By Jesus Felipe, John S. L. McCombie
This authoritative and stimulating ebook represents a basic critique of the mixture creation functionality, an idea commonplace in macroeconomics. The authors clarify why, regardless of the intense aggregation difficulties that encompass it, mixture construction services usually supply believable statistical effects.
This is because of using constant-price worth facts, instead of the theoretically right actual facts, including an underlying accounting id that relates the information definitionally. it's during this experience that the combination construction functionality is 'not even wrong': it isn't a behavioural courting in a position to being statistically refuted.
The publication examines the background of the construction functionality and exhibits how definite seminal works on neoclassical development concept, labour call for services and estimates of the mark-up, between others, be afflicted by this primary challenge. The ebook represents a basic critique of the mixture construction functionality and may be of curiosity to all macroeconomists.
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Additional resources for The Aggregate Production Function and the Measurement of Technical Change: ‘Not Even Wrong’
Cohen and Harcourt (2005) emphasise the importance of this through a simple example. Imagine the simple textbook diagram of the isoquant with labour (measured in standard hours worked) on one axis and the value of capital on the other. ) The optimal choice of technique is given by the tangency of the isocost line to the isoquant. indd 42 12/09/2013 07:56 Some problems with the aggregate production function 43 tion to this problem where the current prices are in long-run equilibrium. They have been constant in the past and will remain so for the foreseeable future.
Although she argued that it ‘has a very limited reference to actual problems’, Robinson (1953–54, p. 100) did concede the ‘platitude’ that if in a country ‘more capital had been accumulated in the past relative to the labour available for employment, the level of real wages would probably have been higher and the technique of production more mechanized, and, given the amount of capital accumulated, the more mechanised the technique of production, the smaller the amount of employment would have been’, a concession Sen (1974, p.
See, for example, Ferguson and Allen (1970), Gallaway and Shukla (1974), Sato (1975) and Garegnani (1976). Burmeister (1977) also attempted to rescue the neoclassical position using the concept of the ‘regular economy’ but see Baldone’s (1984) criticism. Ahmad (1991) and Birner (2002) give detailed expositions of these arguments. The latter views much of this subsequent literature as ‘proof driven’ with little or no economic content. The final neoclassical response was to shift the debate into general equilibrium theory, which lies at the core of the neoclassical theory and explains prices in terms of preferences, endowments, technology and scarcity.
The Aggregate Production Function and the Measurement of Technical Change: ‘Not Even Wrong’ by Jesus Felipe, John S. L. McCombie