Title: Neoclassical empirical evidence on employment and production laws as artefact
Abstract:Students that are taught neoclassical economics are often struck by the lack of realism of many assumptions that underlie the theory. They are usually quite relieved when they discover that there are ...Students that are taught neoclassical economics are often struck by the lack of realism of many assumptions that underlie the theory. They are usually quite relieved when they discover that there are other schools of thought in economics that entertain different, more realistic, assumptions. However the enthusiasm of students for these alternative economics paradigms is often moderated by the enormous amount of empirical evidence that seems to provide support for neoclassical theory. If neoclassical economics is wrong, they ask, why is it that so many empirical studies appear to “confirm” the main predictions of neoclassical theory? Heterodox economists often claim that neoclassical production functions and their substitution effects make little sense in our world of fixed coefficients and income effects. Claims to that effect also arose from the Cambridge capital controversies that rocked academia in the 1960s and 1970s. Neoclassical economists, however, have responded by pointing to the large number of empirical studies that seem to “verify” neoclassical theory, in particular when fitting Cobb-Douglas production functions. The purpose of this paper is to resolve this apparent paradox, and show that the “good fits” of neoclassical number crunchers is no evidence at all. Students can embrace heterodox microeconomics and its alternative assumptions without remorse. The numerous studies of empirical “evidence” supporting neoclassical production functions or other derived constructs are worthless. This empirical evidence is nothing but spurious findings, or as the title of the paper suggests, this empirical evidence is nothing but an artefact. The word artefact carries several definitions. The most common definition, relevant to science, says that an artefact, or artifact, is a spurious finding caused by faulty procedures. It is a finding that does not really exist but that was created inadvertently by the researcher. In particular we shall see that neoclassical economists claim to measure output elasticities with respect to capital and labour, whereas in reality they are estimating the profit and wageRead More
Publication Year: 2008
Publication Date: 2008-01-01
Language: en
Type: article
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Cited By Count: 13
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