The choice of numeraire,capital intensity uniqueness,and the reswiritching of techniques

This paper examines the condition for capital-intensity uniqueness and the phenomenon of reswitching of techniques in a two-sector linear capital model when the prices and wages are measured in terms of the value of net output per man (the Sraffa numeraire). It is shown that when the Sraffa numeraire is used, a) the capital-intensity condition is not sufficient to ensure a unique relationship between the value of capital per man and the rate of profit; and b) reswitching of techniques is possible even if there is only one capital good in the system. The results arise only from the interaction between the price and composition effects in the model using the Sraffa numeraire.