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The Neoclassical Theory of Aggregate Investment and its Criticisms

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  • Daniele Girardi

    (Department of Economics, University of Massachusetts Amherst (USA))

Abstract

This paper surveys the neoclassical theory of aggregate investment and its criticisms. We identify four main strands in neoclassical investment theory: (i) the traditional Wicksellian model; (ii) the Fisherian ‘array-of-opportunities’ approach; (iii) the Jorgensonian model; (iv) the now prevailing adjustment cost models. We summarize each approach, discuss the main conceptual issues, and highlight similarities and differences between them. We also provide a systematic summary and discussion of the main criticisms that have been leveled at each of these models and highlight some unresolved theoretical issues.

Suggested Citation

  • Daniele Girardi, 2021. "The Neoclassical Theory of Aggregate Investment and its Criticisms," UMASS Amherst Economics Working Papers 2021-11, University of Massachusetts Amherst, Department of Economics.
    • Handle: RePEc:ums:papers:2021-11
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    File URL: https://scholarworks.umass.edu/econ_workingpaper/308/
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    Keywords

    investment; neoclassical theory; adjustment costs;
    All these keywords.

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