Abstract
A number of recent treatments of growth, otherwise widely divergent in approach, have found themselves confronted by certain common problems.1 For example, a series of questions has arisen with respect to the concept of capital: how should it be measured? Does it consist of one ‘capital good’ or of many goods? Should materials and depreciation be included as part of the capital upon which returns are calculated? Should the wage bill likewise be included? Secondly, some closely related questions concerning distribution have emerged, for the concept of capital adopted in a model determines to a considerable extent both what the model will say about the relation of the return to capital to the wages of labor and how this relation will be affected by growth. Consideration of relative shares leads naturally to a third question concerned with the relation between the amounts of the various factors advanced and the output produced. If this relationship, the ‘production function,’ is to be of any use in the study of technical changes during growth, it must be disaggregated to exhibit the structure of production as a set of relationships between technologically specific inputs and outputs. But in this case ‘capital’ will be composed of different specific goods in different industries, with the result that the notion of a ‘marginal physical product of capital’ must be discarded as meaningless.
* Economic Development and Cultural Change, 16(1) (1967) pp. 15–26, reprinted in G.C. Harcourt and N. Laing (eds,) Capital and Growth (Harmondsworth: Penguin).
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Notes
The following list is meant to be representative rather than exhaustive. H. Atsumi, ‘Mr. Kaldor’s Theory of Income Distribution,’ Review of Economic Studies, 27 (February 1960). M. Dobb, An Essay on Economic Growth and Planning (London, 1960).
J.R. Hicks, Capital and Growth (Oxford, 1965).
N. Kaldor, ‘A Model of Economic Growth,’ in Essay on Economic Stability and Growth (London, 1960).
N. Kaldor, ‘Capital Accumulation and Economic Growth,’ in F.A. Lutz and D.C. Hague (eds), Theory of Capital (London, 1961). N. Kaldor and J.A. Mirrlees, ‘A New Model of Economic Growth,’ Review of Economic Studies, 29 (June 1962).
W.A. Lewis, Theory of Economic Growth (Homewood, Ill., 1955).
W.A. Lewis, ‘Economic Development with Unlimited Supplies of Labour,’ Manchester School (May 1954).
I.M.D. Little, ‘Classical Growth,’ Oxford Economic Papers, 2 (June 1957).
G. Mathur, Planning for Steady Growth (Oxford, 1965).
L.L. Pasinetti, ‘Rate of Profit and Income Distribution in Relation to the Rate of Economic Growth,’ Review of Economic Studies, 29 (October 1962).
L.L. Pasinetti, A Multi-Sectoral Model of Economic Growth (Cambridge, 1963).
J. Robinson, Collected Economic Papers, Vol. II (Oxford, 1960).
J. Robinson, Essays in the Theory of Economic Growth (London, 1963).
P.A. Samuelson, ‘Parable and Realism in Capital Theory: The Surrogate Production Function.’ Review of Economic Studies, 29 (June 1962).
A.K. Sen, Choice of Techniques (Oxford, 1962) 2nd edn.
R.M. Solow, Capital Theory and the Rate of Return (Amsterdam, 1963).
L. Walras, Elements of Pure Economics, W. Jaffé trans (London, 1954) p. 269.
K. Wicksell, Value Capital and Rent, S.H. Frowein (trans) (London, 1954) p. 169.
Two well-known discussions of this type of value theory are R.G.D. Allen, Mathematical Economics, 2nd edn (London, 1960), Ch. 10
R.E. Quandt, Microeconomic Theory (New York, 1958), Ch. 5.
A mathematically more advanced discussion is given by G. Debreu, Theory of Value (New York, 1959).
Walras himself assumed fixed coefficients, as do many current authors, cf. K. Arrow and F. Hahn, General Competitive Analysis (San Francisco: Holden-Day, 1980).
The best example of a modern Ricardian model is P. Sraffa, Production of Commodities by Means of Commodities (Cambridge, 1960).
Also cf. L. Pasinetti, Lectures in The Theory of Production (New York: Columbia, 1975).
The modern Ricardian approach outlined here, while in important ways akin to a Leontief system, nevertheless must be sharply distinguished from the latter. A Leontief system represents production in the same way and is similarly concerned with technological interdependence and the role of intermediate goods. But a Ricardian system is principally concerned with the relation between prices, wages, and profits under competitive conditions. Leontief systems never deal with a uniform rate of profit on capital nor with the effects of changes in distribution upon prices. Further, insofar as Leontief systems take account of fixed capital, they treat it as a necessary element in production and neglect its effects upon profits and prices. Cf. W. Leontief, Structure of American Economy (New York, 1952).
Cf. Ricardo, Principles of Political Economy and Taxation, Ch. 1 [P. Sraffa (ed.), Works and Correspondence of David Ricardo, Vol. I] (Cambridge, 1951).
Also P.A. Samuelson, ‘Wages and Interest: A Modern Dissection of Marxian Economic Models,’ American Economic Review, 47 (December 1957).
When there is no surplus, call the matrix of inputs C and the matrix of outputs P. Then for the price equation we have Cp = Pp or (C − P)p = 0, a unique and positive solution of which is guaranteed by the fact that C − P = 0, given certain other restrictions on the matrices. For a full discussion, cf. David Gale. Theory of Linear Economic Models (New York, 1960) Ch. 8.
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© 1992 Edward J. Nell
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Nell, E.J. (1992). Theories of Growth and Theories of Value. In: Transformational Growth and Effective Demand. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-21779-3_2
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