Sorry, Michael. I used the term "fixed cost function" to refer to a cost 
function that is fixed. When people use the term "fixed cost," they 
practically always assume that the cost function is fixed because they 
are practically always referring to a static setting. If the cost 
function is variable, as it would be if technology is changing, the 
fixed cost is like to vary as well, which makes the idea of fixed cost 
rather irrelevant to the analysis you seem to be using. If these words 
sound like nonsense, it is because I am trying to follow your lead of 
using static-analysis words to describe a dynamic situation. Just as we 
would not ordinarily do this, I find your use of the term "fixed cost" 
in a description of a dynamic setting to reveal confusion. But let me go on.

Your dynamic analysis, as I read it, suggests that entrepreneurs would 
be afraid to invest because future costs of production are lower than 
existing costs of production. Of course, this is possible. But if it 
were true of every entrepreneur, there would be no investment at all.

But there is a more important issue, it seems to me. Assuming that there 
is likely to be some investment and technological change, there is no 
public policy that would resolve this problem of high startup or 
overhead costs. A government could itself pay the startup or overhead 
costs. This could encourage investment. But technological change would 
make the government subsidy just as wasteful as the entrepreneur's 
investment. Surely, the economists of the era did not systematically 
make this mistake in reasoning.

Let me repeat that the American economists of the era who I read were 
concerned with economies of scale and with combinations of,  takeovers 
of, or predation on firms producing the same good or service. They were 
not concerned with Marshallian fixed cost. Perhaps you have a reference 
that could demonstrate the naivety of my interpretation? Or perhaps some 
economist of the era used the term "fixed cost" to refer to startup 
costs or to overhead costs in relation to the monopoly problem or 
economic inefficiency. I remain to be persuaded.

With respect,

Pat Gunning