Theory of Production

Abstract

This compelling book contains a comprehensive analytical treatment of the theory of production in a long-period framework. Although the authors take a 'Classical' approach to their subject, the scope of investigation and methods employed should interest all economic theorists. Professors Kurz and Salvadori explore economic systems that are characterised by a particular kind of primary input in the production process, such as different kinds of labour and natural resources. These systems and the corresponding prices can be understood to reflect characteristic features of a capitalist market economy in an ideal way: they express the pure logic of the relationship between value and distribution in an economic system. Specific chapters deal with prices and income distribution, economic growth, joint production, fixed capital, scarce natural resources (both renewable and exhaustible), and heterogeneous labour. The historical origins of the concepts used are also discussed in considerable detail.

Economic Growth in the USA and Germany 1960–2013: The Underestimated Role of Energy

“…Macroeconomic production functions have been criticized by scholars who argued that aggregation of output and inputs should be in physical terms, exclusively (Robinson 1953(Robinson , 1971Fisher 1993;Kurz and Salvadory 1995;Felipe et al 2003;Silverberg 2007). A response to this criticism is based on the understanding that the capital stock of industrialized economies consists of all energy-converting and information-processing machines in conjunction with all buildings and installations necessary for their protection and operation, and that output Y results from work performance and information processing by the combination of such capital with (routine) labor 3 L(t) and energy E(t).…”

Technology and economic theory

“…This gives rise to a circular flow perspective, in which goods are worked on to produce goods within an input output structure that captures a sophisticated division of labour in the production process (Kurz and Salvadori, 1995;Carter, 1970). If the system is to continue in a self sustaining way, the material inputs used up in one production cycle, including worn out capital goods, must be replaced from the outputs of that production cycle, giving rise to the distinction between gross output and net output from which later consumption and investment are drawn.…”

“…Yet, historically, the concept of capital goods (and especially its close relations, 'capital value' and the 'time phasing' of production activities) have been associated with a long series of controversies that embody and reveal deep fault lines between different formulations of the economic process (Kurz and Salvadori, 1995).…”

“…The idea that time elapsing has a cost which constrains investment activity, is reflected in Marshall's concept of waiting, and in Fisher's notion of time preference or impatience. 23 For contrasting views, the standard references are Harcourt (1972), Bliss (1975) and Kurz and Salvadori (1995) #0909 composition of a functionally differentiated stock is as significant as its magnitude. From an economic viewpoint capital goods find their meaning in production plans and it is in the context of such plans that they acquire a forward looking value.…”

Economic Theory in Historical Perspective

“…Market prices, it was observed, are subjected to continuous fluctuations, whose superficial examination may suggest that they are purely stochastic, and, therefore, not amenable to generalization. A more careful examination, however, suggests that the actual prices of commodities are regulated by another set of more fundamental prices, the "natural prices" which operate as centers of gravitation for market prices (Garegnani, 1976;Eatwell, 1983;Kurz and Salvadori, 1995;Tsoulfidis, 2008 and2010).…”