The reswitching debate

Abstract The paper addresses one of the most interesting and fundamental debates in modern economic theory. The so-called Cambridge capital controversies raged for more than a decade from the early 1960s through the early 1970s. At stake was the logical consistency of all economic analysis. The debate centred on the ability of mainstream theory to demonstrate a link between relative input prices and the techniques that profit maximizing capitalists would employ in production. Without this linkage, mainstream theory was left without any mechanism for demonstrating a relationship between input markets and output markets. Much of what economists think they know about how markets work can be traced back to this linkage. The stakes were high indeed. The paper looks at how the participants in the debate made their arguments, how the profession responded, and what the outcomes were. Essentially, the defenders of mainstream analysis lost every battle and, in the end won the war. How can such an outcome be defended on scientific grounds? The paper concludes with some cautious assessments.