‘Not Even Wrong’
Chapter 4: ‘Are there laws of production?’ The work of Cobb and Douglas and its early reception
The year 1927 represents a landmark in the development of economics. It ranks alongside 1871 (the year of publication of Jevons’s Theory of Political Economy and Carl Menger’s Grundsatz), 1936 (the year of Keynes’s General Theory) and 1961 (Muth’s ‘Rational Expectations and the Theory of Price Movements’). It was in 1927 that, at the annual meeting of the American Economic Association, Charles Cobb and Paul Douglas first promulgated the results of the estimation of their now famous aggregate production function. Here, for the first time, was found supposedly empirical support for both the existence of a well-defined aggregate production function and the marginal productivity theory of distribution. Their initially controversial paper was published the following year in the American Economic Review. The importance of some seminal works is immediately apparent on (or even prior to) their publication.
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