" (Blaug, 1974).
The defence of this procedure, however, has been eloquently put forward by Solow (1966), who can hardly be accused of not being fully aware of the aggregation problem. "I have never thought of the macroeconomic production function as a rigorously justifiable concept. It is either an illuminating parable, or else a mere device for handling data, to be used so long as it gives good empirical results, and to be abandoned as soon as it doesnt, or as soon as something else better comes along" (Solow, 1966). Wan (1971) reflects this view when he argues that Solow's (1957) path-breaking approach may be defended on the grounds that "one may argue that the functional relation between Q and K, L is an empirical law in its own right. In the methodological parlance of Samuelson, this is an operationally meaningful law, since it can be empirically refuted". (Q, K and L are output, capital, and labour.) From the first studies by Douglas and his various collaborators (see, for example, Cobb and Douglas, 1928, Douglas, 1944 and 1976) it has often been found that the aggregate production function gives a close statistical fit, especially using cross-sectional data, with the estimated output elasticities close to the factor shares.
However, the problem is that these studies generally could not have failed to find a close correspondence between the output elasticities and the factor shares. This arises from the fact that ideally the production function is a microeconomic concept, specifying the relationship between physical outputs and inputs (such as numbers of widgets, persons employed, and identical machines). On the other hand, at the aggregate level, constant price value data are used for capital and output. Yet this is not an innocuous procedure, as it has been argued that this undermines the possibility of empirically testing the aggregate production function.