‘Not Even Wrong’
Chapter 12: Why have criticisms of the aggregate production function generally been ignored? On further misunderstandings and misinterpretations of the implications of the accounting identity
As we have seen in previous chapters, there are two serious problems with the aggregate production function – so serious that the whole concept is deeply flawed. First, there is the ‘aggregation problem’, broadly defined to include the Cambridge capital theory controversies. Second, there is the problem that, because of the underlying accounting identity in value terms, empirical estimation of the production function using value data can neither provide a refutation of its existence nor can the estimated coefficients necessarily be interpreted as technological parameters. Yet while both these shortcomings have been known for decades, as we noted in the introduction and in previous chapters, they are either barely mentioned or totally ignored in the literature where aggregate production functions are discussed. In this chapter we attempt to answer the question, ‘why’? (See McCombie, 1998b for a methodological assessment).
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