Introduction

All economic measures and empirical constructs must have a theoretical base. The productivity measures advanced in this study can be said to rest primarily, though not entirely, on the Cambridge theory of capital.

In recent years a controversy occurred over whether any aggregate measure of “capital” would be, in comparisons of economies, helpful in “explaining” why levels of consumption per head, “real” wage rates, or real net rates of return to capital differed across such economies. The conclusion was that such aggregate constant-price measures of capital would not, except under the most restrictive assumptions, be found. The problem was not whether an aggregate measure could or could not be constructed. Many such measures can be and are put together. The question was whether knowledge of the constant-price aggregate stock of capital would, for the comparison of economies, permit one to “predict” certain variables. For instance, in a comparison of economies where, other things being equal, the stock of capital in one was greater than in the other, would this lead one to predict a lower rate of return to capital in the former compared to the latter? In general, it is now recognized, following the controversy, no such “predictions” are necessarily entailed.

The problem was neither a measurement nor an aggregation problem but a conceptual one – what was meant by capital as a factor of production?