# ABSTRACT OF PAPER

Title: Marx, the Production Function and the Old Neoclassical Equilibrium: Workable under the Same Assumptions?

Author: *Schefold Bertram*

The critique of capital advanced by the Cambridge economists affected both neoclassical and Marxian theories. The aim of this paper is to analyse what remains of the critique, if the physical data of the theory are regarded as stochastic magnitudes. The question has already been pursued for the aggregate production function in Schefold (2013) and for Marx in Schefold (2014). Here, the critique is extended to what we call the old neoclassical equilibrium. Various authors, in particular Petri (2004), following in the footsteps of Garegnani (1960) and of Sraffa (1960), have shown how the method of comparing long-period positions was used both by the classical economists, who started from a determination of distribution by means of a given real wage, and by neoclassical economists who determined distribution by means of supply and demand for labour and capital, where capital had to be conceived as given in terms of an amount of value, and the amounts of capital goods used in the several lines of production were determined endogenously; their total value corresponded to the value of the capital endowment. This â€˜old neoclassical equilibriumâ€™ approach contrasts with that of modern intertemporal general equilibrium theory, where the endowments are given as quantities of capital goods and non-produced means of production, with the consequence that the rate of profit can become uniform only as a tendency over many periods (so-called turnpike theorem by Dorfman, Samuelson and Solow 1958, see Schefold 1997). The solution of the old neoclassical economists of taking the quantity of capital as given in the form of a value magnitude has survived until today in the form of the production function which is introduced as a one-sector model, but then applied to the economy as a whole. This has been criticised, using the paradoxes of capital, but these seem to occur only rarely in empirical investigations (Han and Schefold 2006). In Schefold (2013), sufficient conditions are given for the construction of approximate surrogate production functions, extending the realm in which this is possible from one-commodity world to more realistic conditions. Schefold ( 2013a) shows that only a few of a multiplicity of linear wage curves will appear on the envelope, if the position of the wage curve is random, and Schefold (2014) shows that a central proposition of Marx in his transformation of values into prices of production holds under analogous conditions: profits equal total surplus value. I shall here summarise these results, adding a clarification of the method, and showing that a similar argument can be made to provide a partial justification of the old neoclassical general equilibrium model, which used the idea of capital as an endowment of a quantity of value.

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