Setting the stage

As we have seen in the preceding chapters, the results of neoclassical marginal productivity theory have played a key role in both the theory of economic growth and the econometric studies of the post-war period. The easiest illustration of this proposition is the essential part which the equality of marginal products with factor rewards plays in the development of the arguments in Swan's famous model of economic growth (Swan [1956]), and in Solow's influential – and equally famous – article on technical progress and the aggregate production function, Solow [1957]. This methodology has been continuously under attack and the latest (and sharpest) arrows in the quivers of the neo-Keynesian critics are the results of the double-switching debate. Not all of these are, however, related to the phenomenon of double-switching itself; a related phenomenon, capital-reversing, also plays a key role: see, especially, Garegnani [1970a, 1970b], Bliss [1970], Pasinetti [1969, 1970] and below, passim.

To the neo-Keynesians, the results of the debate represent a triumph for their point of view and signal if not the re-emergence of classical economics, then the need for it. By destroying, as they believe they have, both the concept of the aggregate production function and the underpins of the traditional demand curves for capital goods and labour, at both economy and industry levels, the neo-Keynesians feel that the marginal productivity theory of value and distribution has also been discredited, especially the traditional demand and supply approach to distributive questions.