ON THE SECOND STAGE OF THE CAMBRIDGE CAPITAL CONTROVERSY

The second stage of the Cambridge capital controversy concerns the neo‐Walrasian theory of value and distribution. Since production is not understood in this theory as employing factors of production but rather commodities, that is goods and services with date and place of delivery, some scholars ma...

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Bibliographic Details
Published inJournal of economic surveys Vol. 33; no. 4; pp. 1073 - 1093
Main Author Fratini, Saverio M.
Format Journal Article
LanguageEnglish
Published Oxford Blackwell Publishing Ltd 01.09.2019
Subjects
Arrow–Debreu equilibrium
Cambridge capital controversy
Disputes
Equilibrium
Neo‐Walrasian theory
Production factors
Saving‐investment market
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Summary:The second stage of the Cambridge capital controversy concerns the neo‐Walrasian theory of value and distribution. Since production is not understood in this theory as employing factors of production but rather commodities, that is goods and services with date and place of delivery, some scholars maintained that it is not affected by the problems that emerged, during the first stage of the controversy, as regards the conception of capital as a factor of production and the rate of interest as the price for its use. The reply of the ‘neo‐Ricardians’ was based on two arguments. The first regarded the relevance of the new notions of equilibrium adopted in the neo‐Walrasian approach, with particular reference to temporary and Arrow–Debreu equilibria, and the second the possibility that the phenomena of re‐switching and reverse capital deepening, by affecting the working of the saving‐investment market, could cause equilibrium multiplicity and instability also in a neo‐Walrasian framework.
ISSN:0950-0804
1467-6419
DOI:10.1111/joes.12312