The Cobb-Douglas production function's underlying core role in the mainstream economics paradigm

Abstract

The Cobb-Douglas production function is certainly a core piece in the mainstream economics field. This neoclassical two-input Production Function, its short mathematical expression (even if early extended to more than two inputs), is yet, explicitly or implicitly, a widely used cornerstone element in mainstream economics texts and manuals; and one of those that graduates in economics usually will afterwards better remind over the topic of Production and firms’ inner operation.
After a previous schematic reminding-oriented presentation of it, a critical review of its assumptions, the postulates mathematically deduced from the function, and its implicit role in the mainstream economics’ paradigm, is developed here. Attention is also paid to its early application beyond its original field of Production & firms (a microeconomics scenario); i.e., to that of the whole economy’s magnitudes: the aggregate of all productions (say, GDP), the whole Labour force (Employment), etc.; what in turn evolved towards the early economic growth models.

Keywords: Cobb-Douglas function, Production function, returns to scale, marginal physical productivity of Labour, marginalism, hypotheses contrasting, economic growth models.

JEL Classification: D24, D22, B21, D01, D50, E10, E20