Recent results in capital theory concerning the reswitching of techniques of production have shaken the foundations of a neoclassical parable according to which the total quantity of output per man is supposed to be a function of the total quantity of capital per man-the Surrogate Production Function-which can be used to predict all behavior in the sense of the wage and profit rates that would prevail in different long-run equilibria or steady states.' The source of the difficulty, it would appear, lies in the fact that the neoclassical parable attempts, as it were, to kill two birds with one stone, namely 1) to provide a general representation (or surrogate) of realistic technologies involving production with heterogeneous commodities, and 2) to link the determination of the (listribution of income directly to the technology itself and to the relative size of factor endowments. It turns out that, in general, not only are realistic

Amit Bhaduri, Donald J. Harris; The Complex Dynamics of the Simple Ricardian System*, The Quarterly Journal of Economics, Volume 102, Issue 4, 1 November 1

We present a theoretical account of the origin of the shapes of utility, probability weighting, and temporal discounting functions. In an experimental test of the theory, we systematically change the shape of revealed utility, weighting, and discounting functions by manipulating the distribution of monies, probabilities, and delays in the choices used to elicit them. The data demonstrate that there is no stable mapping between attribute values and their subjective equivalents. Expected and discounted utility theories, and also their descendants such as prospect theory and hyperbolic discounting theory, simply assert stable mappings to describe choice data and offer no account of the instability we find. We explain where the shape of the mapping comes from and, in describing the mechanism by which people choose, explain why the shape depends on the distribution of gains, losses, risks, and delays in the environment. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2013.1853 . This paper was accepted by Yuval Rottenstreich, judgment and decision making.