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Ep. 273 The Austrian Theory of Interest, Current and Future

Bob Murphy Show

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The Real Wage Rate Is Equal to the Marginal Product of Capital

Romer's analysis seems to openly embrace the naive productivity theory that Mambauver presumably demolished in the 1880s. He would analogously argue that because labor markets are competitive, the real wage rate is equal to the marginal product of labor. The worker gets paid what he's bringing to the table on the margin. And so they think, okay, and our production function clearly is increasing in K. You add more capital, you get more stuff.

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