RE: Re: RE: Re: Re: Small and Imperfect Step to Alt ernative Text

["Devine, James" <jdevine@xxxxxxx>]

I wrote:

>>the aggregate production function, which Samuelson admitted years ago was
fallacious <<

Doug:
>Where'd he do that?

Paul A. Samuelson, 1966, "A Summing Up," QUARTERLY JOURNAL OF ECONOMICS,
vol. 80, pp. 568-83. (Reprinted in G.G. Harcourt & N.F. Laing, CAPITAL AND
GROWTH, Penguin 1971.

"There often turns out to be no unambiguous way of characterizing different
processes as more 'capital intensive', more 'mechanized' more 'roundabout',
except in the _ex post_ tautological sense of being adopted at a lower
interest rate and involving a higher real wage. Such a tautological labeling
is shown, in the case of reswitching [which he explains very clearly], to
lead to inconsistent ranking between pairs of unchanged technologies,
depending upon which interest rate happens to prevail in the market." (in
Harcourt & Laing, p. 250.)

If this is the status of aggregate measures of "capital intensity," then the
aggregate production function (in which labor productivity is a simple &
smooth function of aggregate capital intensity) is fallacious. This is why
serious neoclassicals decided to drop the aggregate production function and
to go for general equilibrium theory.

Speaking of fallacies, this is where Samuelson says that "Under perfect
competition, either workers can hire capital goods or capitalists hire
workers" (and get equivalent results). (In H&L, p. 241.)

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine