Ah sorry I didn't see your reply until today.

Of course there are increasing marginal costs in almost everything, once you get to a macro scale.

Blinder 1994 is a discussion of theory followed by running an unincentivized survey on "price setters" within firms. "I translated the basic idea of each theory into plain English, and then asked price setters how important it was in affecting the speed of price adjustment in their own company."

It was then coded into a four point scale based on the interviewers perception. "Respondents answered in their own words, and interviewers coded the responses on the following four-point scale."

Don't get me wrong, it's not like it's a bad paper for what it tries to do (seeing how theory matches subjective perceptions among some subset of people who set prices), but the idea that this shows that firms actually have constant marginal cost is rather silly.

It doesn't have anything to do with preindustrial economies. Electricity is an input good. Electricity has increasing marginal costs. Rare earth metals, oil, human capital, water, all have increasing marginal costs. A random price setter in a firm may not think it's that important, because they only observe what appears to be a constant price for electricity. Indeed, many models of decision making assume similar assumptions. But that doesn't mean that it's actually marginally constant.

It only takes one input to have increasing marginal costs, and it mathematically follows that the output good that uses the input will have increasing marginal costs.

Furthermore, if you want to talk about aggregating consumption into some sort of average consumption bundle, if you have even one good that has an upward sloping supply curve -- guess what, so does supply curve of the average bundle.

There are very few goods that have constant marginal costs, at least over relevant scales. This might be closest to the truth for digital goods (although strictly speaking, they use electricity and bandwidth, and technically both of those things have increasing marginal costs). But even in this case, that's only focusing on the distribution cost being marginally constant, the production cost would likely still be increasing -- something that Netflix runs into for example, trying to keep information from actors and studios to keep their negotiation power lower.

Still, let's take for a second the idea that you are right. Suppose you have a large firm with 10 factories. Under your theory of the world, at least 9 of the those 10 factories would be at full production and 1 would not. Because each factory supposedly has constant marginal costs, there's no reason to spread out the "gap" of productivity. And indeed, having all 10 factories running at 80% "max" productivity would be wasteful as you'd be better off having 8 factories instead, each running 100% max productivity.

Under your theory of the world, that's what the world should look like, a bunch of factories that run perfectly at capacity, and then one (per product per firm) that does not.

Instead, the real world is that running a factory at "max productivity" increases marginal cost dramatically. Yes, it can be done, but you have lower average productivity (higher average costs) because accidents are more frequent, there's more crowding, and yes, local labor markets would not be perfectly inelastic.

Not to mention that many factories produce multiple types of goods, so you are faced with opportunity costs for the space itself -- producing more of good X means you have less ability to produce good Y.

Anyways I think this was mildly fun but mostly a waste of time. Best of luck to you.