Psychology Dictionary of ArgumentsHome
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| Production function: A production function represents the relationship between input factors (labor, capital, etc.) and output in an economy or firm. It shows how efficiently resources are converted into goods or services, often expressed as Q = f(L, K, ...). It helps analyze productivity, efficiency, and returns to scale in production processes. See also Aggregate production function, Production, Capital, Capital structure, Cobb-Douglas production function, CES Production function._____________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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Robert Solow on Production Function - Dictionary of Arguments
Harcourt I 47 Production function/technical progress/Solow/Harcourt: The use of the malleability assumption and a simple marginal productivity theory of distribution underlies the early post-war work on aggregate production functions: the attempts to sort out from actual statistics the increases in output per man that are due to technical progress, i.e. shifts of an aggregate production function, from those which are due to capital deepening, i.e. movements along a given production function. >Aggregate production function. Solow: Solow(1) assumed a coiistant-returns-to-scale aggregate production function, static expectations and competitive conditions. It followed that paying factors their marginal products exhausted the total product, which consisted of a Clark-Ramsey one all-purpose commodity, see J. B. Clark [1889](2), Ramsey [1928](3). (Capital may then be measured in the same units as output, remembering that one is a stock, the other a flow, see Solow [1956a](4), p. 101.) >Economic models. Cobb-Douglas function: Solow did not specify the form of the production function until after he made the empirical fittings when Cobb-Douglas gave the best fit. Technical progress was assumed to be neutral and completely disembodied, i.e. left all factors unaffected, so that marginal rates of substitution between factors at given factor ratios were unchanged, though, at each ratio, there was a mystical rise of the same proportion in the total output associated with each ratio. All capital goods were treated alike, whether they were newly created and incorporated the latest advances in technical knowledge (and the effects of the pull of expected factor prices) or whether they were fossils inherited from the past, previous years' investments which in fact could be expected to reflect the then prevailing technical conditions, expectations and relative factor prices. >Factor prices, >Factors of production, >Cobb-Douglas production function. Harcourt I 48 Harcourt: It was as if we were in Swan's world where, at any moment of time, all existing capital goods could be costlessly and timelessly taken to pieces and, using the latest booklet of instructions as our guide, changed into the latest cost-minimizing form as indicated by expectations of future product and relative factor prices. >T. W. Swan. (Indeed, the expectations themselves must be a mirror image of present happenings.) >Expectations. Thus disembodied neutral technical progress may be likened to a mysterious manifestation of grace - when two or more, in this case, capital and labour, are gathered together in this life, there immediately occurs a rise (of considerable dimensions) in total factor productivity. >Technical progress. Progress/technology: With a production function and technical progress of these natures, it is almost inevitable that 'technical progress' will explain most of the growth in output per man (…). Harcourt I 50 Solow's method is a most ingenious means whereby annual observations which are viewed as if they came from underlying production functions which drift up neutrally over time (…) are boiled down into observations on one function which itself is an appropriately scaled down image of all the others. Harcourt I 114 Production function/Solow/Harcourt: Solow's(5) production function has as one input an 'effective‘ stock of capital which is obtained by summing together all profitable vintages, each layer weighted by its respective productivity (which due to technical progress will rise as we go from earlier to later vintages, (…)). This avoids the need to calculate the contribution to total output of each layer of 'fossils' in the stock. It also makes it unnecessary to distribute labour (or to know its distribution) over the range of vintages in use. It is, of course, assumed, though, that the actual labour supply may be treated as if it had been distributed so that marginal and average products were equalized, vintage to vintage, so maximizing total output, with earlier vintages worked less labourintensively than later ones. >Aggregate production function, >Surrogate production function, >Pseudo-production function. 1. Solow, R. M.1957] 'Technical Change and the Aggregate Production Function', Review of economics and Statistics, xxxix, pp. 312-20. 2. Clark, J. B. [1889] 'The Possibility of a Scientific Law of Wages', Publication of the American Economic Association, iv, pp. 39-63. 3. Ramsey, F. P. [1928] 'A Mathematical Theory of Saving', Economic Journal, xxxvm, pp. 543-59. 4. Solow, R. M. [1956a] 'The Production Function and the Theory of Capital', Review of Economic Studies, xxin, pp. 101-8. 5. 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 |
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