Abstract
The chapter deals with some of the major controversies of the period between the end of the war and the mid-Seventies. Firstly, the methodological controversy between Cowles Commission (represented by Tjalling Koopmans) and NBER (represented by Rutledge Vining), known as the “Measurement Without Theory” controversy, is examined. Secondly, the main mainstream methodological controversy on Milton Friedman’s Methodology of Positive Economics, which involved two of the most important economists of the period, Paul Samuelson and Herbert Simon, is analyzed. Lastly, the chapter deals with “the reswitching of techniques” theoretical controversy which involved economists of the two Cambridges (Cambridge, England, and Cambridge, Massachusetts) in a debate which concerned the measurement of capital goods in a way consistent with the requirements of neoclassical economic theory.
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Notes
- 1.
The literature has emphasized that the backdrop for the debate was the search for funding for Cowles’s work in theoretical econometrics and the NBER’s work in applied economics. After World War II Mitchell’s good reputation among philanthropic organizations became an obstruction to Cowles’s ambitions. From the beginning of Marschak’s directorship, the Commission started looking to widen its institutional support. As Mirowski (1989) has argued, “even with the continuing support of Alfred Cowles, they still were no match for the army of researchers at the NBER, with their extensive sources of support from the SSRC [Social Science Research Council], the Carnegie Corporation, the Rockefeller Foundation, the U.S. Government and private business” (Mirowski 1989, pp. 73–74).
- 2.
It seems that the reason it was Vining to respond to Koopmans’s criticism was Mitchell’s health problems and Burns’s political obligations (see Mirowski 1989). Orozco Espinel (2019) suggests that a generational change at the NBER may be a more general explanation. Cherrier (2011), on the basis of archival research, tells us that Milton Friedman helped Vining draft a reply to Koopmans, but refused to be publicly acknowledged (Cherrier 2011, p. 350).
- 3.
The thesis that the philosopher of science Karl Popper (1902–1994) influenced Friedman’s essay is mainly based on this passage. Friedman met Karl Popper at the first meeting of the Mont Pelerin Society in 1947 and thenceforth developed an interest in Popper’s work. Friedman himself stated that his views on method can be aligned with those of Popper, a claim which has been critically examined (see for example Frazer and Boland 1983).
- 4.
An interesting discussion of some of the critics of Friedman’s essay is in Boland (1979).
- 5.
Fifteen years later, in his 1978 Nobel lecture, Simon again claimed that “numerous logical fallacies […] can be found in Friedman’s […] essay”.
- 6.
There was a second stage of the Cambridge capital controversy, starting in the 1970s, which did not involve the American Cambridge and concerned the neo-Walrasian theory of value and distribution, untouched in the first stage of the controversy. This second stage involved neo-Walrasian and neo-Ricardian (Sraffian) economists, and concerned the problem of whether the conclusions of the first controversy also had an impact on the neo-Walrasian theory of value and distribution. For a presentation and discussion of the second controversy see Fratini (2019).
- 7.
- 8.
On Ruth Cohen see Johnson (1978).
- 9.
- 10.
- 11.
According to some commentators, and above all according to Joan Robinson (J. Robinson 1979), Samuelson (1962) was essentially a reply to Sraffa (1960). Others, for example Roncaglia (1978) and Birner (2002), seem to not agree with this judgment. What we can say is that in the early Sixties the reswitching of techniques did not yet seem to be considered a central issue—and its relevance was not completely grasped—which could mean that the main topic of discussion at the time was Robinson’s criticism, not Sraffa’s contribution.
- 12.
The reference is to the 1928 model of a society’s optimal saving entitled “A Mathematical Theory of Saving”, published by the Cambridge mathematician Frank Ramsey in The Economic Journal, which became part of the neoclassical literature on economic growth in the 1950s and 1960s (see Duarte 2009).
- 13.
As Lazzarini (2011, p. 80) writes: “it is a matter of persistent misunderstanding that the damaging implications of ‘reswitching’ on the conception of capital as a single magnitude […] is misread as damaging the ‘aggregate’ production function, as if the results of the controversies would have only affected a ‘less rigorous’ version of the theory”.
- 14.
The recollections of an MIT student of the mid-1980s reflect the MIT attitude toward the issue and generally toward economics and what they consider “substantive issues”. The Italian economist Giuseppe Bertola (1960–), Turin University, MIT Ph.D. in 1988, recalls in an article (Bertola 2010) the guest lecture Paul Samuelson gave in academic year 1984–1985 on the reswitching problem. He writes:
I remember very well his [Samuelson’s] final words: “So, we were wrong that time. Does it matter? No. We are here. You are here. The other people will be disappearing funeral after funeral”. The first part of that sentence surely sounded right to the class […] We knew that the production function is really useful if one wanted to study macroeconomics […] And we felt that usefulness and common sense are important because we were at MIT. The MIT approach to economics, largely shaped by Paul Samuelson as the Department’s founder and iconic figure, had long been, was, and is inspired by substantive issues, to be analyzed by whichever happen to be the most practical tools. It seemed obvious to us that, to study an aggregate economy, one should be aware that aggregate production is an imperfect tool and use it for all it’s worth […] The second half of the sentence, and the reference to funerals just a few months after Sraffa’s, was not so nice. But so was Samuelson. Polite, precise, clear, but not nice. A superiority complex emphasis on “us” as something special, and a very competitive and slightly insecure attitude, were similarly less-than-nice aspects of the MIT Department he had made.
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Marchionatti, R. (2024). Great Theoretical Controversies. In: Economic Theory in the Twentieth Century, An Intellectual History—Volume III . Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-50222-4_9
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