Daniel Davies wrote:
this is the Cambridge Capital Controversy in disguised form. You can't get any general equilibrium theory of prices off the ground unless you are either prepared to take a rate of profit as given, or take a schedule of prices of capital goods as given. Otherwise, you have no numeraire with which to make any aggregations of the capital stock.
But the profit rate can be estimated. The profit rate required to value an asset is not a historical profit rate, it's always an expectation. Expectations don't have to be accurate or rational. People need to value their assets one way or another. It's a premise of using them. From the point of view of estimation, history is just information. It doesn't matter if the estimation of the return rate is not "scientific" in some Keynesian sense. Value is always an expectation, right or wrong.
Michael Perelman wrote:
The Cambridge Capital Controversy has to do with a static model in which different rates of profit/wage rates change relative prices.
Then the "controversy" is moot because general equilibrium in its modern versions is not static.
Julio
