The Cambridge capital controversies (CCC) as market and firm structure controversies: modern neoclassical interpretation
No xequg, OSF Preprints from Center for Open Science
How dynamic stochastic general equilibrium (DSGE) models, widely used in mainstream macroeconomics, revive neoclassical capital theory parables and the uniform rate of interest is analyzed. While Arrow-Debreu-McKenzie (ADM) general equilibrium models disallow such a revival, DSGE has agents re-optimizing at each period, along with separate intra-period budget constraints, which then result in first-order conditions that lead to the resurrection of capital aggregation and the traditional neoclassical capital theory. Despite these initially positive results for neoclassicals, the Cambridge capital controversies (CCC) can be re-cast in form of market and firm structure: quasi-complete contract versus incomplete contract and ADM-style complete market versus DSGE-style incomplete market. In both a theory of the firm and 'ADM versus DSGE,' the question is: why do agents choose the inferior market structure (incomplete contract and DSGE-style incomplete market) that leads to lower expected time-discounted utility? In this sense, CCC is alive even in neoclassical macroeconomics.
New Economics Papers: this item is included in nep-dge and nep-hpe
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:xequg
Access Statistics for this paper
More papers in OSF Preprints from Center for Open Science
Bibliographic data for series maintained by OSF ().