Friday, June 20, 2014

Robert Vienneau — A Sophisticated Neoclassical Response To Cambridge Capital Controversies

One way of reading the Cambridge Capital Controversy (CCC) is an internal exploration of and debate about neoclassical price theory1. Both sides agreed to concentrate on the case of perfect competition, with no principal agent problems, no asymmetric information, etc. The Cambridge-Italian critics thought themselves to have demonstrated that neoclassical economists could not consistently with their theory claim that equilibrium prices were indices of relative scarcity. Such a claim is not well-founded in the theory, and economists should turn away frombiotechnological determinism and turn toward developing price theories in which class power matters. 
In this post, I want to outline the sophisticated neoclassical response, in the 1970s, to the Cambridge-Italian critics.

This neoclassical response asserted that price theory was best expressed in terms of General Equilibrium Theory (GET). Capital theory involves production over time. Models of intertemporal and temporary equilibrium have been developed in GET. And these models, it is claimed, are both logically consistent and unaffected by Cambridge-Italian criticism2.
Thoughts on Economics
A Sophisticated Neoclassical Response To Cambridge Capital Controversies
Robert Vienneau

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