23 Pages

The Neoclassical Classical Fallacy

ByO.F. Hamouda

"The Classical Classical Fallacy" (1994) exemplifies Samuelson's vigourously sustained interest both in the capital controversies and in his conviction in the persuasive role of mathematics. Although in the article Samuelson has attempted to tackle the issue of capital from the perspective of Marxists, neo-Ricardians, Sraffa, Stigler, Wicksell, Schumpeter and Bohm Bawerk, and Hicks, the present consideration of it restricts itself to his treatment of the "fallacy" of Ricardo and Hicks and its misunderstanding. It is an in-depth discussion of three numerically comparable examples from Ricardo, Hicks and Samuelson. Since Samuelson's main goal was to establish that it is fallacious to hold that 1) fixed capitals are prejudicial to wages and the demand for labour and 2) circulating capitals are favourable to the real wage rate and the demand for labour, it is argued that Samuelson's approach to the topic is much more general than that intended by either Ricardo or Hicks. The present contribution sheds light on the tremendous difficulties connected with the concept of capital and the issue of machinery's effect.