Overview of Cambridge Capital Controversy In the 1960s there was
... In the 1960s there was a debate over the nature of capital as an input to production
between Cambridge (UK) University and Cambridge (MA), MIT economists. The
main protagonists were Joan Robinson and her school in the UK and Robert Solow
at MIT. The main debate was whether or not capital can be seen ...
Title Goes Here - Binus Repository
... • Because the supply of land is inelastic, land will always
work for whatever it can earn. Thus the value of the land
derives entirely from the value of the product, and not
• A tax on pure economic rent will lead to no distortions or
Solow (1957) “Technical Change and the Aggregate
... as human capital, technological improvements embodied in plants
and equipment, multiple sectors, and so on
Many growth economists disagree about the fraction of economic
growth that can be explained by technological progress, but virtually
all agree it is important
Solow’s analysis also gives us one ...
The Simple Macro Model Firm Guide
Classical economics is widely regarded as the first modern school of
... Neoclassical economics is a term variously used for approaches to economics focusing on the
determination of prices, outputs, and income distributions in markets through supply and
demand, often as mediated through a hypothesized maximization of income-constrained utility
by individuals and of cost- ...
... – The entrepreneur is the driving force behind production.
– Entrepreneurs introduce new products and new techniques
– Risk takers- the people who take chances. They do this
because they anticipate that they will make profits. But they may
also suffer losses and perhaps bankruptcy.
... confirm Garegnani's thesis that early neoclassical authors have had the concept of a capital stock
as a magnitude able to change its content while presuming its value. Especially Böhm-Bawerk
points out the path, on which intertemporal general equilibrium theory will pursue decades later
with Lindahl ...
... ◦ The time and effort people devote to producing
goods and services in exchange for wages
◦ Includes both physical and mental labor
◦ Human capital = knowledge and skill gained from
education or training
◦ Strong correlation between country’s level of
human capital and standard of living
Problem Areas in AP Economics Real Interest rate
... Real Interest rate – cost of borrowing the money
to buy the capital goods (machinery)
If rate of return is greater than the cost of the
interest, the investment will be profitable
Ex: 10% rate of return is greater than 7% interest =
Even if capital is financed by savings, it give ...
Economic Factors Influencing Design
... willing to pay higher prices for those goods, and more workers will work on making
them. In time, this will create a shortage of consumer goods, and workers will be drawn
back toward making them.
Likewise, when there's more demand for land, the land factories gear up and crank out
more land -- or, w ...
... Investing in human capital means that you
spend money to train or educate your employers
with the goal of making a greater profit.
EX. Technology training, further personal
II.1. Critique of MPT/MDT
... classical economy, neoricardianism)
Concept of the so called real capital (as the critique of NCE
approach towards the capital )
Capital which exists at a given point of time is the (physical)
embodiment of time of labor of past periods
Capital represents this part of labor resource (in terms of lab ...
... good may take time and
money, but it may be
worth it in the long run
– Buying a tractor helps
farmers produce more
Chapter 6 The Forms of Capital
... External wealth converted into an integral part of the
person recognized as legitimate competence; as
inherent in the person
Factors of Production and Factor Markets in Islamic Framework
... seems plausible apparently. Let us take an example. In case people find that the wages
are too low, they will like to refuse wage-employment and try to move to EFP sector
where expected profits are higher. But soon the flow of resources into EFP will increase
the supply of labor in this sector. It w ...
Chapter 14 : Economic Growth
... 1) Exogenous growth model driven by growth in labor productivity
2) Endogenous growth model with externality from spillovers
3) Endogenous growth model that assumes all factors are
... Supply concept
• The short run and the long run
• Short run: all factors fixed except one
• Usually capital/technology are fixed, only
labour variable. Capacity utilization index.
• Long run: all factors variable, new
• Let’s have some case examples: IT,
Given the following graph
... What is the dollar amount of new common stock to be sold associated with the optimal capital
Slides for Week 2
... P = 100 – 10Q
TR = (100 – 10Q)×Q = 100Q – 10Q2
AR = TR/Q = 100 - 10Q
DRAFT On the Cambridge, England, critique of the marginal
... Next, there is a debate about the role of econometrics in responding to the Cambridge,
England, critique, that is to say, whether capital-reversing and reswitching are rare or
common in reality – an incoherent question for Joan Robinson but not for Charles Ferguson
(1969) who had faith (based on res ...
... Suppose that a firm has cost function C(x) and revenue function R(x).
In a free-enterprise economy, the firm will set production x in such a way as to maximize the
profit function P(x) = R(x) – C(x).
If P(x) has its maximum at x = a, then P’(a) = 0. It follows that since P’(x) = R’(x) – C’(x) that
29 (b) Efficiency in Production
... fixed factor of production i.e. amount of capital for production cannot be adjusted in order to
change the amount of output. Whereas in the long run all factors of production are considered
Productivity and Efficiency
According to Farrell (1957), economic efficiency has two components: Tec ...
The Neoclassical Growth Model
... The neoclassical growth model begins with
three stylized facts that characterize the U.S.
data to a first approximation.
1. GDP per person has grown at an average rate
of 1.89% over the past century.
2. The share of consumption in GDP have
remained approximately constant.
3. The labor’s share of inc ...
Theories of Development I
... As every individual, .., endeavors as much as he can both to employ his
capital in the support of the domestic industry, and so to direct that
industry that its produce may be of greatest value; every individual
necessarily labors to render the annual revenue of society as great
as he can. He genera ...
Cambridge capital controversy
The Cambridge capital controversy – sometimes called ""the capital controversy"" or ""the two Cambridges debate"" – refers to a theoretical and mathematical debate during the 1960s among economists concerning the nature and role of capital goods and the critique of the dominant neoclassical vision of aggregate production and distribution. The name arises because of the location of the principals involved in the controversy: the debate was largely between economists such as Joan Robinson and Piero Sraffa at the University of Cambridge in England and economists such as Paul Samuelson and Robert Solow at the Massachusetts Institute of Technology, in Cambridge, Massachusetts. The two schools are often labeled ""Sraffian"" or ""neo-Ricardian"" and ""neoclassical"", respectively.Most of the debate is mathematical, but some major elements can be explained in simple terms and as part of the 'aggregation problem'. That is, the critique of neoclassical capital theory might be summed up as saying that it suffers from the fallacy of composition, i.e., that we cannot simply jump from microeconomic conceptions to an understanding of production by society as a whole. The resolution of the debate, particularly how broad its implications are, has not been agreed upon by economists.