Capital Theory Debates: New Developments and Direction

In recent years, the research on capital theory has shifted from reverse capital deepening and reswitching in techniques to a new direction, which goes beyond the near-linearities of price-rates of profit trajectories and wage-rates of profit curves and explicates the reasons behind them. The reswitching issue remains in the background of these studies as a remote, albeit ever-present, possibility. The article contributes some more evidence to the extant literature by utilizing data from the last available benchmark input-output table of the US economy of the year 2012. The derived near-linearities of price trajectories and wage-rate of profit curves are explained by the low effective rank of the economy’s input-output matrices and not from their seemingly random character. These findings shed additional light on a new and more meaningful direction in the research agenda; that is, the possibility of molding the essential features of the economy through dimensionality reduction.