Reswitching conclusions only survive if capital is aggregated and the
present value of output equals the value of the machine expressed as: delta
K = (delta consumption/ rate of profit). In practice this seems not to
occur because capital goods do not substitute well one for the other
therefore the aggregation of capital that gives us different rates of profit
for a given quantity of capital in the CCC does not survive.
Aggregation is only possible if items are perfect complements or
substitutes. There's a special problem with the market value of capital
equipment and its value in service because if an additional unit of capital
is added its weighted value in the aggregate must correspond to its marginal
effect on output which may in practice be different than its market value.
These difficulties in calculating the market value of capital in order to
switch techniques of production make the CCC unable to yield any interesting
results. This is probably why the problem was dismissed as unworthy of
attention.
It is probably inappropriate to push Neoclassical Economics to do the
impossible as Robert tries to force it to do mathematical tricks it was
never intended to perform. NE is a useful way to get your thinking straight
about how the world works but it is not extensible in the way that Robert
wishes it to be. Perhaps Robert has some ideas on how to extend economic
reasoning that yields interesting results.
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Original post & context:
70vfjj$m0u$1@camel29.mindspring.com
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