Economies of scale: The physics basis

Why is size so important? Why are “economies of scale” a universal feature of all flow systems, animate, inanimate, and human made? The empirical evidence is clear: the bigger are more efficient carriers (per unit) than the smaller. This natural tendency is observed across the board, from animal design to technology, logistics, and economics. In this paper, we rely on physics (thermodynamics) to determine the relation between the efficiency and size. Here, the objective is to predict a natural phenomenon, which is universal. It is not to model a particular type of device. The objective is to demonstrate based on physics that the efficiencies of diverse power plants should increase with size. The analysis is performed in two ways. First is the tradeoff between the “external” irreversibilities due to the temperature differences that exist above and below the temperature range occupied by the circuit executed by the working fluid. Second is the allocation of the fluid flow irreversibility between the hot and cold portions of the fluid flow circuit. The implications of this report in economics and design science (scaling up, scaling down) and the necessity of multi-scale design with hierarchy are discussed.