Book contents
- Frontmatter
- Contents
- PREFACE
- 1 INTRODUCTION
- PART I THE MICROECONOMIC THEORY OF PRODUCTION
- 2 THE TECHNICAL THEORY OF PRODUCTION UNDER CONDITIONS OF FIXED PROPORTIONS
- 3 THE ECONOMIC THEORY OF PRODUCTION UNDER CONDITIONS OF FIXED PROPORTIONS
- 4 TECHNICAL ASPECTS OF CONTINUOUS PRODUCTION FUNCTIONS: GENERAL THEORY
- 5 TECHNICAL ASPECTS OF CONTINUOUS PRODUCTION FUNCTIONS HOMOGENEOUS OF DEGREE ONE
- 6 ECONOMIC THEORY OF PRODUCTION WITH FIXED INPUT PRICES
- 7 THE THEORY OF COST WITH FIXED INPUT PRICES
- 8 THE ECONOMIC THEORY OF COST AND PRODUCTION WITH VARIABLE INPUT PRICES
- 9 ‘INFERIOR FACTORS’ AND THE THEORIES OF PRODUCTION AND INPUT DEMAND
- 10 THEORY OF THE MULTI-PRODUCT FIRM
- PART II MACROECONOMIC THEORIES OF DISTRIBUTION AND TECHNOLOGICAL PROGRESS
- REFERENCES
- AUTHOR INDEX
- SUBJECT INDEX
5 - TECHNICAL ASPECTS OF CONTINUOUS PRODUCTION FUNCTIONS HOMOGENEOUS OF DEGREE ONE
Published online by Cambridge University Press: 07 October 2011
- Frontmatter
- Contents
- PREFACE
- 1 INTRODUCTION
- PART I THE MICROECONOMIC THEORY OF PRODUCTION
- 2 THE TECHNICAL THEORY OF PRODUCTION UNDER CONDITIONS OF FIXED PROPORTIONS
- 3 THE ECONOMIC THEORY OF PRODUCTION UNDER CONDITIONS OF FIXED PROPORTIONS
- 4 TECHNICAL ASPECTS OF CONTINUOUS PRODUCTION FUNCTIONS: GENERAL THEORY
- 5 TECHNICAL ASPECTS OF CONTINUOUS PRODUCTION FUNCTIONS HOMOGENEOUS OF DEGREE ONE
- 6 ECONOMIC THEORY OF PRODUCTION WITH FIXED INPUT PRICES
- 7 THE THEORY OF COST WITH FIXED INPUT PRICES
- 8 THE ECONOMIC THEORY OF COST AND PRODUCTION WITH VARIABLE INPUT PRICES
- 9 ‘INFERIOR FACTORS’ AND THE THEORIES OF PRODUCTION AND INPUT DEMAND
- 10 THEORY OF THE MULTI-PRODUCT FIRM
- PART II MACROECONOMIC THEORIES OF DISTRIBUTION AND TECHNOLOGICAL PROGRESS
- REFERENCES
- AUTHOR INDEX
- SUBJECT INDEX
Summary
Introduction
This chapter is devoted to a systematic and intense investigation of the technical theory of production in the special case of linearly homogeneous production functions. This might seem unnecessary inasmuch as this class of functions is a highly simplified form of the general class considered in chapter 4. Yet such a discussion is worthwhile. First, the assumption of linear homogeneity is so specialized and simplifying that it leads to some significant extensions of the general theory of production. Even more important, perhaps, this assumption seems to be an accurate empirical approximation of production conditions in a wide range of circumstances. Thus these extensions appear to have important empirical applications. Second, the case of linear homogeneity is so important in the analyses of distribution and aggregate production that it merits special attention. Finally, and somewhat surprisingly, there seems to be a widespread misunderstanding of certain aspects of the technical theory of production under conditions of linear homogeneity.
The last point is illustrated by the recent argument concerning ‘diminishing returns and linear homogeneity’. The argument was begun, innocently enough, by Nutter. He cited the following textbook statements, one of which is attributable to negligence, the other to error. The first is from Liebhafsky:
Many writers also draw the total product curve with a point of inflection and then ‘assume that the production function is linearly homogeneous’. A thorough search of the literature has failed to reveal a single case in which a writer has specified a linearly homogeneous production function which produces such a total product curve! […]
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- Chapter
- Information
- The Neoclassical Theory of Production and Distribution , pp. 93 - 126Publisher: Cambridge University PressPrint publication year: 1969