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The New Palgrave Dictionary of Economics pp 1336–1349Cite as

Palgrave Macmillan

Capital Theory (Paradoxes)

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Abstract

Capital theory has led economists to discover relationships that look ‘paradoxical’ or counter-intuitive, as they run counter widely accepted ‘parables’. The transformation of microeconomic diminishing returns relations into a macro-social law induced the mistaken belief of an inverse, monotonic relation between the interest rate (and profit rate, taken as the ‘price of capital’) and the quantity of capital per head. Subsequent work alerted economists to the difficulty of finding aggregate measures of heterogeneous capital goods, and to the possibility that a falling rate of interest (and of profit) may be associated with a decrease not an increase) of the quantity of capital per head.

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  1. http://link.springer.com/referencework/10.1057/978-1-349-95121-5

    Luigi L. Pasinetti & Roberto Scazzieri

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  1. Luigi L. Pasinetti
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  2. Roberto Scazzieri
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Pasinetti, L.L., Scazzieri, R. (2018). Capital Theory (Paradoxes). In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_240

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