The Emperors Have No Clothes or Much Ado about Nothing : the Cambridge Capital Controversy Revisited

For 70 years, the participants in the Cambridge capital controversy have been arguing about the wrong things––the technical aspects of capital and whether they can support the neoclassical theory of distribution beyond the case of the corn model, a single homogeneous good as both input and output, capital and consumption good. Overlooked is that, whether in the case of the corn model or the case of heterogeneous capital, the neoclassical theory depends on a single, essential assumption, an invariant real capital quantity as technique varies. With this assumption, the neoclassical theory will go through in all cases, both for the corn model and for heterogeneous capital. Without this assumption, the neoclassical theory will not go through in any case, including the corn model. The assumption of an invariant real capital as technique varies has no basis whatsoever, let alone a plausible basis. The neoclassical theory of distribution therefore fails because its essential factual premise is false. Technique of production is not, and cannot be, a determinant of distribution, but not for any of the reasons given by the post-Keynesian critics of the neoclassical theory, all of which are incorrect