This website uses cookies to ensure you have the best experience. Learn more

Cambridge Capital Controversy Essay

2474 words - 10 pages

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 needed in order to allow for factor substitutability, but also to determine a uniform rate of profits on the supply prices of the several capital goods. Satisfaction of this condition ensures that the equilibrium determined by neoclassical supply and demand forces could conceivably be taken as a long period equilibrium in that the persistent nature of the conditions of the economy can guarantee that the theoretical variables become gravitational centers of the actual ones (trends or average) over time. Thus, that treatment of capital
allows determining a normal position of the economy’s quantities and prices characterized by a uniform rate of profits on the capitals’ supply price under free competition both in consumption-goods’ and factors’ markets. For that determination it is crucial that the theory accounts for downward-sloping demand curves for factors. As we shall see in this study, the Cambridge controversies have shown that the belief on an inverse relation between demand for factors and their rewards cannot in general be postulated.

2. Circularity of Capital Measurement
Capital is conventionally regarded as the aggregation of capital goods. This heterogeneity means that capital goods cannot be aggregated in...

Find Another Essay On Cambridge Capital Controversy

Hayeks Contribution to the Business Cycle

1983 words - 8 pages offset by this type "capital shallowing", and total investment demand in the economy falls off (Blaug, 571). Controversy, when there is a depression "the rising level of real wages brings about a revival of investment as "capital deepening" - the tendency to adopt more durable machines - begins to offset the decline in induced investment" (Blaug, 571). The Ricardo-Hayek effect is dynamic because it deals with transient phase. It

Rasputin's influence on the Romanov's Essay

1378 words - 6 pages Mary whom is supposed to protect the city of Kazan, Tatarstan, Russia. Rasputin had supposedly witnessed a theophany of the Virgin Mary as the Russian Orthodox Church views the Virgin Mary as a holy being. After seeing Our Lady of Kazan, Rasputin then began his journey of religious mysticism. In December of 1093, Rasputin moved to the then capital of Russia, St. Petersburg from his hometown of Pokrovskoye, Siberia which is about 1,700 miles to

Unemployment in Britain

1875 words - 8 pages , 1984, p.386), a significantly higher rate than the pre-war (1870-1913) average of 5.8 per cent (T J Hatton, 2004, p.347). Much controversy exists about the specific causes of this high rate of unemployment. It is likely that no single factor was solely responsible. Instead here were a number of problems within the British economy and changes in export markets that must be considered in order to understand why the problem existed and why it

Apartheid in South Africa

1600 words - 6 pages South Africa has ended, doesn’t mean wounds are now healed. Black education was a poorer quality of schooling. Education was characterized by externalities and capital market imperfections. It was the government’s responsibility to address the problems of the poor quality education that blacks received. Not only was black education poor quality in South Africa, it was also viewed by its external features and capital market. Since black

The Digital Divide: A Problem for Thrid World Problems

1778 words - 8 pages far too great for the average household of third world countries to afford. When a population is worried about nutrition, health care, and sanitary water to drink, computer technology starts to seem less important. Kimberley Heitman addressed this in her article titled “Internet Freedom: Controversy” by saying “At present, access to the Internet requires a stable telecommunications system and an expensive set of hardware.” By having to buy a

Davie's Concept of Believing but Not Belonging to Religion

1866 words - 7 pages Catholic Church as seen by the developments in social media and scientific progress. The 21st century challenges the once sacred teachings of the church. People no longer feel they have to conform to the rigid structure of Catholicism. These social changes can be seen throughout society when it comes to the core religious arguments that have caused controversy over the years- the role of women, homosexuality, contraception, sex before marriage and

Writing Techniques of Emily Dickinson

2319 words - 9 pages conventional Protestantism, and though never abandoning her belief system, she is able to make her own conclusions that often differ from people around her. The controversy surrounding Emily Dickinson is her odd lifestyle and her tendencies to be somewhat of a recluse. She is sometimes considered abnormal because she does things differently from most others. She spends much of her life dressed in white and withdrawn from much of society

Constantinople's Fall

1977 words - 8 pages and admiration of his soldiers and people. By the time Constantine came to rule the Empire in its entirety, was in shambles. The Capital city of Rome was a shadow of its former self, “Constantine abandoned the attempt to hold the world empire together. There was no longer an eternal Rome served by subject peoples. There could be only salvage” (Lamb 18). Constantine looked east toward Byzantium. The Byzantines were an isolated bunch that never

EU as a Normative Power

9885 words - 40 pages as continuing an older tradition of promoting European or Western civilization in international society. To go further, one could see the normative power of the present-day EU as resting at least in part on that legacy: the EU is, in effect, drawing on the 'cultural capital' that was accumulated in a much earlier period in the history of international society. Secondly, however, despite these continuities, there are also significant differences

A 4000 word essay critically analysing the importance of the new initiative to primary education

1659 words - 7 pages early. Until the 19th Century, the traditional technique of the teaching of reading was the alphabetic method. This method involved teaching children to recognise and name the letters of the alphabet, both capital and lower case, in alphabetical order. In the mid 1930’s, phonics was deemed outdated and was banned from schools, and ‘the whole word method’, also known as the ‘look and say’ technique, was established in the UK in the 1940s, after

The Marine Corp Memorial

1752 words - 7 pages . The memorial like any other in Washington was met with controversy. The primary dispute came from the National Sculpture Society. This society had done all of the big memorials in Washington and did not what to be left out on this one. The Government’s Commission of Fine Arts also joined in the attempt to stop the memorial. The commission appointed by the president, was a body of aesthetic consultants that had jurisdiction over art placed on

Similar Essays

Women At Cambridge Essay

2080 words - 9 pages became known as ‘Steam Boat Ladies.’ When Cavendish College folded in 1894, its ready made spacious site was promptly purchased by the Homerton Academy, an established teacher training institution from London. They were keen to move away from their industrial area to the green and pleasant lands of Cambridge. To avoid controversy the previously mixed institution only transferred women to Cambridge. This proved to be a wise move as it enabled them

Paul A. Samuelson Was The Last Generalist Of Economics

1310 words - 5 pages the nature and role of capital good. Capital goods are machines and tools used in the production of other goods (, and Samuelson’s contributions to the Cambridge Controversy also critiqued the widespread vision of total production and distribution (Ramrattan, Lall and Szenberg) Samuelson was also a prolific writer; his most famous work was Economics: An Introductory Analysis, which became the best selling textbook of all time

Death In Space Essay

8234 words - 33 pages Cambridge Secondary 2 SYLLABUS Cambridge O Level Pakistan Studies 2059 For examination in June and November 2015 Cambridge International Examinations retains the copyright on all its publications. Registered Centres are permitted to copy material from this booklet for their own internal use. However, we cannot give permission to Centres to photocopy any material that is acknowledged to a third party even for internal use

Capital Punishment Essay

1753 words - 7 pages collar fraud.By 1976, two chairmen of the U.S Supreme Court, Thurgood Marshall and William J. Brenner Jr were persistence on their believes as capital punishment was out right unconstitutional and they brought a lot of controversy on the behalf of the this heinous act of murder pertaining to Death Row. According to the Eighth Amendment of the U.S Constitution has prohibits the government from inflicting cruel and unusual punishments. This meeting