What Remains of the Cambridge Critique? A New Proposal

Abstract

Abstract The debate on capital theory is no more about the historical formation of neoclassical ideas in their original, most abstract form, but about the tools—certainly influenced by those ideas—which are used in teaching applied economics. One focus still is on the economy’s aggregate production function, almost 70 years after Joan Robinson attacked this concept. It has turned out that reswitching—once the most effective argument against the production function—is rare, and that an approximate surrogate production function can be constructed, using random matrices. This seems to weaken the critique, but a new one has emerged, which shows that the number of effective techniques on the wage curve is small and that the possibilities of substitution between capital and labour are quite restricted in the relevant range.