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The Cobb—Douglas Function

  • David F. Heathfield
  • Sören Wibe
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Abstract

Without doubt the most widely known production function is the Cobb-Douglas function. It owes part of its name to Professor Paul Douglas who, from empirical observations, inferred its properties, and part to his colleague Cobb, a mathematician, who suggested the mathematical form. Douglas had drawn a graph of the capital stock, total labour force and GNP for the US manufacturing industries for the period 1899–1922. He discovered that the difference between the log of capital and the log of GNP was always about three times greater than the difference between the log of the labour force and the log of GNP. It was this constant which caused Cobb to suggest the form
$$q{\mkern 1mu} = {\mkern 1mu} Av_1^\alpha {\mkern 1mu} v{\mkern 1mu} _2^{1{\kern 1pt} - {\kern 1pt} {\kern 1pt} \alpha }$$
(4.1)
where q is valued added, v1 is capital stock and v2 is employment. All for US manufacturing.

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© David F. Heathfield and Sören Wibe 1987

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  • David F. Heathfield
  • Sören Wibe

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