A Brief History of Production Functions

Abstract

This paper gives an outline of evolution of the concept and econometrics of production function, which was one of the central apparatus of neo-classical economics. It shows how the famous Cobb-Douglas production function was indeed invented by von Thunen and Wicksell, how the CES production function was formulated, how the elasticity of substitution was made a variable and finally how Sato's function incorporated biased technical changes. It covers almost all specifications proposed during 1950-1975, and further the LINEX production functions and incorporation of energy as an input. The paper is divided into (1) single product functions, (2) joint product functions, and (3) aggregate production functions. It also discusses the 'capital controversy' and its impacts.

Keywords: Production function, Cobb-Douglas, CES, Transcendental, translog, Zellner-Revankar, VES, Bruno, Kadiyala, Diewert, Kummel, Mundlak, Engineering, Kmenta, McCarthy, Fare, Mitchell, Multi-output, joint product, Data Envelopment, Household, Humbug, Cambridge capital controversy

JEL Classification: B13, B21, B23, C13, D24, D33, E25