...then it seems to me you are grasping at straws in an effort to criticize mainstream economics.
Anyway, I don't personally think of the Solow model as a development model per se - it's a growth model. Obviously that's of interest to development economists, but presumably they're interested in more than just that.
It's a nice first approximation that more precise ideas collapse into under special conditions.
Not to mention you don't evaluate marginal productivity by looking at average productivity and average wages.
ReplyDeleteStrikes me that MPT predicts increases in productivity will be correlated with increases in wages.
Delete@UE:
DeleteNot necessarily if there is some underlying structural change in the economy. With standard Cobb-Douglas technology Y = K^a L^(1-a), marginal product = wage = (1-a)Y/L. If "a" goes up over time, wages will rise more slowly than average productivity. This is the idea of "capital-biased" technological change that e.g. Paul Krugman wrote about recently - I'm not saying that this is really what happened, but such an explanation would surely be consistent with MPT.
And while I'm writing this, your criticisms of general equilibrium are pretty off-mark too. I'll just point out that your preferred Sraffa's model can be reinterpreted in general equilibrium framework (Hahn 1982, Mandler 1999), so it can hardly be considered "more realistic", at least on an abstract level. Of course a particular (with specific values for technology, etc.) Sraffian model could be more realistic than some particular GE model, but that would be an entirely different dicussion.
F. Hahn (1982). The neo-Ricardians. Cambridge Journal of Economics, 6 (4), 353-374
M. Mandler (1999). Sraffian Indeterminacy in General Equilibrium. Review of Economic Studies, 66 (3), 693-711
That's fine, but it goes against Tabarrok's seeming contention that average productivity is irrelevant for discussion of MPT.
DeleteAll I was looking for was some sort of explanation. Whether technological development has been capital biased is another issue.
Sorry - it is not 'another issue' - it is a related falsifiable proposition. I would be interested in seeing whether it is true or not.
DeleteWould you please -- pretty please -- for G*** sake, please -- expand your thoughts on this subject? Since one of the things driving me mad is that economists in the 1960's took an interest in technological improvements, which always seemed sensible to me, and modern day economists seem to have no interest in expanding science and rtechnology. And I'd really like to know ehat changed their minds.
ReplyDeleteSo I don't agree with your premise in a whole lot of ways, but am very interested in speaking to the question. I'll try to in the near future - feel free to bug me if I put it off.
DeleteSolow just opens the door to those questions - there's actually much better work on it and in fact it's those questions that animate modern growth theory. I think a lot of that is incomplete, personally.
Just seems to me the Solow model is something that should have been superseded by now for something more immediately relevant (something Solow commented on - he was broadly talking about production functions, but obviously the Solow model is very similar to these).
ReplyDelete