Friday, 3 January 2014

Blaug on the Cambridge controversy

I have just discovered that there are economists out there who are still going on about the Cambridge controversy, an old and largely forgotten battle between the two Cambridges - UK and Massachusetts - on (non)questions like what are the problems encountered with the concept of an aggregate production function; what to make of the so-called "Sraffa Revolution" - more accurately described by the historian of economic thought Mark Blaug as "the Rip-van-Winkle phenomenon": that is, the solution with linear programming techniques of a question ("the invariable measure of value") that may have made some empirical sense in Ricardo's corn-economy world but whose solution in a modern industrial input-output economy makes no empirical sense at all (as Harry Johnson once put it) and, of course, double switching.

Mark Blaug concludes his book "The Cambridge Revolution: Success or Failure?", London: Institute of Economic Affairs, 1974, by saying
The Cambridge UK theories are certainly logically consistent, even if they do not always hang together in a logically consistent total framework of theories. They are possibily more realistic in some of their basic assumptions, although that statement is itself highly ambiguous. But they are not simpler, they are not more elegant, they are totally incapable of producing testable predictions. Whatever is wrong with neoclassical economics (and who can doubt that there is much to complain of?), it wins hands down on all possible criteria.
But there are those, it would seem, on the UK (losing?) side that will not let the debate die.


Matt Nolan said...

Thought Mas Colell had put this to an end a long time ago!

He simply stated that capital theory had gone the same way as GE theory, and in truth these complications implied simply that data needed to be used as well as a priori theory. A result that, nowadays at least, is simply indicative of best practice.

Paul Walker said...

Thanks Matt. I had not seen the Mas-Colell paper before. The controversy is one of those things that, I fear, will never fully die.