This chapter first looks at important theoretical and statistical critiques of Douglas’s production function research that appeared during WWII. A theoretical line of criticism used neoclassical models to infer what relationship, if any, would exist between parameters of firm production functions and the coefficients estimated by Douglas. A critique from the perspective of the Cowles Commission econometric research program was provided by Marschak and Andrews. The Marschak and Andrews article can be read as a devastating criticism of Douglas’s work, a list of problems that fatally marred the program, but their tone suggested a different conclusion: that Douglas’s pioneering vision of statistically estimating the key relationships of neoclassical value and distribution theory could be realized, given better data and the methods of the Cowles econometricians. The chapter also analyzes Douglas’s 1947 AEA presidential address, which reveals his own understanding (as opposed to that of his coauthors and those who reacted to his work) of what he had accomplished with his 20-year research program.

The chapter puts the orignal Cobb–Douglas paper in the context of Douglas’s previous research and the theoretical frameworks and empirical practices employed by economists in the 1920s. Douglas’s early research with the time series version of the regression is described. During this period, Douglas linked his procedure to the marginal productivity theory of distribution, and presented his research as part of a broader effort to build a quantitative account of economic activity on the “valuable theoretical scaffolding” of neoclassical theory. Several friendly critics saw Douglas’s research program as complementary to their own neoclassical-econometric program, but judged Douglas's methods and results based on what they revealed about the characteristics of firm-level production functions. This issue was never crucial for Douglas, who considered an aggregate production function to be an important theoretical entity worth estimating. However, Douglas regarded these economists as potential allies in his effort to promote his new research technique. It was they who had first labeled the relationship that Douglas was attempting to estimate a “production function”, and after 1935 Douglas adopted this label.