Economics Dictionary of ArgumentsHome
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| CES Production Function: The CES (Constant Elasticity of Substitution) production function models output as a combination of inputs—typically capital and labor—allowing for a constant elasticity of substitution between them. It generalizes the Cobb-Douglas function by permitting varying degrees of input substitutability, influencing income distribution and growth analysis in economic modeling. See also Cobb-Douglas rpoduction function, Production function, Aggregate production function, Capital._____________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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Franklin M. Fisher on CES Production Function - Dictionary of Arguments
Harcourt I 174 Cobb-Douglas production function/CES production function/F. M. Fisher/Harcourt: [In] F. M. Fisher [1970](1), (…) he reports the results of a simulation experiment. His main conclusion is that if the real world behaves in such a way as to throw up, say, a constant share of wages, or a linear relationship in the logarithms between productivity and wages, it is these findings which explain the 'apparent success' of the Cobb-Douglas and CES production functions respectively rather than the other way around. „. . . the view that the constancy of labour's share is due to the presence of an aggregate Cobb-Douglas production function is mistaken. Causation runs the other way and the apparent success of aggregate Cobb-Douglas functions is due to the relative constancy of labour's share.“ (p. 4.) The present results suggest... that the explanation of that wageoutput per man relationship may not be in the existence of an aggregate CES but rather that the apparent existence of an aggregate CES may be explained by that relationship.“ (p. 32.) Econometrics/HarcourtVsFisher, F. M.: Fisher appears to have been too literal in his understanding of the nature of the econometric hypotheses involving the Cobb-Douglas and the CES functions. Their proponents have never believed that they actually existed, only that it may be useful to interpret trends in real world observations 'as if they were observations thrown up by a jelly world of either the Cobb-Douglas or CES variety. Harcourt I 175 Distribution/factor prices/Harcourt: If, then, a small (but, I like to think, significant) section of the trade is convinced that the distribution of income and factor prices cannot be explained either within the system of production alone or, relevantly, as the outcome of a general equilibrium system even when (because) we use marginal productivity notions and modern programming methods, factors and forces elsewhere in the economic system - and other than these - must be introduced. >Measurements/Sraffa. 1. Fisher, F. M. [1970] 'Aggregate Production Functions and the Explanation of Wages: A Simulation Experiment', Working Paper 61, Department of Economics, M.I.T._____________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. |
F.M. Fisher I Franklin M. Fisher Disequilibrium Foundations of Equilibrium Economics (Econometric Society Monographs) Cambridge 1989 Harcourt I Geoffrey C. Harcourt Some Cambridge controversies in the theory of capital Cambridge 1972 |
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