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The Fund-Flow Approach: A Critical Survey

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  • Giuseppe Vittucci Marzetti

Abstract

The fund-flow approach to production theory was first proposed by Nicholas Georgescu-Roegen almost half a century ago. Since then, from time to time it has received attention, but, probably because of its analytical complexity and difficulty to deliver sound "operational conclusions", it is now almost abandoned. The approach has been also recently criticized for its instrumental assumption of constant efficiency of funds, by emphasizing its limitations in addressing issues related to fixed capital depreciation. The paper critically surveys Georgescu-Roegen's original model, together with the later developments and modifications. It also discusses the recent criticisms. The conclusion is that, despite its drawbacks, the fund-flow approach has a "competitive advantage" in the actual description of production as a process unfolding in time and entailing a temporal coordination between different elements. In this respect, it seems that most of its fruitful applications have yet to come.
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Suggested Citation

  • Giuseppe Vittucci Marzetti, 2013. "The Fund-Flow Approach: A Critical Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 27(2), pages 209-233, April.
    • Handle: RePEc:bla:jecsur:v:27:y:2013:i:2:p:209-233
    DOI: 10.1111/joes.2013.27.issue-2
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    Cited by:

    1. Quentin Couix, 2019. "Natural resources in the theory of production: the Georgescu-Roegen/Daly versus Solow/Stiglitz controversy," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 26(6), pages 1341-1378, November.
    2. Patrick Llerena & Corentin Lobet & André Lorentz, 2024. "Two halves don't make a whole: instability and idleness emerging from the co-evolution of the production and innovation processes," LEM Papers Series 2024/27, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Couix, Quentin, 2020. "Georgescu-Roegen's Flow-Fund Theory of Production in Retrospect," Ecological Economics, Elsevier, vol. 176(C).
    4. Quentin Couix, 2018. "From Methodology to Practice (and Back): Georgescu-Roegen's Philosophy of Economics and the Flow-Fund Model," Documents de travail du Centre d'Economie de la Sorbonne 18021, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    5. Morroni, Mario, 2014. "Production of commodities by means of processes," Structural Change and Economic Dynamics, Elsevier, vol. 29(C), pages 5-18.
    6. Moriah B. Bostian & Cinzia Daraio & Rolf Fare & Shawna Grosskopf & Maria Grazia Izzo & Luca Leuzzi & Giancarlo Ruocco & William L. Weber, 2018. "Inference for Nonparametric Productivity Networks: A Pseudo-likelihood Approach," DIAG Technical Reports 2018-06, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    7. Savona, Maria & Steinmueller, W. Edward, 2013. "Service output, innovation and productivity: A time-based conceptual framework," Structural Change and Economic Dynamics, Elsevier, vol. 27(C), pages 118-132.

    More about this item

    JEL classification:

    • B29 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Other
    • B59 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Other
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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