The Cambridge Controversy. A note

Download full paper

Abstract

A debate, which started at the late 1950s and lasted up to the early 1970s, known as the Cambridge controversy, is the subject of this paper. The core of that debate was the composition of capital and moreover the production and the reproduction of commodities.  The “roots” of the Cambridge Controversy can be found in the literature of K. Marx and D. Ricardo. However both schools of thought have underestimated the important role of price normalization, leaving the problem of choosing techniques unexplained.

Posted for comments on 7 Nov 2016, 12:36 pm.

Comments (1)

  • Enrico Bellino says:

    Report on:‘The Cambridge Controversy. A note’, written by Kosmas Manoudakis submitted to Economic Thought

    Brief summary of the paper

    The author argues about the role of the choice of the numeraire in the procedure of selection of the most profitable technique in linear production models.

    Overall evaluation and Recommendation

    The paper does not seem to add any new result to the debate on the choice of techniques. The only one argument which could be original concerns the influence of the numeraire on the choice of techniques, on switching points and on the ordering of techniques along the profit-wage frontier.* But these points are not proved in the paper. There is just a reference to other works, already published by Stamatis and Manoudakis, where a proof of these results should be found. The rest of the paper (especially the first 8 pages) surveys many aspects of the reswitching debate, but the entire account is quite rough, not always clear and with some disputable argument (some of doubtful points are listed below).

    [*By the way, the points maintained by the author contradict with some well-established results in the literature: see, for example, Luigi Pasinetti, Lectures on the Theory of Production, Chap. 7, §§ 4.2 and 4.3, proposition (iii).]

    For these reasons I suggest to reject the paper.

    Minor comments

    1. Page 2: with reference to Samuelson (1962) the author writes: ‘Under the special assumption of his model the occurred w-r relation was linear regardless if one or more commodities were used as means of production’ (emphasis added); but in Samuelson (1962) each techniques employs just one (specific) capital good.
    2. Page 2: ‘The linear w-r implied that without substitution, in a steady state, a given proportion of output and homogenous labor is produced’: not clear.
    3. Page 2, footnote 4: ‘these production processes are represented by a diagonal coefficient Matrix – in linear algebra terms – or with a matrix with linear dependent rows or columns’: but in a diagonal matrix all rows or columns are independent.
    4. Page 3, footnote 8: probably the word ‘continuous’ should be replaced with ‘contiguous’.
    5. Page 5: the ‘neoricardian perspective’ is also expressed by Pasinetti, who disproved Levhari’s non-reswitching result firstly (see Pasinetti, QJE, 1966).
    6. Page 5, ‘For them [neoricardians] prices could be determined based not only to technological attributes of the system but to income distribution variables as well’: not clear. If the author means that in order to choose the most profitable technique we must fix one distributive variable from outside, then he should refer to one distribution variable, not to ‘distribution variables’.
    7. Page 5: ‘The commodities were divided into non-reproducible the price of which was determined by scarcity – such as Labour’: according to the Classical perspective the wage rate is not determined by scarcity. It is determined by other elements, like subsistence or other ‘institutional’ elements.
    8. Page 6: ‘Joan Robinson (1953-54) studied the “nature” of capital into the SPF …’ (emphasis added): the SPF had not invented yet in those years but it is reasonable to think that J. R. would have rejected it too, as she rejected the aggregate production function. So, the above proposition does not seem appropriate.
    9. Page 6, footnote 12: Levhari’s paper (QJE 1966) contains two parts: the first one contains a proof of the ‘non-substitution theorem’ which was correct; the second part contains the non-reswitching theorem, and was wrong. Bidard (1990) probably refers to the first part, not to the second one.
    10. Page 7, first row: ‘For L. Passinetti(1966) there was no functional relation between capital intensity and profit rate’. This is not correct: Pasinetti proved that in a multisectoral model there was no decreasing relation between capital intensity and the profit rate.
    11. Page 8: ‘He had shown that the introduction of a standard commodity, such as the Sraffian one […] ensured the existence of a linear w-r curve, and therefore an unambiguous choice of techniques’. Given a technique

      technique figure it is possible to calculate the Standard commodity associated to this technique, denoted by standard commodity figure.

      If we want to compare technique α with another technique, say β, we must draw on the same graph the relation between the rate of profit and the wage rate associated to technique α expressed in terms of standard commodity figure, which can be denoted by  relation between the rate of profit and the wage rate associated to technique alpha, and the relation between the rate of profit and the wage rate associated to technique β still expressed in terms of standard commodity figure, which can be denoted by  relation between the rate of profit and the wage rate associated to technique beta

      As we know,  relation between the rate of profit and the wage rate associated to technique alpha is linear but  relation between the rate of profit and the wage rate associated to technique beta is not linear, because bundle standard commodity figure is not an invariant standard of value with technique β. Relations  relation between the rate of profit and the wage rate associated to technique alpha and  relation between the rate of profit and the wage rate associated to technique beta may thus intersect more than one time, making ambiguous the order of technique with respect to their capital intensities.

    Misprints
    Page 1: the reference to Samuelson (1953) is not in the list of References.
    Page 2, row 4 and page 3, footnote 5, first row: Sollow → Solow.
    Page 5, row 12: Sraffain → Sraffian.
    Page 6, rows 7-8: ‘For her it … economy’: to be deleted.
    Page 6, last row of the text: ‘capital intended’ → ‘capital intensive’.
    Page 7, row 1: Passinetti → Pasinetti.
    Page 8, row 22 and page 9, footnote 17, last row: Sraffaian → Sraffian.

Your comment

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Please note that your email address will not be published.