Economy And The Improvement Of Terms Of Trade Of Our Country

The theory of scale economy has been used in practice, and has been thought as aneffective mode of development of economy, since it was introduced into China. However,compared with scale economy in practice, it is in theory seldom to discuss the theoryof scaleeconomy. A lot of Chinese papers about scale economy just introduce western existingtheories, the matured theory does not seem to be further developed. As we know, scale economy, as a mode of development of economy, is introduced intothe theoryof international trade, and becomes the foundations and the hypothetical situationsof intra-industry trade and new trade. However, some scholars and top managers continuedkeeping the old scale economy in mind. The old theory of scale economy has manydisadvantages, as following: the fixed input factors, static index of scale economy, etc. So wecan define the new scale economy, under given institutions and inputs factors situations, asincreasing the amount of the inputs and reengineering of the processes, with the increasingoutputs, the outputs will be over the inputs, the average cost will lower. The factors includeorganization,institution and information. If the company and factory produce according to the new theory of scale economy, thecost of per unit is less, moreover, the quality of goods is higher,therefore, it is profitable forus to exchange these goods with foreign goods. From what we mentioned above, we can draw a conclusion that the reengineered theoryof scale economy has a close relationship with terms of trade, so we can improve the terms oftrade through modifying scale economy. It not only brings out a new field to research termsof trade, but also makes some feasible suggestions for enterprises, industries and government.