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TOWARD UNDERSTANDING SOME PARADOXES IN CAPITAL THEORY
Author(s) -
YEAGER LELAND B.
Publication year - 1976
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1976.tb00425.x
Subject(s) - economics , capital (architecture) , neoclassical economics , value (mathematics) , production (economics) , microeconomics , factors of production , distribution (mathematics) , positive economics , mathematics , mathematical analysis , statistics , archaeology , history
Examples of reswitching (or double‐switching), capital‐reversal, and the apparent couterproductivity of thirft are widely supposed to cast doubt on the neoclassical theory of resource allocation and functional income distribution.1 The present paer tries to dispel this doubt, largely by insisting that “capital”– or however better we may lable the productive factor whose price is teh rate of interset – cannot be measured in purely physical terms. It has both time and value dimensions. In an economically relevant sense, its amount required in a physically specified production process does indeed depend partly on its own price. Supposed paradoxes arise from well‐entrenched but mistaken prejudices in this regard.