Elgaronline requires a subscription or purchase to access the full text of books or journals. If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. The book represents a fundamental critique of the aggregate production function and will be of interest to all macroeconomists. This paper discusses the recent controversy over the sources of economic growth in East Asia. Cite this chapter as: Lavoie M. The objective is to make neoclassical economists aware of the insurmountable aggregation problems and their implications.
There is no necessary relation between the total value of capital and profitability. On further misunderstandings and misinterpretations of the implications of the accounting identity. The article concludes with a discussion on the significance and policy implications of the findings. Subsequent research on general equilibrium has emphasized how precarious any such momentary equilibria are. This implies that statistical estimations of putative aggregate production functions can provide no independent evidence as to whether they accurately describe the production technology of the economy or, indeed, whether the aggregate production function actually exists. We show there are important differences between revenue and physical productivity. The authors explain why, despite the serious aggregation problems that surround it, aggregate production functions often give plausible statistical results.
We conclude by showing how estimates of cost functions suffer from the same problem. The book represents a fundamental critique of the aggregate production function and will be of interest to all macroeconomists. Second, in the rush to put data to a convergence hypothesis, researchers have failed to consider certain methodological procedures with respect to the treatment of capital. The authors explain why, despite the serious aggregation problems that surround it, aggregate production functions often give plausible statistical results. This argument has been widely ignored. But the Cambridge Capital Controversy demonstrated that this approach to production and distribution led to impossible inconsistencies.
The authors provide a cogent guide to all that is wrong with the theory and empirical applications of the discredited notion of an aggregate production function. Instead, growth models that feature cheerfully guilt free old style production functions proliferate, with most of their consumers and producers seemingly unaware of their fragility. Because of the identity, estimates of putative aggregate production functions, such as the aggregate elasticity of substitution, cannot be interpreted as reflecting the underlying technology, and hence the use of the aggregate production function is extremely problematical. Are estimates of labour demand functions mere statistical artefacts? The book is highly recommended to researchers in macroeconomics and in all related fields that use aggregate production functions. Nicht zuletzt unter dem Einfluß eines Aufsatzes von J.
Nadia Garbellini was the interviewer. . We extend Simon's argument that production functions should ideally be estimated using physical data, and discuss the serious problems that arise when they are estimated using constant-price monetary data. But José Arcadio Segundo is only lightly wounded and jumps from the train when he comes to. This reply seeks to clarify the areas of agreement and disagreement. If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item.
This paper expands on Robert M. It has been argued in the literature that growth accounting may be undertaken by directly differentiating the national income and product accounts identity where total income equals labour's total compensation and total profits. Simulations show that the estimates of total factor productivity growth resulting from growth accounting performed with aggregate monetary data are not equivalent to the true rate of technological progress implied by the micro-data. The reason for the large discrepancy for Singapore is because the return to capital has remained constant, despite the high rate of capital accumulation indicated by Singapore's national accounts. The models in the paper incorporate this effect in a more flexible way than previous work.
Second, China's reformed economic institutions have encompassed both market-supplanting and market-conforming elements. The most salient results are summarized, and the problems that economists should be aware of from incorrect aggregation are discussed. Rigorous approaches to aggregation indicate that aggregate production functions do not exist except in unlikely special cases. This paper questions Wan's 1995, J. For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Darrel McCalla. You are not authenticated to view the full text of this chapter or article.
This casts doubt not only on macroeconomic theory but also on empirical work and policy. We must respect, and appraise, the facts of life. In this light, the analytical findings of the article give rise to two main propositions. Dostoevsky Glendower: I can call spirits from the vasty deep Hotspur: Why, so can I, or so can any man; But will they come when you do call for them? Simulation studies, the aggregate production function, and the accounting identity -- 4. This paper examines whether the Solow growth model is consistent with the international variation in the standard of living. What does total factor productivity actually measure? It is shown that when the assumption of a common rate of technical progress is relaxed in the neoclassical model, the goodness of fit of Mankiw et al.
Why are some countries richer than others? Just like the non-stop propaganda in Macondo, the refrain is incessantly repeated in contemporary economics — it is almost the Rosary of modern microeconomics. Das hiermit angesprochene Aggregationsproblem existiert in der Ökonomie allgemein, es ist nicht auf die Produktionstheorie beschränkt1. It is shown how design selection based on functions of variances, and on functions of efficiency factors, are both subsumed by the weighted approach. Die geschichtliche Entwicklung der Lehrmeinungen innerhalb der Produktionstheorie geht bis auf das Jahr 1768 zurück. At best one finds highly contrived Dynamic Stochastic General Equilibrium Models that have nothing to say about soaring corporate compensation, the real political economy of tax cuts and starvation public budgets, or rising mark ups in major big business sectors. The Role of the Growth of Capital and its Externality Effect in Economic Growth 10.
The mainstream story of China is thus judged to be partial, and the lessons to be drawn from the experience are arguably far more complex than have been hitherto perceived. Why Are Some Countries Richer than Others? Finally, observed distributions of executive salaries are explainable in simple sociological terms, without recourse to classical theory. The authors provide a cogent guide to all that is wrong with the theory and empirical applications of the discredited notion of an aggregate production function. We predict these important and relevant issues, latent in endogenous growth and real business cycle theories, will erupt in future controversy. Professor Pasinetti relates some of the high points of his distinguished career in the videos: Born near Bergamo in the north of Italy, he compiled a brilliant academic record that eventually won him fellowships to Cambridge University, Oxford, and Harvard. This empirical work has either used growth accounting or estimated econometrically aggregate production functions. This authoritative and stimulating book represents a fundamental critique of the aggregate production function, a concept widely used in macroeconomics.