Approximate surrogate production functions

Abstract

The Cambridge debate showed that an aggregation of capital is not possible in general. A recent investigation has found one example for reswitching and several for reverse capital deepening, but the paradoxes appear to be infrequent. The paper provides a theoretical justification of this result and shows how wage curves of input–output matrices with small non-dominant eigenvalues become quasi-linear with some numéraires. Large random systems lead to the genesis of such states. Approximate surrogate production functions then seem possible. A family of economic systems with constant capital composition allows construction of a surrogate production function.

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