Half century of the Cambridge capital controversy

Abstract

This article seeks to reexamine the apparent logical inconsistencies of neoclassical theory identified during the Cambridge Controversy but subsequently disregarded in the mainstream literature based on the argument that these inconsistencies are not present in Arrow Debreu’s general equilibrium models. In this sense, it presents the main problems involved, as well as numerical examples that try to clarify the argument developed. Besides a critical perspective, it intends to have a propaedeutic function, which, however, is naturally limited by the complexity of the theme and the arguments used by the authors who have addressed it.

Keywords:
Cambridge controversy; Capital controversy; Law of diminishing returns; Free competition; Neoclassical theory