Abstract
SUMMARYThe article presents a two‐sector, fixed‐proportions neoclassical model with endogenous demand. The object of the model is to demonstrate two important points: (a) neoclassical theory, distribution theory or capital theory, is not dependent upon smoothly continuous and well‐defined marginal productivity functions; and (b) any theory of distribution that is not merely based upon accounting identities must contain a supply side as well as a demand side. The model does not contain an ‘unobtrusive postulate’, and it demonstrates that neoclassical theory does not depend upon aggregating capital and defining the rate of interest as the marginal productivity of ‘it’.
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