Econometric Studies of Production

In the previous chapter we discussed the econometric studies of the behaviour of consumers, in the form of demand curves and consumption functions. ‘Consumption’ is one of the three main branches of economics — the others are ‘distribution’ and ‘production’. If our survey of applied economics had pretensions to comprehensiveness, we should have to discuss in detail the models of distribution theory and their verification. Such a task has not been attempted here. We restrict our survey to production. But of course much of the theory of distribution is derived from the theory of production through the marginal productivity relationships. One cannot avoid measuring marginal productivity and associating it with the wage rate. Such analysis is, however, incidental to the main purpose of this chapter which is concerned with the empirical measures and tests of productive relationships.