The notion of capital in marginalist theory between 1929 - 1953: A physically heterogeneous collection of goods or a single factor in value terms?

ARIEL DVOSKIN; ANDRÉS LAZZARINI

Trento

Congreso; 7th STOREP conference (Associazione Italiana per la Storia dell Economia Politica) "Pubblico e privato in economia: i confini sfuggenti"; 2010

STOREP

The theoretical conflict over capital theory between both Cambridge in the 1950s and 1960s appeared to the discipline as a definitive result undermining the notion of capital as a single factor and hence the principle of factor substitution. Yet, many commentators, both past and present, have disputed the meaning of the controversies by contending that the true bone of contention was not the traditional notion of capital (expressed in value) but the Walrasian treatment - a physically heterogeneous goods vector, and that consequently the results that emerged from the theoretical clash cannot be extended to such a notion and hence to marginalist theory. In this paper we are going to dispute this view by suggesting that actually the central notion of capital in the beginnings of the controversy and later on was the traditional, single factor in value terms and that, contrary to some current views, the Walrasian conception, although it was retaken by some theorists since the late 1920s through 1950s, was the minority position amidst mainstream marginalist authors at the time of the controversy. In order to show our thesis, we shall survey the main works on capital theory from Lindhal, Hayek, Allais and Lange. It will be argued that although all these authors used the physical notion, still their works referred to the value notion (and hence the traditional conception of equilibrium) when drawing the factor substitution principle from the data of the theory.