Unconventional Results with Surrogate Production Functions

Abstract

AbstractStarting from Samuelson's famous 1962 Surrogate Production Function, we show that some such functions are perfectly consistent with a ‘return of the machine type’. This is so when we introduce a distinctly conventional possibility—that of machine–labour substitution—instead of Samuelson's fixed proportions, within every technique. We also show that, in the presence of two primary inputs, the surrogate model can give distinctly unconventional primary input use/input price relations at the level of the consumer good industry, even if the rate of interest is identically null.