As usual, Jim - many thanks for this - you're a fine man to have on a list. I especially like that 'new growth' theory - seems to get terribly close to notions like variable capital and surplus value. A little more theoretical development there, and we could be in 1857 by 2010 ... Now all I gotta do is find out what disaggregated general equilibrium theory is - and probably end up wondering why they didn't chuck out equlibrium while they were chucking out aggregation. Many thanks again. Rob. >The problems with the TFP is that it assumes (1) a neoclassical aggregate >production function; (2) perfect competition; (3) that "factors" of >production are paid according to their contribution. > >The last one isn't all bad, since once one realizes that externalities >(benefits or costs that don't correspond to the payment made) exist, one >can start talking about labor contributing more to output than it gets paid >(etc.) This is part of the "new" growth theory. > >But the first assumption is a problem. The aggregate production function >theory has been discredited, with the intelligent neoclassicals retreating >to disaggregated general equilibrium theory. > >Note that I don't see anything wrong with aggregating capital goods. The >problem is when we use it in a production function in hopes of saying >anything about distribution theory. That's the point of the Cambridge >Controversy. (Shockingly, I heard one paper at an URPE session at the >economics convention in early January which used that aggregate production >function theory -- and the even worse Solow theory of growth and >distribution, complete with the implicit assumption of Say's Law. I'll keep >the presenter's name secret to hide his shame. Joan Robinson must be >spinning in her grave.) > >Instead of talking about TFP, we can talk about labor producitivity and >output per unit of measured capital goods, keeping conscious of the >problems of aggregation and the large extent of our ignorance concerning >economic growth and technical change when it comes to quantification. > >Jim Devine [EMAIL PROTECTED] & >http://clawww.lmu.edu/Faculty/JDevine/jdevine.html >
