Retrospectives: The Introduction of the Cobb-Douglas Regression
At the 1927 meetings of the American Economic Association, Paul Douglas presented a paper entitled "A Theory of Production," which he had coauthored with Charles Cobb. The paper proposed the now familiar Cobb-Douglas function as a mathematical representation of the relationship between capital, labor, and output. The paper's innovation, however, was not the function itself, which had originally been proposed by Knut Wicksell, but the use of the function as the basis of a statistical procedure for estimating the relationship between inputs and output. The paper's least squares regression of the log of the output-to-capital ratio in manufacturing on the log of the labor-to-capital ratio—the first Cobb-Douglas regression—was a realization of Douglas's innovative vision that a stable relationship between empirical measures of inputs and outputs could be discovered through statistical analysis, and that this stable relationship could cast light on important questions of economic theory and policy. This essay provides an account of the introduction of the Cobb-Douglas regression: its roots in Douglas's own work and in trends in economics in the 1920s, its initial application to time series data in the 1927 paper and Douglas's 1934 book The Theory of Wages, and the early reactions of economists to this new empirical tool.
Volume (Year): 26 (2012)
Issue (Month): 2 (Spring)
|Contact details of provider:|| Web page: https://www.aeaweb.org/jep/|
More information through EDIRC
|Order Information:||Web: https://www.aeaweb.org/subscribe.html|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Solow, Robert M, 1974. "Law of Production and Laws of Algebra: The Humbug Production Function: A Comment," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 121, February.
- Reder, Melvin W, 1982. "Chicago Economics: Permanence and Change," Journal of Economic Literature, American Economic Association, vol. 20(1), pages 1-38, March.
- Samuelson, Paul A, 1979. "Paul Douglas's Measurement of Production Functions and Marginal Productivities," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 923-39, October.
- Wassily Leontief, 1934. "Interest on Capital and Distribution: A Problem in the Theory of Marginal Productivity," The Quarterly Journal of Economics, Oxford University Press, vol. 49(1), pages 147-161.
- Shaikh, Anwar, 1974. "Laws of Production and Laws of Algebra: The Humbug Production Function," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 115-20, February.
When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:26:y:2012:i:2:p:223-36. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)or (Michael P. Albert)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.