Fifteen years after the Global Financial Crisis: Recessions and Business Cycles in the History of Economic Thought

The Rarity of Reswitching Explained

Schefold Bertram, Goethe-University, Frankfurt

Most studies of the frequency of reswitching and reverse capital deepening were based on two or three sector models and came to the conclusion that these phenomena are rare. Here it is shown that the probability of isolated reswitching tends to zero in large economic systems. The assumptions of the new mathematical theorems proposed are supported by an empirical enquiry. The randomness of input-output systems can help to explain the result, but is not essential. If the number of switchpoints tends to infinity in large systems, it is not certain that even one represents a case of reverse capital deepening. The focus of the critique of capital will have to change. – The paper is long and analytically difficult and has undergone a number ob revisions; a further revision is in course.

Area: Eshet Conference

Keywords: Keywords: capital theory, reswitching, reverse capital deepening, Sraffian economics, input-output analysis JEL codes: B24, C62, C67, D57

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