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The Kaldor/Knight controversy: Is capital a distinct and quantifiable factor of production?


  • Avi Cohen


Controversy focuses on three questions: Is capital a distinct factor of production? Is capital quantifiable in a theoretically consistent manner? Are process stories necessary around convergence to, or changes in, equilibrium interest rates? To all, Kaldor answers 'yes' to Knight's 'no'. The controversy is historically important in: 1) shifting issues in recurring twentieth century capital theory controversies from periods of production to production functions, from roundaboutness to diminishing returns; 2) revealing Knight's position on increasing knowledge offsetting diminishing returns over time as an unacknowledged 'precursor' of new growth theory; 3) marking the turning point for Kaldor's attachment to Austrian theory.

Suggested Citation

  • Avi Cohen, 2006. "The Kaldor/Knight controversy: Is capital a distinct and quantifiable factor of production?," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 13(1), pages 141-161.
  • Handle: RePEc:taf:eujhet:v:13:y:2006:i:1:p:141-161
    DOI: 10.1080/09672560500522801

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    References listed on IDEAS

    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Blaug,Mark, 1997. "Economic Theory in Retrospect," Cambridge Books, Cambridge University Press, number 9780521577014.
    3. Bliss, C. J., 1975. "Capital Theory and the Distribution of Income," Elsevier Monographs, Elsevier, edition 1, number 9780720436044 edited by Bliss, C. J..
    4. Harcourt,G. C., 1972. "Some Cambridge Controversies in the Theory of Capital," Cambridge Books, Cambridge University Press, number 9780521096720.
    5. A. Cohen & G. Harcourt., 2009. "Whatever Happened to the Cambridge Capital Theory Controversies?," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 8.
    6. Christian Gehrke, 2003. "The Ricardo Effect: Its Meaning and Validity," Economica, London School of Economics and Political Science, vol. 70(277), pages 143-158, February.
    7. Milgate, Murray, 1979. "On the Origin of the Notion of "Intertemporal Equilibrium"," Economica, London School of Economics and Political Science, vol. 46(181), pages 1-10, February.
    8. Peter Boettke & Karen Vaughn, 2002. "Knight and the Austrians on Capital, and the Problem of Socialism," History of Political Economy, Duke University Press, vol. 34(1), pages 155-176, Spring.
    9. Targetti, Ferdinando, 1992. "Nicholas Kaldor: The Economics and Politics of Capitalism as a Dynamic System," OUP Catalogue, Oxford University Press, number 9780198283485.
    10. D. G. Champernowne & R. F. Kahn, 1953. "The Value of Invested Capital," Review of Economic Studies, Oxford University Press, vol. 21(2), pages 107-111.
    11. F. H. Knight, 1924. "Some Fallacies in the Interpretation of Social Cost," The Quarterly Journal of Economics, Oxford University Press, vol. 38(4), pages 582-606.
    12. Avi J. Cohen, 2003. "The Hayek/Knight Capital Controversy: The Irrelevance of Roundaboutness, or Purging Processes in Time?," History of Political Economy, Duke University Press, vol. 35(3), pages 469-490, Fall.
    13. Harald Hagemann & Hans-Michael Trautwein, 1998. "Cantillon and Ricardo effects: Hayek's contributions to business cycle theory," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 5(2), pages 292-316.
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