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After giving a summary of the Cambridge debate, the comment criticizes the proposal by Flaschel, Franke and Veneziani to base the classical approach on systems of production with unequal rates of profit both theoretically and on empirical grounds: The classical gravitation of market prices towards normal prices is hard to defend, if there are persistent differentials of profit rates, but the profit rate differentials in the paper are not even stable. The comment further defends the idea of representing states of knowledge about technology by means of input-ouput tables against objections regarding the transferability of methods between countries and discusses alternative approaches to the treatment of fixed capital. It is shown that the data used by the authors for capital stocks are not supported by the data of the German Statistical Office. I agree with the authors in the most essential point, however: Contrary to the position taken e.g. by Joan Robinson, we all believe that the problems of capital theory raised in the Cambridge debate must be analyzed not only in abstract theory but also at the applied level. We all were surprised to find that empirical wage curves tend to be close to straight lines so that double intersections of such wage curves, hence reswitching and reverse capital deepening, must be rare. This phenomenon needs to be explained; a possible explanation can be derived from the random nature of the input-output matrices, and, so far, no other explanation has been proposed. [ABSTRACT FROM PUBLISHER]

This paper responds to Christian Gehrke's comment, and argues that the main conclusion of my earlier paper is sustained-that, contrary to Sraffa, Marx did not 'adopt' in any sense of the word the joint product method of treating fixed capital. It agrees with Gehrke that Torrens adopted a form of the joint product method, and that Malthus seems to have followed Torrens in this regard. However, it argues that Ricardo did not adopt the joint product method, not even in the one instance cited by Sraffa. Finally, it argues briefly that Marx's 'transformation of value' method of treating fixed capital and depreciation is superior to Sraffa's joint product method. [ABSTRACT FROM AUTHOR]

This paper reviews Heinz D. Kurz's edited collection of Critical Essays on Piero Sraffa's Legacy in Economics. Besides providing an evaluation of the various contributions to the volume, the paper discusses some broad issues such as the notion of ‘price’ emerging from Sraffa's Production of Commodities , the role of demand in Sraffa's theory, the classical approach to political economy, the Hayek–Keynes–Sraffa debate and the capital controversy. [ABSTRACT FROM AUTHOR]

This paper shows that the mass of profits may be strictly increasing even when the rate of profit is strictly decreasing. Thus, a recent ‘long-wave version’ of the falling rate of profit theory of crisis is called into question. [ABSTRACT FROM PUBLISHER]

The foundations of the aggregate production function were long ago thrown into doubt by problems of aggregation and the Cambridge capital theory controversies. Yet the aggregate production function, whether in the familiar form of the Cobb-Douglas, the CES, or the translog, continues to be widely used in both theoretical and applied analysis. The reason for its continued use rests on the instrumental position that ‘it works’. The aggregate production function sometimes yields good statistical fits with plausible estimates of the coefficients. However, for some time, it has been realised that the existence of an underlying accounting identity can explain the regression results, even if the aggregate production function does not exist. This argument has been widely ignored. This paper, drawing on a rhetorical approach, assesses why this is the case. It shows that the few criticisms that have been made of the critique involve fundamental misunderstandings that represent a failure of the economic method. [ABSTRACT FROM PUBLISHER]

This paper re-examines P. Sraffa's 'References to the literature' in Appendix D of Production of Commodities by Means of Commodities (Cambridge: Cambridge University Press, 1960) on precursors of the joint production method in the treatment of fixed capital. It is shown that Moseley's view, according to which Sraffa's attribution of the joint production method to Torrens, Ricardo, Malthus and Marx is 'misleading at best and totally wrong at worst' (F. Moseley, 2009, 'Sraffa's interpretation of Marx's treatment of fixed capital', Review of Political Economy, 21, p. 99), is difficult to sustain. Moseley's argument is based on the absurd premise that Sraffa's attribution of the joint production method to the four classical authors mentioned would only be justified if it could be shown that they had used the joint production method in the same way and for the same purpose as Sraffa did. [ABSTRACT FROM AUTHOR]

This paper provides an analysis of the Hodgskin section of Theories of Surplus Value and the general law section of the first version of Volume III of Capital . It then considers Part III of Volume III, the evolution of Marx's thought and various interpretations of his theory in the light of this analysis. It is suggested that, as late as the 1870s, Marx had hoped to be able to provide a demonstration that the rate of profit must fall. The main conclusions are that (1) Marx's major attempt to show that the rate of profit must fall occurred in the general law section, (2) Part III does not contain a demonstration that the rate of profit must fall and (3) Marx was never able to demonstrate that the rate of profit must fall and he was aware of this. [ABSTRACT FROM AUTHOR]

Thomas Piketty’sCapital in the Twenty-First Century (2014)has been spectacularly successful. One reason for this is that while it often challenges received views and supports a non-apologetic interpretation of capitalism, at the same time it relies on mainstream economics. This theoretical framework, however, is not always conducive to consistency and interpretative accuracy. This paper points out some of the book’s analytical weaknesses and shows that some empirical evidence, a clearer distinction between wealth and capital, and a different theoretical perspective, could lead to questioning some of the book’s claims. In particular, it argues that the increase in the wealth-to-output ratio (but not the capital-to-output ratio) cannot explain the observed changes in income shares. It also contends that non-mainstream perspectives on income distribution and growth suggest that changes in income distribution are due more to policy and power relations than to the factors Piketty identifies. [ABSTRACT FROM PUBLISHER]

This paper examines the determination of exchange values, income distribution, output and population in a Ricardian stationary state with fixed capital under less restrictive assumptions than previous studies. A fully determined and internally consistent model is derived with differing capital/labour ratios between sectors, with emphasis on showing that the assumptions made are drawn from Ricardo's writings. The model is extended to include gold and foreign trade. [ABSTRACT FROM AUTHOR]

There has been a great deal of interest in the data on income and wealth inequality collected by Thomas Piketty. This paper does not question that data; rather, it questions the framework of Piketty's analysis, both theoretically and empirically—namely the alleged upward tendency of the ratio of wealth to national income and the rise of wealth inequality. First, in the mechanism put forward, wealth can only grow as a result of savings, thus ruling out any form of price effect (as in urban land). Second, Piketty’s second law defines an asymptotical trajectory, in which variables grow in parallel, something incompatible with the rise of the ratio between two variables. In addition, Piketty’s model does not match data for the USA. The historical profile of the ratio of wealth/national income is actually the inverted image of the productivity of capital (the ratio of output/firms’ fixed capital). Doubts are also expressed concerning the dramatic fall of the ratio of wealth/national income in Europe around World War I. [ABSTRACT FROM PUBLISHER]

This paper aims to cross-breed the standard monetary circuit accounting model with elements from the Post-Keynesian literature. The goals are: (i) to analyse the implications of credit-based household consumption fed by capital asset inflation for the soundness of a pure credit-money economy of production; and (ii) to provide a more sophisticated description of the working of modern financial systems than the one grounded in the usual ‘bank-based vs. market based’ distinction. [ABSTRACT FROM PUBLISHER]

Nearly four decades ago, Stephen Marglin explored the origins of hierarchy in capitalist production with a divide and conquer hypothesis based on the idea that the monopolisation of knowledge about production technology plays a major role in explaining how workers are deprived of control over the labour process. Nevertheless, this explanation has some shortcomings that Marx and Babbage had avoided. Those two authors provided a highly accurate and convincing interpretation of the division of labour that remains relevant. The present paper proposes a general synthesis of their analysis. Two points are emphasised: (1) the division of labour plays a major role in wage determination; and (2) the division of labour largely determines the form of subjection of labour to capital. [ABSTRACT FROM PUBLISHER]

In their recent book Capital as Power, Jonathan Nitzan & Shimshon Bichler depict capitalism as a mode of power rather than a mode of production, in which political and economic power are no longer distinct. In addition, they argue, contrary to neoclassical theory, that capital has nothing to do with productivity but instead represents power. I make three broad criticisms: first, their elimination of the distinction between economics and politics renders any empirical test of their ostensible integration impossible; second, they do not adequately define their main concepts, including capital, capitalization, capitalism, and power; and third, they do not acknowledge the possibility that the patterns they attribute to power may in fact be self-organized. This paper argues that money is a claim to wealth, not wealth itself, that it measures and distributes the power of payment, and that payments redistribute the power of ownership, including the ownership of money. Finally, I suggest that, in light of the global debt crisis, a theory of capital-as-power should examine the power of finance, which entails the privatization and concentration of the power to create money as debt. [ABSTRACT FROM PUBLISHER]

In 1969 the American neoclassical economist C.E. Ferguson wrote that reliance on neoclassical aggregate production and distribution theory is a 'matter of faith' to be sorted out (he says 'answered') by econometricians. Ferguson was criticized on both sides of the debate for invoking this religious metaphor. Using the methodological framework of A.J. Cohen & G.C. Harcourt (2005), Introduction: capital theory controversy: scarcity, production, equilibrium, and time, in: A. Cohen, G.C. Harcourt & C. Bliss (Eds) Capital Theory, 3 Vols. Northampton, MA: Edward Elgar, this paper argues that faith plays a recurring role in all capital controversies and especially in modern theories of growth that rely wholesale on the aggregate production function. Ferguson's faith proves to be much more insightful than previously recognized. [ABSTRACT FROM AUTHOR]

Some writings of the early 1930s by Dennis Robertson and John Hicks present, with a clarity not easily found elsewhere, the reasons why marginalist economists, who until recent decades normally treated capital as a single magnitude, were in fact compelled to do so. This paper focuses on a first reason that emerges from these writings: namely the fact that only this treatment of capital can lend plausibility to the notion of substitutability between factors of production on which the orthodox theory of distribution is built. [ABSTRACT FROM AUTHOR]

This paper evaluates Nordhaus's neoclassical complaints about the Stern Review from the vantage point of classical growth theory. Nordhaus criticizes the Stern Review because it uses a discount rate that is well below the market rate of return on capital. From the perspective of classical growth theory, Nordhaus's belief in choosing preference parameters for the social planner based on observed market rates of return is equivalent to assigning the preferences of the capitalist agents to the social planner. This equivalence is an implication of the Cambridge Theorem, which interprets the Ramsey equation as the saving function of the capitalist agents. [ABSTRACT FROM AUTHOR]

It is well known that Sraffa analyzed fixed capital as a 'joint product' along with regular products, such that in each period a given machine (together with other material and labor inputs) produces a regular product plus a one-period-older machine of the same type. What is perhaps less well known is that Sraffa attributed this same method of dealing with fixed capital to Marx, and to Torrens, Malthus, and Ricardo. This paper examines the textual evidence presented by Sraffa to support his interpretation of Marx's treatment of fixed capital, and also examines more comprehensive textual evidence from the three volumes of Capital not considered by Sraffa. It is argued that Marx did not treat fixed capital as a joint product in his theory of prices, but instead consistently assumed a 'straight-line' method of depreciation, according to which a constant fraction of the total value of the fixed capital is transferred to the price of the product in each period, and the remaining value of the fixed capital is not part of the value of the product, but instead 'remains fixed' in the capital goods. [ABSTRACT FROM AUTHOR]

This paper addresses the effects on employment and the price level of a range of factors including capital accumulation, technical progress and money wage changes by formalising the aggregate supply and demand framework posited by Keynes in his General Theory. We find that labour-augmenting technical progress reduces the equilibrium level of employment, thus lending support to Hansen's notion of technological unemployment. We also find that capital accumulation and capital-augmenting technical progress raise the level of employment whereas, as argued by Keynes and several subsequent authors, money wage cuts have an ambiguous effect on the level of employment. We discuss a number of results as well as some aspects related to the adjustment of aggregate demand to aggregate supply in the long run. We conclude that Keynes's aggregate supply and demand framework provides a robust explanation of the mechanism through which increases in potential output lead over time to equiproportional increases in the level of aggregate demand and that the mechanism of adjustment to increases in the labour force in Keynes's theory differs markedly from that in classical theory. [ABSTRACT FROM AUTHOR]

In this paper, we study the consequences of the 2000-2001 financial crisis in Turkey to identify the impacts of the crisis on capital and labor. We uncover three significant empirical effects of this crisis. First, international capital benefited from the crisis by increasing both its total assets in Turkey and its income flows from these assets, while large domestic financial capitalists also increased their profits in the aftermath of the crisis. Second, industrial capital benefited via a repression of labor. Third, the attempt to 'remedy' the economy by imposing structural changes furthered the interests of capital in general. [ABSTRACT FROM AUTHOR]

Determining the optimal life of capital constitutes an important problem in economic analysis, one that has been extensively addressed in the Sraffian literature. In Sraffa's system the lifetime of fixed capital is posited as a given parameter. In the most recent literature on the topic, the lifetime of capital goods becomes endogenous, the outcome of entrepreneurial decisions concerning alternative techniques. This paper concentrates on the problem as an issue separate from, but not antithetical to, the choice of techniques. By changing some fundamental aspects of Sraffa's framework, which is adopted as a point of departure, a solution displaying interesting properties is worked out. In particular, for the determination of commodity prices, the importance of an equation emerges, in which only intermediate input and labour costs appear. [ABSTRACT FROM AUTHOR]

This paper develops a long-run equilibrium growth model, in the tradition of Keynes, Kalecki and Steindl, involving international capital flows between a debtor and a creditor country, and in which capacity utilization is variable. This latter assumption implies that the shares of savings by capitalists and workers will vary with capacity utilization. Profit rates will also vary with capacity utilization rates, so that the establishment of a common warranted rate of growth requires that the rates of profit in the creditor and the debtor countries must vary inversely. The long-run equilibrium shares of ownership of the two stocks of capital must therefore vary as the utilization rates vary. Taking the international interest rate as given, steady growth in each country at near full employment is shown to be accommodated, to some extent, through variations in the degree of capacity utilization. Even if income distribution remains unchanged, the variability of capacity utilization allows the existence of a range of growth rates consistent with the long-run equilibrium conditions of the model. [ABSTRACT FROM AUTHOR]

Various European proposals for wage-earner funds are briefly surveyed. The central issues of the policy debate surrounding these funds are then discussed. It is argued that the outcome of this debate was not determined solely by a rational appraisal of the economic costs and benefits of the various policy options. Wage-earner funds raise questions concerning the ownership and control of capital and have therefore been the focus of political conflict between prayerful interest groups. The paper then analyses the experience of wage-earner funds in Sweden, dealing with their objectives, behaviour and economic performance. [ABSTRACT FROM AUTHOR]

The extensive critical literature on Thomas Piketty’s Capital in the Twenty-First Century is surveyed under nine headings. The first deals with the conservative argument that inequality in the distribution of wealth does not matter, since a rising tide lifts all boats. Second, it is claimed that Piketty’s prediction of continuously increasing inequality and the return of ‘patrimonial capitalism’ is unjustified. Third, the quality of the empirical evidence that he cites is questioned, on a number of quite different grounds. Fourth, some critics object that Piketty’s explanation of long-run trends in the distribution of wealth is too general and too theoretical. Fifth is the argument that he has used the correct (neoclassical) theory incorrectly, exaggerating the elasticity of substitution of capital for labour. Against this, post-Keynesian critics claim, sixthly, that Piketty is using the wrong theory, and should have drawn on the Kaldor–Pasinetti model of distribution and growth, and not the discredited neoclassical analysis. Seventh, Piketty has been criticised for ignoring the distribution of wealth in developing countries. Eighth, there is a wide range of objections to his most striking policy proposal, for a progressive global wealth tax. Finally, several critics from outside economics complain that Piketty has neglected a number of non-economic dimensions of inequality. I conclude by welcoming both the book and the critical literature, and calling for the distribution of wealth to be placed back on the political agenda. [ABSTRACT FROM PUBLISHER]

Frank Fetter’s contributions to entrepreneurship and the theory of the firm are usually overlooked although his original treatments are relevant to both the history of economic thought and contemporary entrepreneurship research. This article highlights three ways in which Fetter’s work adds to our understanding of the entrepreneurial process. First, entrepreneurs direct their enterprises through the careful delegation of authority to managers, thereby maintaining residual control over the firm; similar views were pioneered by Frank Knight and the Austrian economists who continue to study cognate problems like judgmental decision making and proxy-entrepreneurship. Second, Fetter foreshadows Knight’s influential distinction between risk and uncertainty by arguing that entrepreneurs bear uncertainty through their investment decisions. However, Fetter extends Knight’s work by explicitly considering the role that chance and luck play in entrepreneurial success, a problem still debated in entrepreneurship studies. Third, Fetter argues that scarcity implies the active investment of resources, and thus the need for entrepreneurship. This view hints at current research on entrepreneurialbricolageas well as work emphasizing investment rather than opportunity as the defining concept of entrepreneurship. It also provides the microfoundations for strategic entrepreneurship research. [ABSTRACT FROM AUTHOR]

Bliss (Capital Theory and Distribution of Income, Amsterdam/New York: North-Holland/Elsevier) claims that reswitching is nothing but an ‘optical illusion’ due to the exclusion of non-stationary price sequences from the analysis. This note develops this point. The standard case for choice of techniques and reswitching is reformulated in terms of Arrow-Debreu intertemporal prices and the conditions making these prices stationary are highlighted separately. It is then shown that the analysis of the choice of techniques in terms of ‘switch points’ requires stationary conditions. [ABSTRACT FROM AUTHOR]

The services sector has grown as a share of GDP and employment in most countries in recent years, and there has been increasing interest in understanding this sector and in its growth potential. This article analyses the meaning and nature of the 'services sector' from a Marxian perspective. Marx did not analyse 'services' as such (although he did discuss certain types of activities that are currently classified as services), and 'sectors' are not the units of his economic analysis. From a Marxian approach, an activity needs to be analysed in terms of its location in the circuit of capital and its relationship with the production of surplus-value. The 'services sector' includes activities that are highly heterogeneous in these terms, including activities in which surplus-value is directly produced, activities that facilitate the production of surplus-value elsewhere (or increase the rate at which it is produced), and activities that stand outside of the circuit of capital. Marxian tools of analysis yield particular insights into the nature of various types of service activities, and these insights are helpful in understanding sectoral structure and the potential implications of changes therein. [ABSTRACT FROM AUTHOR]

The article presents the author's response to the comments made to his article "Value, distribution and capital: a review essay." He agrees with the commentators with the acceptance of neoclassical economic theory as the basis for scientific investigation of political economic questions despite the fundamental flaws in its theory of distribution and capital. However, he clarifies the issue of the core and its significance in classical theory and in the history of thought.

The linear structure of the model in Mertzanis (2000) points to errors in his Table 1. In a number of cases, inequality constraints on the model's endogenous variables are violated. Satisfying all constraints imposes restrictions on the model's parameters. The focus here is on wage shares which must be restricted to ensure a meaningful solution. Depending on savings propensities, full utilization of capital at a higher interest rate may require higher rather than lower wage shares in one or both countries. [ABSTRACT FROM AUTHOR]

The formation of money hoards, which underpins the demand for money, is typically treated by mainstream monetary theory as originating in the motives of the rational individual. In contrast, Marx’s discussion of money hoarding treats hoard formation as a necessary tendency of capitalist production and circulation rather than as a result of the individual’s predilections. Based on Marx’s analysis, this article identifies several structural reasons for money hoard formation in the circuit of capital. It is also shown that Marx’s discussion, despite its insight, suffers from a technical error in analysing the overlapping of production and circulation time in the circuit, and in drawing the implications for hoarding. Finally, it is argued that the broader significance of capitalist money hoarding lies in the foundations it provides for the emergence of the credit system. [ABSTRACT FROM AUTHOR]

Clarifies the classical notion of the rate of profit with respect to the process of gravitation towards long period positions. Revelation of capital by cost of replacement; Evaluation of outputs at historical prices; Evaluation of outputs at prices and inputs at historical cost.

Discusses the implication of reverse capital deepening for neoclassical economic theory, placing special emphasis on the role of the numeraire. Surplus approach of the classical economists; Analogy between capital or land and labor; Meaning of taking the quantity of capital as given in value terms.

Discusses the spatial outcomes of post-Fordist economic developments with particular reference to the specialization models of the 'new industrial spaces.' Caution in treating the concept of transaction costs; Examination of the relationships between large and small companies and capital and labor.

With quality variations in a factor affecting inputs of other factors, production functions are not strictly quasi-concave and inputs are not a function of factor prices and firm output. The absence of strict quasi-concavity holds also with aggregation. In aggregation systems where capital inputs are proportional to rent (a highly desirable characteristic), the nature of factor quality variations suggests that isoquants will typically have linear segments unless rent and capacity are always equal, a condition that is seldom if ever met. [ABSTRACT FROM AUTHOR]

This article deals with the neglect of the economics profession towards Hicks's change of mind, after Value and capital, concerning the appropriateness of the use of the notion of temporary equilibrium analysis. In what follows a reconstruction and critical evaluation of Hicks's views on the legitimacy of the equilibrium method will be undertaken. It will be argued that Hicks's rejection of both the traditional (long-period) marginalist general equilibrium and the post-Walrasian alternative of temporary or intertemporal equilibrium raises wider issues that pose problems for contemporary treatments of such matters. [ABSTRACT FROM AUTHOR]

This article focuses on the peculiarities and autonomy of the Hicksian opus on a specific theme, the theory of capital and growth. The main thesis is that in this area of research Hicks's work exhibits unity and diversity, contrary to the often voiced charge that he would have changed his mind. The discussion of the evolution of Hicks's ideas on the subject under scrutiny starts from the temporary equilibrium method, moves to the growth equilibrium method and ends with the analysis of traverse. Particular attention is devoted to the understanding of the link between dynamics and equilibrium on the one hand and of the prerequisites for a meaningful analysis of processes of change on the other. [ABSTRACT FROM AUTHOR]