By Jesus Felipe, John S. L. McCombie
ISBN-10: 1782549684
ISBN-13: 9781782549680
This authoritative and stimulating ebook represents a primary critique of the combination construction functionality, an idea popular in macroeconomics. The authors clarify why, regardless of the intense aggregation difficulties that encompass it, combination construction capabilities frequently provide believable statistical effects.
This is because of using constant-price price facts, instead of the theoretically right actual info, including an underlying accounting id that relates the knowledge definitionally. it really is 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 ebook examines the historical past of the construction functionality and indicates how yes seminal works on neoclassical progress thought, labour call for services and estimates of the mark-up, between others, be afflicted by this basic challenge. The booklet represents a primary critique of the combination construction functionality and should be of curiosity to all macroeconomists.
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Additional info for The Aggregate Production Function and the Measurement of Technical Change: ‘Not Even Wrong’
Sample text
This instrumentalist defence of estimating aggregate production functions has been eloquently put forward by Solow, who can hardly be accused of not being fully aware of the aggregation problems underlying the concept of the aggregate production function:1 I have never thought of the macroeconomic production function as a rigorously justifiable concept. In my mind, it is either an illuminating parable, or else a mere device for handling data, to be used so long as it gives good empirical results, and to be abandoned as soon as it doesn’t, or as soon as something better comes along.
At any point on the factor-price frontier, the slope of the curve is equal to the capital–labour ratio. 4 These results hold for a one-sector model and the key question is whether or not they can be generalised to the case where there are heterogeneous capital goods. In other words, can the results from the one-sector model act as an approximation, or a parable, for the more complex underlying technology? This is what Samuelson (1962) thought, erroneously as it turned out, that he had shown. Samuelson assumed that a good can be made from a single technique 1, which comprises two separate production relationships.
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. No aggregation of capital is required. ‘But the switch to general equilibrium, rather than saving the neoclassical parables, abandoned them for simultaneous equation price systems, and correct statements about factor returns being equal to or measured by disaggregated marginal products’ (Cohen and Harcourt, 2003, p.
The Aggregate Production Function and the Measurement of Technical Change: ‘Not Even Wrong’ by Jesus Felipe, John S. L. McCombie
by Ronald
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