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Is reswitching still important? One should ask: important for what purpose? 
 
Does it play an important role in the way economics is actually done and taught by the
majority of practising economics today? Clearly not (as one could easily show by looking
at graduate syllabuses, contents of leading journals, etc.). In terms of the history of
economics, it is a topic which aroused some interest in the 1960s but which was eventually
judged (by the majority) not to be of further interest.
 
Is it important in some absolute sense? In itself, pretty clearly not since it relates
only to a very special class of models in which prices and technology are constant over
time. But it was never meant to be important in itself - it served as a counter example to
a class of models which were briefly popular in which capital was represented as a
homogeneous and divisible input in a well-behaved production function. At most,
reswitching shows that heterogeneous capital models may be rather messy, but there are
plenty of other problems in modelling growth and distribution in a world characterised by
international competition, changing technology and skills, etc.
 
As far as I know, no-one has ever shown that the theoretical possibility of reswitching
has any observable consequences relevant to any actual data or observations. It remains
wholly hypothetical.
 
Tony Brewer ([log in to unmask]) 
 
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