Blogging about international development, politics and living with disease.
sigh - to busy to blog, at least until October. But then the blog shall re-awake...
Ramblings and Musings
While you are effectively sleeping, here is an interesting link(s) to read: http://haloscan.com/tb/angrybear/2347064426076440082 linking to http://www.iea.org/Textbase/work/2004/eewp/Ayres-paper1.pdf The supposed link between factor payments and factor productivities gives the national accounts a direct and fundamental (but spurious) role in production theory. In reality, however, (as noted in the introduction) the economy produces final products from a chain of intermediates, not directly from raw materials or, still less, from labor and capital without material inputs. In the simple single sector model used to `prove’ the relationship between factor productivity and factor payments, this crucial fact is neglected. Allowing for the omission of intermediates (by introducing even a two-sector or three-sector production process) the picture changes completely. In effect, downstream value-added stages act as productivity multipliers. This enables a factor receiving a very small share of the national income directly, to contribute a much larger effective share of the value of aggregate production, i.e. to be much more productive than its share of overall labor and capital would seem to imply if the simple theory of income allocation were applicable ..
Terence - it's October, where are you? We miss you and want you back!
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