The Improbability of Reswitching, the Certainty of Wicksell-Effects and the Poverty of Production Functions: The Cambridge Critique of Capital Transformed☆

Bertram Schefold

A chapter in Including a Symposium on New Directions in Sraffa Scholarship, 2017, vol. 35B, pp 171-194 from Emerald Group Publishing Limited

Abstract: Capital theory has taken a new turn with the theoretical discovery that wage curves tend to get linear in random systems, the larger they are, and with the confirmation that empirical wage curves do not deviate a great deal from linearity. The present chapter adds to these results by arguing that reswitching becomes less likely for larger systems, while Wicksell effects are almost surely present. But it can also be shown that the elasticity of substitution is likely to be small in random systems so that a policy to lower real wages will not easily generate much additional employment in a closed economy. A new perspective on employment policies is therefore called for.

Keywords: Sraffa; capital theory; Wicksell effects (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eme:rhetzz:s0743-41542017000035b008

DOI: 10.1108/S0743-41542017000035B008

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