Recent Work in the Classical Tradition

More recently, the focus of attention of authors working in the classical tradition was especially, but not exclusively, on the following problems. First, there has been a lively interest in generalizing the results provided by Sraffa on joint production, fixed capital, and land.

In the 1960s and 1970s the long-period versions of marginalist theory revolving around the concept of a uniform rate of return on capital were called into question on logical grounds. While many marginalist authors accepted this criticism, some of them contended that intertemporal equilibrium theory, the “highbrow version” of neoclassi­cism, was not affected by it (see especially Bliss 1975; Hahn 1982).

The significance of “reswitching” of entire systems of production or economy-level techniques has sometimes been denied on the grounds of its purportedly low prob­ability. More recently Arrigo Opocher and Ian Steedman (2015) have drawn the attention to the question whether the employment of one or several or all inputs may return in different full long-period equilibria at the industry level. They argue that such “recurrence” is generically far more probable than the return of entire systems of production. Interestingly, these recurrences can be associated not only with changes in income distribution (changes in the rate of profits), but also with changes in the relative prices of primary inputs. Opocher and Steedman insist that recurrence alone, without reswitching, undermines standard marginalist theory. Therefore, a low “prob­ability of reswitching” must not be taken to weaken the case of the critics of marginal- ist theory.

While the criticism of the long-period versions of marginalist theory is irrefutable, as authors from Paul Samuelson to Andreu Mas-Colell have admitted, this has not pre­vented the economics profession at large from still using this theory. This is perhaps so because in more recent years the way of theorizing in large parts of mainstream econom­ics has fundamentally changed. Whether this change is a response to the criticism need not concern us here. It suffices to draw the reader’s attention to a statement by Paul Romer in one of his papers on endogenous growth in which he self-critically pointed out a slip in his earlier argument. The error he had committed, he wrote, “may seem a trifling matter in an area of theory that depends on so many other short cuts. After all, if one is going to do violence to the complexity of economic activity by assuming that there is an aggregate production function, how much more harm can it do to be sloppy about the difference between rival and non-rival goods?” (Romer 1994: 15-16).

Heinz D. Kurz and Neri Salvadori

See also:

Ladislaus von Bortkiewicz (I); British classical political economy (II); Cambridge School of economics

(II) ; Capital theory (III); Competition (III); Keynesianism (II); Vladimir Karpovich Dmitriev (I); Growth

(III) ; Income distribution (III); Input-output analysis (III); Karl Heinrich Marx (I); Methods in the history of economic thought (III); Resource and environmental economics (III); David Ricardo (I); Scottish Enlightenment (II); Adam Smith (I); Piero Sraffa (I); Technical change and innovation (III); Value and price (III).