Monday, March 16, 2026

Misinformation From Economists

I have found another source of economists confidently spouting mistakes, Economics Stack Exchange. This has been around for more than a decade.

If I went back in time, I think I would have trouble convincing my 20 year old self that standard introductory textbooks are incoherent nonsense, never corrected.

I quickly found questions on the Cambridge Capital Controversy. What technology do we need to have reswitching to occur? Why is reswitching and reverse capital-deepening a problem exactly? Why did the Cambridge Capital Controversy have no impact on economic modelling? The participants do not seem to have much to say on the topic.

Ten years, ten moths ago, a question was posed: Can capital still be paid its marginal product in the absence of a homogeneous capital stock? This question was inspired by a Krugman answer to critics of Piketty. One answer was offered:

Different sorts of capital used as separate production technologies prevent clean aggregation to a representative form of capital but does not prevent capital from being paid its marginal product...

On the margin the two sorts of capital don't have the same product and so aggregation doesn't make sense here. But in this setting, it is likely that the rental rate on capital would be equated (r1 = r1) because why would you buy one sort of capital when the other sort paid more?

The answer is foolish. The variables are supposed to be "rental prices". They might be in units of numeraire units per year per services of ton iron and numeraire units per year per services of square meters of the services of steel sheets, where the latter are of a specified thickness. You could change their values by a change in units. For example, the latter could be in square yards, not square meters. So it makes no sense to equate these values.

I suspect I can find more confusion.

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