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2023 | OriginalPaper | Buchkapitel

10. On the Capital Controversies as a Choice of Paradigms

verfasst von : Ramiro E. Álvarez, Jose A. Pérez-Montiel

Erschienen in: Science, Technology and Innovation in the History of Economic Thought

Verlag: Springer Nature Switzerland

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Abstract

In economics, the conventional (also called neoclassical or marginalist) theory is characterised as a framework based on demand and supply functions to explain prices, exchanged/produced quantities and remuneration rates of productive factors. This theory had to face a huge opposition during the 1950s and 1960s, during the Capital Debates or Cambridge-Cambridge Controversies (CCC). This chapter studies how the CCC arose and evolved, as well as how they apparently came to an end in the 1960s and have now been forgotten. To this end, our research makes use of Thomas S. Kuhn’s characterisation of the history of scientific thought, by presenting the debate as a real choice between paradigms. We shall see how answers to the question of why the CCC did not lead to a Scientific Revolution that would bring about the demise of the neoclassical hegemony in economic theory fall outside the logical rigour of the competing theories and reflect the inherent circularity of the communication between different economic paradigms.

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Fußnoten
1
We speak of the Cambridge-Cambridge Controversies (Harcourt, 1969) because the debate was led by economists from Cambridge in the USA (specifically from the Massachusetts Institute of Technology, MIT) and from Cambridge in the United Kingdom. The economists from MIT (mainly P. Samuelson, R. Solow, D. Levhari, C. Ferguson, and M. Blaug) defended the marginalist paradigm, while the critical side was represented by economists such as J. Robinson, P. Sraffa, L. Pasinetti and N. Kaldor. It is nevertheless true that some economists from Cambridge UK also stood in favour of the neoclassical side, namely, F. Hahn and C. Bliss, and that critical economists, such as P. Garegnani, worked at both MIT and Cambridge UK.
 
2
Following on from Dobb (1973), it can be stated that the work of T.R. Malthus, An Inquiry into Rent, had a profound influence on the formulation of the Ricardian Theory of Distribution. With the Malthusian Theory of Rent, which focuses on the notion of diminishing returns related to the decreasing labour productivity brought on by intense agricultural production, Ricardo managed to define rent as a surplus.
 
3
In this respect, the contribution of León Walras, of which we will speak below, was fundamental (Dvoskin & Lazzarini, 2013).
 
4
“Capital includes the raw materials (…) and other commodities which must be saved-up. This, of course, is the commonly accepted sense of the term. [A]ll [different capital goods] have only one quality in common, namely, that they represent certain quantities of exchangeable value so that they may be regarded as a single sum of value, a certain amount of the medium of exchange, money” (Wicksell, 1934 [1901], pp. 144–145).
 
5
The substitution mechanism that underlies the construction of decreasing demand function relationships between the rate of profit (or interest) and the capital-labour ratio does not operate only in the case of changes of technique but also where a single technique is applied to the production of heterogeneous consumer goods. In this case, which is known as an indirect substitution mechanism, goods are distinguished according to the relative proportion of productive factors in the method of production of the consumer good. Distributive changes therefore tend to be associated with changes in the relative costs and, consequently, with the quantities demanded by consumers, which changes the demand for factors of production (Petri, 2021).
 
6
It is important to stress that this strategy has recently gained new impetus from some contributions, such as D’Ippolito (1987) and Potestio (2010). The replies to this argument are presented in Ciccone (1996), Petri (2011) and Dvoskin & Petri (2017).
 
7
The Symposium Commensurability, Comparability, Communicability of 1982, organised by the Philosophy of Science Association, introduced the notion of incommensurability to the debate. In Kuhn (1983), the author analyses in greater detail what he considers to be one of the main omissions of Kuhn (1195 [1962]): the few references to language change as a mutation associated with the emergence of anomalies that alter some part of the language (Kuhn, 1983, pp. 682–683). With this, he could not avoid a certain amount of overlap with the notion of scientific revolution, and he tried to temper his assertions about incommensurability between successive paradigms, as well as differentiate the tasks of interpreting and translating theories.
 
8
Bliss argues that one of the most striking conclusions in Garegnani (the possible non-existence of equilibrium in the savings-investment market due to reverse capital deepening) is contradictory to the results produced by Debreu, who included the same conditions used by Garegnani but showed the existence of equilibrium (Lazzarini, 2013, p. 138).
 
9
In fact, Walras (1954 [1926]) attempts to make the theory of distribution based on factor supply and demand compatible with the derivation of normal positions by introducing an auction mechanism in the market of capital goods that would enable the uniformity of profit rates on the supply prices of those goods. However, Garegnani (1976, 1990) and Petri (2021), among other contributions, show that this attempt was unsuccessful because it required potential adjustments in the set of capital goods available, while these are determinants of prices, quantities and distributive variables obtained previously. In other words, the Walrasian treatment of capital introduces impersistence among the determinants of the neoclassical theory (see Petri, 2021, Vol. I, p. 628), which is at the very root of Hicks’s (1939) short-period equilibrium and the need for intertemporal equilibrium’s unrealistic assumptions (such as Arrow & Debreu, 1951).
 
10
As is explained in the works of Garegnani (2012) and Lazzarini (2013), the neoclassical theory evaded a well-known and accepted problem during the first phase of the controversy: a uniform rate of return in the supply prices of capital goods cannot generally be determined in a framework of general equilibrium with Walrasian capital.
 
11
In Epilogue: 1969, Thomas S. Kuhn scrutinises the notion of paradigm in two ways. With respect to its general character, he asserts that it refers to the notion of a disciplinary matrix, whilst in its more specific character, the epistemologist addresses the central and most novel aspect of the elements previously developed: Shared Examples. In essence, these embody the puzzle-solving methods employed for a new problem faced by researchers in the course of their normal research. The Aggregate Production Function, whose theoretical basis became infused with inconsistencies, today nevertheless still constitutes one of the symbolic generalisations of the neoclassical paradigm that is most used in introductory textbooks on macro and micro-economics, in the teaching of “economic” problem-resolution.
 
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Metadaten
Titel
On the Capital Controversies as a Choice of Paradigms
verfasst von
Ramiro E. Álvarez
Jose A. Pérez-Montiel
Copyright-Jahr
2023
DOI
https://doi.org/10.1007/978-3-031-40139-8_10