Moreover, with the production functions that generate flat cost curves, one cannot satisfy Euler's theorem. If labor is paid the value of its marginal product, there is nothing left over for capital. Therefore income distribution becomes political, not economic in the neoclassical sense. This then becomes true at the macro level as well.
I guess this is what happens when I forget to include the smiley icon. :) >On 2/28/07, Eugene Coyle <[EMAIL PROTECTED]> wrote: >> Would you elaborate on the cost curves? What is the PK position on >> cost curves that leads to the flat-earth society? >> >> And how does "cost curves" tie to the macro side? > >as Sraffa & Kalecki pointed out, there are no diminishing returns as a >variable input increases, because all of the inputs are variable, >until you get to the capacity constraint. (The amount of fixed capital >is fixed, yes, but its utilization rate is not.) This implies a flat >supply curve until capacity is hit. > >Of course, with heterogeneous production processes, as aggregate >demand increases we should see an increasing number of them hitting >capacity constraints and creating bottlenecks for others, until we hit >"potential output" where bottlenecks become general. This implies >something of an upward slope to aggregate supply, except under >depression conditions. > > >-- >Jim Devine / "The truth is more important than the facts." -- Frank Lloyd >Wright > >
