The Rarity of Reswitching Explained

CSWP 58 (August 2022)

Author Bertram Schefold

Keywords Capital Theory; Reswitching; Reverse capital deepening; Sraffian economics; Input-output analysis

JEL B24; C62; C67; D57

Most studies of the frequency of reswitching and reverse capital deepening were based on two or three sector models and came to the conclusion that these phenomena are rare. Here it is shown that the probability of isolated reswitching tends to zero in large economic systems. The assumptions of the new mathematical theorems proposed are supported by an empirical enquiry. The randomness of input-output systems helps to explain the result. If the number of switch-points tends to infinity in large systems, it is not certain that even one represents a case of reverse capital deepening. The focus of the critique of capital will have to change.

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