93 Pages

Determinacy of equilibria in a model of intertemporal equilibrium with capital goods


In the history of economic thought, the theory of value with fixed capital goods and capital formation is essentially linked to the names of Wicksell and Walras. Two different analytical roads were pursued. While Wicksell’s theoretical construction builds on the notion of aggregate capital measured in value terms, Walras’s model of general economic equilibrium is based on the assumption of heterogeneous capital goods available in arbitrarily given initial quantities. Piero Sraffa’s discovery of the possibility of reswitching of tech niques – and, subse ­ quently, of more general phenomena of capital deepen ing reversal – represents an insuperable critique of the notion of an aggregate measure of capital and of the related tool of the aggregate production function. This critique has, accordingly, determined the abandonment of the Wick sellian1 approach as a foundation for an internally consistent theory of value.