Aggregate Long Run Production Functions

[tcpip]

Production estimations distinguish between short-run and long-run functions, stating the relationship between inputs, scarce resources, and the outputs that result. Short-run and long-run functions typically refer to the variability of production inputs and have a tenuous association with any real temporal statements of such runs (with the

Comments

[tisiphone]

Increases in variable capital, instead of being the sole source for the generation of surplus value, actually become a negative to both production and profit.

They do in Marxian economics as well, although the mechanism is considered to be slightly different. Basically you end up with a crisis of overproduction, driving down profits and eventually causing economic pain.

[tcpip]

Sure, there is that. In the competition to produce greater amounts than their competitors, the capitalists engage in expansion of constant capital "without any consideration for the actual limits of the market or the needs backed by the ability to pay", thus leading to cyclical overproduction. Marx was however critical of underconsumption theories that simply asserted that workers needed to be paid more to make up for the surplus of goods (which seems antithetical to a Keynesian solution).

[tisiphone]

The arms race between pay levels and consumption levels wasn't really addressed by Marx, who was analyzing things in a time when subsistence wages were commonplace, but this has come under scrutiny by modern Marxian economists; it's a relatively recent development. Robert Reich's "Supercapitalism" gives a great (not-quite-Marxian) analysis of this particular dilemma.

[tcpip]

On this topic I notice that Wikipedia under 'underconsumption' has a quote supposedly by Marx rejecting the pay levels theory of overproduction in Capital Vol II. Try as I might however I cannot actually the find (or remember) the quote or anything like it..

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[lesslucid]

I think your analysis does add something, but I also think there's something missing, because whether you call it "land" or "nature" or whatever, it has some special properties or... parts of it behave in different ways that (in terms of time-scales) seem significant to me

Re: ...

[tcpip]

Yes, I think you're right. N does not represent a constant addition to output, but one that can declines over time as well as well as representing the potential value of Q. That's even more important. Thanks for that.

[engelhardtlm1]

A few thoughts

[tcpip]

Thank you for that. Excellent comments; very useful.

(One you think you teach this for a living or something)