Monday, April 11, 2016

Inane Responses To The Cambridge Capital Controversy

I consider the following views, if unqualified and without caveats, just silly:

  • The Cambridge Capital Controversy (CCC) was only attacking aggregate neoclassical theory.
  • The CCC is just a General Equilibrium argument, and it has been subsumed by General Equilibrium Theory. (Citing Mas Colell (1989) here does not help.)
  • The CCC does not have anything to say about partial, microeconomic models.
  • Perverse results, such as reswitching and capital-reversing, only arise in the special case of Leontief production functions. If you adopt widely used forms for production functions, the perverse results go away.
  • It is an empirical question whether non-perverse results follow from neoclassical assumptions. And nobody has ever found empirical examples of capital-reversing or reswitching.
  • Mainstream economists have moved on since the 1960s, and their models these days are not susceptible to the Cambridge critique.

I would think that one could not get such ideas published in any respectable journal. On the other hand, Paul Romer did get his ignorance about Joan Robinson into the American Economic Review

  • Andreu Mas-Colell (1989). Capital theory paradoxes: Anything goes. In Joan Robinson and Modern Economic Theory (ed. by George R. Feiwel), Macmillan.

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