In a period of economic recession, most companies are able to increase production efficiency by reducing their workforce without any decrease in the level of output. Apparently, firms take action to reduce costs only when profit rates are declining. Many firms seem to be able to restore previous profit levels by taking this kind of action. Why do firms not minimize production cost in the first place, before the recession sets in?

(Economic approaches to organization, Chepter 7, Behavioural theory of the firm)