The Cobb-Douglas Function

Abstract

Of the Marshallian type of function, the best known and the most widely used is the Cobb-Douglas production function. It takes its name from Professor (one-time Senator) Douglas who, from empirical observation, inferred its properties, and to his colleague Cobb, a mathematician, who suggested the mathematical form which had those properties. The function had been suggested earlier by Wicksteed [61] but it was Douglas, with his vast amount of empirical support for the function, who secured it its current popularity. The original function estimated by Douglas was of the form:

$$\Upsilon = A{K^{\left( {1 - \alpha } \right)}}L$$

where K is fixed capital

L is labour

Y is the value added by labour and fixed capital

and A and α are constants.