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Old and new formulations of the neoclassical theory of aggregate investment : a critical review

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  • Daniele Girardi

    (Department of Economics, University of Massachusetts, Amherst)

Abstract

This paper surveys the neoclassical theory of aggregate investment and its criticisms. We distinguish four main formulations of this theory: the traditional Wicksellian investment function; the Fisherian array-of-opportunities approach (as Witte Jr. called it); the Jorgensonian model; the now prevailing adjustment-costs models. With respect to other papers criticizing the neoclassical theory of investment, we do not appeal to market imperfections. We instead argue that all four formulations present serious theoretical difficulties, even conceding free competition.

Suggested Citation

  • Daniele Girardi, 2017. "Old and new formulations of the neoclassical theory of aggregate investment : a critical review," UMASS Amherst Economics Working Papers 2017-03, University of Massachusetts Amherst, Department of Economics.
    • Handle: RePEc:ums:papers:2017-03
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    References listed on IDEAS

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    Cited by:

    1. Daniele Girardi & Riccardo Pariboni, 2019. "Normal utilization as the adjusting variable in Neo‐Kaleckian growth models: A critique," Metroeconomica, Wiley Blackwell, vol. 70(2), pages 341-358, May.

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    More about this item

    Keywords

    investment; neoclassical theory; Wicksell; Jorgenson; Fisher; adjustment-costs;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)

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