Does the aggregate production function imply anything about the laws of production? A note on the Simon and Shaikh critiques

Abstract

The aggregate production function (especially the Cobb–Douglas) is widely used in both applied and theoretical work, in spite of the large number of criticisms of it that have been advanced since its inception. Two related criticisms by Simon and Levy (1963) and Shaikh (1974) are particularly damaing since they have shown that if factor shares are stableanyunderlying technology will generate a Cobb–Douglas relationship. This argument seems to have been largely ignored in the literature or, by implication, not seen as particularly important. The purpose of this paper is to assess and extend these criticisms. New empirical evidence is presented which, it is argued, illustrates the former. Furthermore, it is shown that a Kaleckian mark-up model will equally give rise to a Cobb–Douglas even though, of course, no neoclassical assumptions are invoked. It is concluded that the Cobb–Douglasper se can give no independent corroboration of either the marginal productivity theory of distribution or the assumption of perfect competition.