Production functions – so pretty, so unphysical

I’m rediscovering my old frustrations with aggregate production functions like the CES. They’re handy, but I have a nagging suspicion, never quite formalized, that they just don’t capture the engineering/thermodynamic realities of substitution. Anyone know any papers on that? I’m aware of critiques of KLEM applications, but not interfuel aggregation.


Click to enlarge. From a google images search for production function.

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