Switching of Techniques

The paper demonstrates the invalidity of Levhari’s attempts to show that it is impossible for a production system that has ceased to be profitable due to a change in the rate of profits, to become profitable again when the profit rate changes further in the same direction. We first point out where Levhari’s argument fails and then show, by means of a numerical example, that such a ‘return’, or ‘switch-back’, of a production system is possible under Levhari’s own assumptions. We will then comment on the origin and implications of the error that the ‘return’ of a system reveals in traditional theory.