The Neoclassical Theory of Aggregate Investment and its Criticisms

Authors

Daniele Girardi, Economics Department, University of Massachusetts AmherstFollow

Working Paper Number

2021-11

Publication Date

2021

Abstract

This paper surveys the neoclassical theory of aggregate investment and its criticisms. We identify four main strands in neoclassical investment theory: (i) the traditional Wicksellian model; (ii) the Fisherian ‘array-of-opportunities’ approach; (iii) the Jorgensonian model; (iv) the now prevailing adjustment cost models. We summarize each approach, discuss the main conceptual issues, and highlight similarities and differences between them. We also provide a systematic summary and discussion of the main criticisms that have been leveled at each of these models and highlight some unresolved theoretical issues.

DOI

https://doi.org/10.7275/23485220

License

UMass Amherst Open Access Policy

Recommended Citation

Girardi, Daniele, "The Neoclassical Theory of Aggregate Investment and its Criticisms" (2021). Economics Department Working Paper Series. 308.
https://doi.org/10.7275/23485220