Capital controversy

from Wikipedia, the free encyclopedia

As capital controversy is referred to a debate in the economic theory of the 1960s to the nature and role of capital goods as a factor of production or means of production . Mainly involved in it; Joan Robinson , Piero Sraffa and Luigi L. Pasinetti from the University of Cambridge on the one hand and Paul Samuelson and Robert Solow from the Massachusetts Institute of Technology in Cambridge , Massachusetts on the other . That is why there is sometimes talk of the Cambridge-Cambridge controversy .

The logical circle in determining the value of capital

In turning away from the theory and method of classical economics , neoclassical theory seeks to solve the question of production and distribution within its equilibrium system of simultaneously determinable supply-demand functions through marginal productivity theory . In a reformulation of Malthus' rent theory it is shown that the basic rent can be understood as a marginal product of the soil. The other factors of production, namely labor and capital, are then dealt with in the same way. The wage is found as the marginal product of labor, the interest (remuneration for the employment of capital) as the marginal product of the production factor capital.

This distribution theory of the 1950s was based on the empirical generalization of Wicksteed and had been brought into the aggregated form of the Cobb-Douglas production function by Cobb and Douglas under the influence of JB Clark . One sought to determine the rate of profit by determining wages and the price of capital by means of the marginal products of labor and the aggregate value of capital goods. If the factor prices are given in this way, the distribution results from a multiplication of the factor quantities by the factor prices.

The first doubts about the correctness of this approach were expressed by RF Kahn and Joan Robinson .

“If the sum of the heterogeneous capital goods is to be calculated as an aggregate that is comparable to profits, it must be expressed in units of value in order to provide a homogeneous ratio of profit to capital. But when the rate of profit is determined by the marginal product of this sum, a logical circle occurs, for the prices of capital goods must initially have been calculated for some rate of profit. Thus, the marginal product of capital, as it is determined on the basis of an aggregated production function, can only result in the rate of profit that was previously determined and is expressed in the prices of capital goods, which are added as weights. "

With the marginal productivity theory one can therefore at most find out which rate of profit the prices of the existing capital stock imply - but that does not represent an explanation of the level of the rate of profit, but only the tautological proof that the rate of profit is always as high as it has been assumed.

Reswitching

See detailed article on reswitching

The discussion about reswitching was also part of the capital controversy. Sraffa was able to show that if the wages in an economy continue to rise, then there is not always a shift in the same direction to less and less labor-intensive production techniques, but that it is possible that a production technique that was previously abandoned when wages rose , with wages that continue to rise, it will once again become the cheapest production technology for the economy.

Such a process cannot be represented within the neoclassical theory, which represents a one-good parabola , for example on the basis of a Cobb-Douglas production function.

literature

  • Piero Sraffa: Goods production using goods. Afterwords by Bertram Schefold (1976 [first published in 1960]), Suhrkamp-Verlag Frankfurt / Main.
  • Pierangelo Garegnani : Capital, Income Distribution and Effective Demand. Contributions to the renaissance of the classical approach in the political economy Marburg 1989.
  • Michael Heine, Hansjörg Herr: Economics - Paradigm-Oriented Introduction to Micro- and Macroeconomics. Munich, Vienna 2003, p. 233ff.

English:

  • Heinz D. Kurz : Capital Theory - Debates , in: J. Eatwell, M. Milgate and P. Newman (eds.), The New Palgrave: A Dictionary of Economics , vol. 1. London, New York, Tokyo 1987.

Individual evidence

  1. ↑ Wirtschaftslexikon Gabler: Definition: Cambridge-Cambridge controversy
  2. ↑ Hubert Hoffmann: Post-Keynesian Economy - Overview and Orientation. In: Post-Keynesianism: Economic theory in the tradition of Keynes, Kalecki and Sraffa / with contributions by Karl Dietrich, Hubert Hoffmann, Jürgen Kromphardt, Karl Kühne, Heinz D. Kurz, Hajo Riese u. Bertram Schefold. Metropolis: Marburg 1987. ISBN 3-926570-00-8 . P. 29.
  3. ^ Joan Robinson: The Production Function and the Theory of Capital . In: The Review of Economic Studies, Vol. XXI (1953/54); Reprinted in: dies .: Collected Economic Papers , Vol. II, Oxford 1960./ Joan Robinson: Euler's Theorem and the Problem of Distribution . In: Economic Journal, Vol. XLIV (1934); Reprinted in: dies .: Collected Economic Papers , Vol. I, Oxford 1951. / RF Kahn: The Elasticity of Substitution and the Relative Share of a Factor . In: Review of Economic Studies, Vol. I, Oct. 1933.
  4. ^ Hubert Hoffmann: Post-Keynesian Economy. Overview and orientation. In: Post-Keynesianism: Economic Theory in the Tradition of Keynes, Kalecki and Sraffa. Metropolis. Marburg 1987. p. 29 f. ISBN 3-926570-00-8