Economics Dictionary of ArgumentsHome
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| Capital reversing: Capital reversing refers to a paradox in capital theory where a lower interest rate leads to the adoption of more labor-intensive techniques instead of more capital-intensive ones. This challenges the neoclassical assumption that cheaper capital always increases capital intensity, impacting theories of income distribution and economic growth. See also Capital, Capital theory, Cambridge Capital Controversy, Reswitching._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Geoffrey C. Harcourt on Capital Reversing - Dictionary of Arguments
Harcourt I 118 Reswitching/double-switching/reverse capital/Harcourt: (…) the results of neoclassical marginal productivity theory have played a key role in both the theory of economic growth and the econometric studies of the post-war period. >Marginal Product of Capital, >Economic growth/Solow. The easiest illustration of this proposition is the essential part which the equality of marginal products with factor rewards plays in the development of the arguments in Swan's famous model of economic growth (Swan [1956](1)), and in Solow's influential - and equally famous - article on technical progress and the aggregate production function, Solow [1957](2). Double-switching: This methodology has been continuously under attack and the latest (and sharpest) arrows in the quivers of the neo-Keynesian critics are the results of the double-switching debate. Reverse capital: Not all of these are, however, related to the phenomenon of double-switching itself; a related phenomenon, capital-reversing, also plays a key role: see, especially, Garegnani [1970a(3), 1970b(4)], Bliss [1970](5), Pasinetti [1969(6), 1970(7)]. >Neo-neoclassicals, >Neo-Keynesianism, >Production function. Harcourt I 120 If the neoclassical stories as told, for example, by Swan [1956](1) and Solow [1957(2)] did in fact hold for heterogeneous capital-goods models, this would be an enormous simplification for economic theory and econometric specification alike (see Brown [1968(8), 1969(9)]). It is to this question that the double-switching debate is especially addressed. >Economic models, >Idealization. 1. Swan, T. W. [1956] 'Economic Growth and Capital Accumulation', Economic Record, xxxn, pp. 334-61. 2. Solow, R. M. [1957] 'Technical Change and the Aggregate Production Function', Review of economics and Statistics, xxxix, pp. 312-20. 3. Garegnani, P. [1970a] 'Heterogeneous Capital, the Production Function and the Theory of Distribution', Review of Economic Studies, XXXVII (3), pp. 407-36. 4. Garegnani, P. [1970b] 'A Reply', Review of Economic Studies, XXXVII (3), p. 439. 5. Bliss, C. J. Comment on Garegnani, The Review of Economic Studies, Volume 37, Issue 3, July 1970, Pages 437–438, 6. Pasinetti, L. L. [1969] 'Switches of Technique and the "Rate of Return" in Capital Theory', Economic Journal, LXXIX, pp. 508-31. 7. Pasinetti, L. L. [1970] 'Again on Capital Theory and Solow's "Rate of Return" ', Economic Journal, LXXX, pp. 428-31. 8. Brown, Murray [1968] 'A Respecification of the Neoclassical Production Model in the Heterogeneous Capital Case', Discussion Paper No. 29, State University of New York at Buffalo. 9. Brown, Murray [1969] 'Substitution-Composition Effects, Capital Intensity Uniqueness and Growth', Economic Journal, LXXIX, pp. 334-47._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Harcourt I Geoffrey C. Harcourt Some Cambridge controversies in the theory of capital Cambridge 1972 |
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