economics as faith (4)

Robert Solow continued to defend the neo-classical faith in 1974.

Mr. [Anwar] Shaikh’s article is based on misconception pure and simple. The factor-share device of my 1957 article is in no sense a test of aggregate production functions or marginal productivity or of anything else. It merely shows how one goes about interpreting given time series if one starts by assuming that they were generated from a production function and that the competitive marginal-product relations apply. Therefore, it is not only not surprising but it is exactly the point that if the observed factor shares were exactly constant the method would yield an exact Cobb-Douglas and tuck everything else into the shift factor.

Robert M. Solow, “Law of Production and Laws of Algebra: The Humbug Production Function: A Comment” The Review of Economics and Statistics 56:1 (February 1974), p. 121.

Paul Samuelson became a heretic just five years later, in a critical ‘eulogy’ for a deceased Paul Douglas, co-inventor in 1928 of the Cobb-Douglas Production Function.

Why has the freedom to make h differ from 1 – k been rejected the scatter? Because nature really favors constant returns to scale? Nonsense: she has not shown us her petticoat. Profit and wages add up to total PjQj along any fixed ray not because Euler’s theorem is revealed to apply on that ray but rather because of the accounting identity involved in the residual definition of profit: with PQj a trivial … sum of WLj and RCj along any Lj/Cj ray, how can its form of (WLj)^k (RCj)^h give other than k + h = 1? ….

It is a late hour to raise these doubts about the Emperor’s clothes, but not until undertaking the present assignment did this child give the matter of across- industry fitting the careful attention it deserves and does not seem to have received. ….

Why use the words “production function” for such an accounting-tautology … ?

Paul A. Samuelson, “Paul Douglas’s Measurement of Production Functions and Marginal Productivities”, Journal of Political Economy 87:5, Part 1 October 1979), pp. 923-939.

These words of Paul Samuelson could easily have been written by Herbert Simon, but perhaps not by Joan Robinson. Robert Solow and Paul Samuelson led the American side of the ‘Cambridge controversy’ between Cambridge, England and Cambridge, Massachusetts. Anwar Shaikh taught (and teaches) at the New School University in New York City; he was allied with the Cambridge, England side of the controversy.

Regrettably, no ungated version of Samuelson’s paper is available on the web.

Update: We noted that Herbert Simon’s 1979 paper on production functions has been cited only 67 times. This small number of citations might be attributed to the fact that Simon published his paper in an obscure journal, The Scandinavian Journal of Economics. Well, Samuelson’s 1979 paper was published in the JPE – the leading economics journal – and has received even fewer citations – 38  according to Google Scholar. In contrast, Samuelson’s 1962 paper on the same subject, written when he was a true believer, has been cited 270 times. I conclude that most researchers have not yet lost their faith, so ignore heretical writing.

Tags: , , ,

Comments are closed.