Blaug Versus Garegnani On The ‘Formalist Revolution’ And The Evolution Of Neoclassical Capital Theory

In a series of papers, Mark Blaug has accused modern, mainstream economic theory of sterility because of the abandonment of “competition as a process,” tracing the cause to the Formalist Revolution of the 1950s. The paper agrees with the criticism but disagrees on the cause, which is, rather, to be found in the shift from the treatment of capital as a single factor of variable ‘form’ to a Walrasian specification of the capital endowment as a given vector, a datum incompatible with the role of equilibrium as a center of gravitation of time-consuming adjustments. The shift was due, as shown by Pierangelo Garegnani, to unease in the 1930s with the conception of capital as a single factor, a fact neglected by Blaug but historically evident and a cause of great uncertainty in capital theory in subsequent decades. The conclusion is that, to avoid the sterility of neo-Walrasian equilibria, one cannot return to Alfred Marshall with his inconsistent notion of capital as a single factor, but Blaug himself indicates another possible direction.