1. Introduction Beginning in the mid-1950s and for the following twenty years or so, a debate concerning the neoclassical treatment of capital turned apparent in the discipline. This gave rise to a series of exchanges between scholars associated with Cambridge, England, and Cambridge, Massachusetts, (US). This debate is broadly known in the literature as the ‘Cambridge capital theory controversies’. The relevance of this controversy lies in that the criticisms of neoclassical theory raised by Cambridge (UK) concern both the theoretical illegitimacy of measuring ‘capital’ as a single magnitude in value terms to determine prices and distribution, and the foundational premise underlying the dominant supply and demand approach: the factor substitution principle. In the controversies it has been shown that this principle cannot in general be posited to explain the distribution of the social product in terms of supply and demand. This result, discovered by means of the analysis of the relation between prices and distribution in economies with heterogeneous capital goods, has been revealed as theoretically irrefutable, and, as this study will argue, concerns the hard core of the neoclassical or marginal theory both in its traditional (capital measured in value terms) and in its contemporary formulations (capital as a set of heterogeneous goods). Capital as a single magnitude has been the treatment on which, under conditions of free competition, traditional theory had to resort to explain the distribution of the social product between wages and profits (and rents) in terms of supply and demand – in other words, by applying the factor substitution principle. As we shall see in the following chapter, capital in value terms not only is ne... ... middle of paper ... ...ory of Distribution”. Review of Economic Studies, 37, pp. 407-436. • Harcourt, G.C. (1969). “Some Cambridge Controversies in the Theory of Capital”. Journal of Economic Literature, 7, pp. 369-405. • Harcourt, G.C. (1972). Some Cambridge Controversies in the Theory of Capital. Cambridge University Press, Cambridge. • Robinson, J. (1953). “The Production Function and the Theory of Capital”. Review of Economic Studies, 21, pp. 81-106. • Samuelson, P.A. (1962). “Parable and Realism in Capital Theory: The Surrogate Production Function”. Review of Economic Studies, 29, pp. 193-206. • Solow, R. (1983). Modern Capital Theory, in Brown, E.C., Solow, R. (eds.). Paul Samuelson and Modern Economic Theory. McGraw-Hill, New York. • Sraffa, P. (1960). Production of Commodities by means of Commodities: Prelude to a Critique of Economic Theory. Cambridge University Press, Cambridge.
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Biernacki, Richard, and Ellen Meiksins Wood. “The Origin of Capitalism.” Contemporary Sociology 2000 : 638. Print.
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Adam Smith, David Ricardo and Thomas Malthus have all greatly influenced how people thought about modern economics, especially in areas relating to markets, in terms of the economy and whether certain things affected population rates. In this essay I will cover each of the three topic areas and how each economist interpreted these areas in order to explain why certain phenomena occur within British economics, most of which are still widely accepted today.
Gaynor Ellis, Elisabeth, and Anthony Esler. ""New Economic Thinking"" World History: The Modern Era. Prentice Hall. 186. Print.
Heilbroner, Robert L. The Worldly Philosophers: the Lives, Times, and Ideas of the Great Economic Thinkers. New York: Simon & Schuster, 1999. Print.
A number of studies have also been done specifically on the deterrent effects of capital
ROBINSON, Joan (1965b). “The General Theory after Twenty-Five Years”. Collected Economic Papers, vol. III, pp. 100-2.
This method is akin to dividing the economy into AL pieces. As a result, we can look at the quantity of capital per unit of effective labour and its impact on output per unit of effective labour, as opposed to being overly concerned with the overall size of the economy. f(k) is assumed to satisfy that f(0) = 0, f’(k)> 0 and f”(k) <0. this means that the marginal product of capital is positive, but it declines as the level of capital rises , i.e. there is diminishing marginal product of capital.
Heilbroner, Robert. "The Economic Problem." The Making of the Economic Society. Englewood Cliffs: Prentice Hall, 1993. pp. 1-15
Although this view has undergone considerable modification by economists in the light of historical developments since Smith’s time, many sections of The Wealth of Nations notably those relating to the sources of income and the nature of capital, have continued to form the basis of theoretical study of the field of political economy. The Wealth of Nations has also served as a guide to the formulation of governmental economic policies.
There were many theories that promotes and explains how the capitalist system works; however, Karl Marx’s Capital is the first one that can explain the imminent relationship between poverty and wealth, inequality and growth under capitalism. ...
Modigliani & Miller, M&M, (1958) found that in a world without taxes, the value of the firm is not affected by its capital structure, and also that the total return to investors remains the same regardless. M&M showed the
Sullivan, A., & Steven M., (2003). Economics: Principles in action. Upper Saddle River, New Jersey : Pearson Prentice Hal