Richard Chase On Reswitching

"Thus the reswitching anomaly, along with its theoretical developments and implications, has been placed in abeyance. And so it must be, for if this criticism were taken as being no less applicable to the real world than the theoretical, then it follows, as already noted, that orthodox economics is unable to make any reliable statements concerning the relationship of production to the various input markets. That is, the neoclassical vision of a market-coordinated production system, along with derivative growth and distribution theories, are all invalidated. As a consequence, the nature of the entire traditional circular flow conception is called into question...

...It is one thing to say that this conception of indirect economic management does not satisfactorily achieve its goals because of the existence of such real-world problems as bottlenecks, power, premature inflation, inflationary expectations, random shocks, ratchet and spillover effects, and the like. In such situations, an economically coherent and consistent market-based system of production and distribution is still assumed to exist, though it is overlaid with political, institutional, and psychological factors that affect economic adjustments and performance. The basic strategy, in this case, would be to maintain the general neoclassical-synthetic emphasis on fiscal and monetary management (with perhaps somewhat greater stress on the monetary tool, if the monetarists were to have their way), and supplement these tools with finely targeted direct and specific devices - for example, stricter antitrust enforcement, more sharply focused incentive (and disincentive) taxes, expanded job training and subsidization programs - so as to allow and encourage the effective functioning of centerpiece fiscal and monetary devices.

It is quite another thing to argue that key markets in the system, particularly those in the resource or input sector, do not possess the fundamental economic characteristics necessary to the orderly systematic functioning that is postulated by mainstream theory..." -- Richard X. Chase, "Production Theory," in A Guide to Post-Keynesian Economics, (edited by Alfred S. Eichner), M. E. Sharpe, 1978, p. 79-80