Marx, the Production Function and the Old Neoclassical Equilibrium: Workable under the Same Assumptions? With an Appendix on the Likelihood of Reswitching and of Wicksell Effects

CSWP 19 (April 2016)

Author Bertram Schefold

Keywords Capital theory, Random matrices, Aggregate Production Function, Transformation problem, Wicksell effects

JEL B13, B14, E25

A stochastic approach has been introduced to explain the empirically observed fact that wage curves calculated from input-output systems tend to be nearly linear and that the paradoxes of capital appear to be rare. The stochastic approach allows to justify the simplifying treatment of normal prices common to 19th and early 20th century authors as diverse as Marx (transformation problem), Wicksell (old neoclassical equilibrium), J.B. Clark (neoclassical production function). It is shown that the likelihood of reverse capital deepening is much lower than that of Wicksell effects. With this, the likely characteristics of the wage frontier obtained from a multiplicity of input-output tables are derived. The conclusion summarises what we know and do not know about the validity of the Cambridge critique of capital.

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