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The Theorem of Proportionality in Contemporary Capital Theory: An Assessment of its Conceptual Foundations
2009
Social Science Research Network
It is ascertained that the theorem of proportionality, which maintains that replacement investment is a constant proportion of the outstanding capital stock, has several fundamental shortcomings. It derives from a model founded on assumptions that are highly restrictive and unlikely to hold in reality. It is alien to the thinking of researchers in industrial organization and other neighboring fields to economics that treat the durability of capital goods as a choice variable. It ignores several
doi:10.2139/ssrn.1533705
fatcat:3zwpgnac6vhkna5ivblgo77zcy