Psychology Dictionary of ArgumentsHome
| |||
|
| |||
| Capital: Capital in economics refers to assets used to produce goods and services, including financial capital, machinery, buildings, and human skills. It represents an investment in productive resources, contributing to economic growth, productivity, and wealth generation. Capital can be physical or human, and its accumulation is crucial for development._____________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. | |||
| Author | Concept | Summary/Quotes | Sources |
|---|---|---|---|
|
Robert Solow on Capital - Dictionary of Arguments
Harcourt I 7 Capital/Measurements/return on investment/Fisher/SolowVsFisher/Solow/Harcourt: Solow [1963a(1), 1966(2), 1967(3), 1970(4)]: Solow's purpose was, in part, to get away from the obstacles of the measurement of capital and its related problems by developing instead the concept of the rate of return on investment. His own contributions were to graft technical progress on to Fisher's analysis and to apply the resulting concepts empirically, in order to obtain estimates of the orders of magnitude of the rates of return on investment in post-war U.S.A. and West Germany. >Irving Fisher. Joan RobinsonVsSolow: It is argued that neither in theory nor in empirical work has Solow been able completely to escape from the need to define and measure aggregate capital and to work within the confines of a one-commodity model. >Aggregate Capital. Harcourt I 46 Capital/SolowVsRobinson/Solow/Harcourt: Solow's comment in Solow [1956a](5) on Joan Robinson's [1953-4](6) article: Solow investigated the conditions under which it would be legitimate to aggregate heterogeneous capital items into a single figure, no doubt having in mind his subsequent econometric studies. >Econometrics. He found that the conditions were very stringent - the rate at which one capital good could be substituted for another had to be independent of the amounts of labour which subsequently would be used with each. (He discusses in this context a neoclassical model in which continuous substitution is possible, not the discrete case of Joan Robinson's article, but he also looks at the latter towards the end of his article.) >Neoclassical economics. His conclusion is quoted in full below because it is an extremely clear statement of the stand that he takes in the debates that followed: „I conclude that discreteness is unlikely to help matters. Only in very special cases will it be possible to define a consistent measure of capital-in-general. Some comfort may be gleaned from the reflection that when capital-labour ratios differ widely we hardly need a subtle index to tell us so, and when differences are slight we are unlikely to believe what any particular index says.“ (p. 108.)(5) Harcourt: For Solow, 'Capital as a number is not an issue of principle. All rigorously valid results come from n-capital-good models. In particular there is no justification ever for supposing that output can be made a function of labour and the VALUE of capital whose partial derivatives do the right thing.' Capital as a number is purely an aid to empirical work 'and you want to get away with the smallest dimensionality possible' (Solow [1969](7)). >Capital, >Economic models. Harcourt: Had the contestants been content to leave the discussion here, the literature of the following years might have served to generate far more light - and certainly a lot less heat.* >Cambridge Capital Controversy. Harcourt I 92 Capital/Solow/Swan/Harcourt: Solow's basic puzzle concerning a simple, unique measure of capital which in fact has many dimensions and characteristics has been put splendidly by Swan [1956](10) as follows: „That there should be great difficulties in handling the concept of Capital in a process of change is not surprising. A piece of durable equipment or a pipe-line of work-in-progress has dimensions in time that bind together sequences of inputs and outputs jointly demanded or jointly-supplied at different dates. The aggregation of capital into a single stock at a point of time is thus the correlative of an aggregation of the whole economic process, not only in crosssection (which gives rise to the ordinary index-number problems), but also in time itself: in other words, the reduction of a very highorder system of lagged equations - in which each event, its past origins and its future consequences, could be properly dated and traced backward and forward in time-to a more manageable system with fewer lags. This second kind of aggregation introduces a further set of ambiguities, similar in principle to those of indexnumbers, but as yet hardly investigated . . . From the idea of capital as a single stock there is in principle no sudden transition to 'the enormous who's who of all the goods in existence'. Between the two extremes lies an ascending scale of nth-order dynamic systems, in which capital like everything else is more and more finely subdivided and dated, with ascending degrees of (potential) realism and (actual) complexity. In fact, most of us are left at ground-level, on ground that moves under our feet.“ (p. 345.) Solow/Harcourt: As a self-confessed middlebrow, Solow sees the rate of return on investment as the link between highbrow capital theory - Harcourt I 93 the microeconomic theory of resource allocation and prices which allows for the fact that commodities can be transformed into others over time and which is only complete when it also explains the distribution between factors - and lowbrow theory, which is concerned with aggregation and approximation and relates to the empirical implications of saving and investment decisions. By analysing these problems in terms of a rate of return, i.e. a price, we take cognizance of the fact that 'the theory of capital has as its "dual" a theory of intertemporal pricing . . .' (Solow [1963a](11), p. 14.) >Return on investment/Solow. * Solow's latest statement of these views is in Solow [1970](8), pp. 424 and 427-8 (but see, also, Pasinetti [1970](9), pp. 428-9). 1. Solow, R. M [1963] 'Heterogeneous Capital and Smooth Production Functions: An Experimental Study', Econometrica, xxxi, pp. 623-45. 2. Solow, R. M., Tobin, J., von Weizsacker, C. C. and Yaari, M. [1966] 'Neoclassical Growth with Fixed Factor Proportions', Review of Economic Studies, xxxm, pp. 79-115. 3. Solow, R. M. [1967] 'The Interest Rate and Transition between Techniques', Socialism, Capitalism and Economic Growth, Essays presented to Maurice Dobb, ed. by C. H. Feinstein (Cambridge: Cambridge University Press), pp. 30-9. 4. Solow, R. M [1970] 'On the Rate of Return: Reply to Pasinetti.Economic Journal, LXXX, pp.423-8. 5. Solow, R. M. [1956a] 'The Production Function and the Theory of Capital', Review of Economic Studies, xxin, pp. 101-8. 6. Robinson, Joan (1953-4). 'The Production Function and the Theory of Capital', Review of Economic Studies, xxi. 7. Solow, R. M. [1969] Letter to author. 8. Solow, R. M. [1970] 'On the Rate of Return: Reply to Pasinetti Economic Journal, LXXX, pp.423-8. 9.Pasinetti, L.L. [1970] 'Again on Capital Theory and Solow's "Rate of Return" ', Economic Journal, LXXX, pp. 428-31. 10.. Swan, T. W. [1956] 'Economic Growth and Capital Accumulation', Economic Record, xxxn, pp. 334-61. 11. Solow, Robert M. [1963a] (Professor Dr. F. De Vries Lectures, 1963) Capital Theory and the Rate of Return (Amsterdam: North-Holland)._____________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. |
Solow I Robert M. Solow A Contribution to the Theory of Economic Growth Cambridge 1956 Harcourt I Geoffrey C. Harcourt Some Cambridge controversies in the theory of capital Cambridge 1972 |
||
