von Thünen: Capital, Production Functions, Marginal Productivity Wages, and the Natural Wage

Abstract

Abstract This paper puts seminal contributions to theory of production functions and maximization of explicit quantitative objective functions by Johann Heinrich von Thünen into a systematic historical perspective. We show that his comprehensive ‘Tableau Economiques’ do imply two exact parametric production functions. Moreover, the renowned ‘geometric mean wage’ formula is restated as an exact CES marginal labor productivity wage for σ= 2. We review four alternative modes of normative (natural) wage calculations without an explicit production function, and conclude that von Thünen’s natural wage differentiation formulas are bona fide alternatives for deriving the natural wage formula.