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On the Second Stage of the Cambridge Capital Controversy

Saverio Fratini ()

No CSWP30, Centro Sraffa Working Papers from Centro di Ricerche e Documentazione "Piero Sraffa"

Abstract: The second stage of the Cambridge capital controversy concerns the neo-Walrasian theory of value and distribution. Since production is not understood in this theory as employing factors of production but rather commodities, i.e. goods and services with date and place of delivery, some scholars maintained that it is not affected by the problems that emerged, during the first stage of the controversy, as regards the conception of capital as a factor of production and the rate of interest as the price for its use. The reply of the ‘neo-Ricardians’ was based on two arguments. The first regarded the relevance of the new notions of equilibrium adopted in the neo-Walrasian approach, with particular reference to temporary and Arrow-Debreu equilibria, and the second the possibility that the phenomena of re-switching and reverse capital deepening, by affecting the working of the saving-investment market, could cause equilibrium multiplicity and instability also in a neo-Walrasian framework.

Keywords: Cambridge capital controversy; neo-Walrasian theory; Arrow-Debreu equilibrium; saving-investment market (search for similar items in EconPapers)
JEL-codes: B51 D15 D25 D33 D50 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2018-04
New Economics Papers: this item is included in nep-hpe and nep-pke
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