Economics Dictionary of ArgumentsHome
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| Production theory: Production theory in economics examines the processes and principles behind transforming inputs (like labor, capital, and resources) into outputs (goods or services). It explores factors influencing production efficiency, optimal resource allocation, technology's impact on output, and the relationships between inputs and outputs within various production frameworks, guiding decision-making for firms and industries._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Wassily Leontief on Production Theory - Dictionary of Arguments
Kurz I 18 Goods/commodity/production theory/Leontief/Kurz: Leontief (…) distinguished between ‘cost goods’ and ‘revenue goods’; the latter satisfy final demand. The concept of revenue good indicates that the economy is taken to produce a surplus over and above what is consumed productively. He suggested (Leontief 1928, p. 585)(1) that the process of production should be described in terms of three sets of ‘technical coefficients’: (i) ‘cost coefficients’, that is, the proportion in which two cost goods participate in the production of a good; (ii) ‘productivity coefficients’, that is, the total quantity produced of a good in relation to the total quantity used up of one of its inputs; and (iii) ‘distribution coefficients’, that is, the proportion of the total output of a certain good allotted to a particular group of property income receivers. Leontief stressed that because of the circular character of production ‘a complete elimination of a factor of production from the given system is in principle impossible’. He added: ‘Of course, the size of the “capital factor” can be reduced to any chosen level by referring back to even earlier periods of production’ ([p. 211] p. 622). The reference is to what became known as the method of reduction to dated quantities of labour (see Sraffa, 1960(2), chapter VI). This reduction, Leontief stressed, has nothing to do with a historical regress ([p. 192 fn] p. 596, fn. 6). >Price/Leontief. Leontief: „In the general circular flow scheme, income from ownership is of course considered alongside other cost items without the slightest direct reference to how it originates (the phenomenon of ownership). It is the task of the theory of interest to investigate these fundamental relationships.“ ([p. 196] p. 600)(1) Leontief’s argument resulted in setting up price equations that reflect not only the socio-technical conditions of production, but also the rule that fixes the distribution of the surplus product. This rule is the second key to a determination of relative prices. Only if both the system of production and the sharing out of the surplus between different claimants in terms of wages, profits Kurz I 19 (or interest) and rents is known, can relative prices be determined. Two ‘keys’ are required in order to solve the problem of value and distribution. Kurz I 27 Classical/Neo-classical economics: While Leontief conceived of his early contribution as firmly rooted in the classical tradition, he called his input–output method developed in the 1930s and 1940s ‘an adaptation of the neo-classical theory of general equilibrium to the empirical study of the quantitative interdependence between interrelated economic activities’ (Leontief, 1966, p. 134)(3). LeontiefVsWalras/LeontiefVscCassel: Scrutiny shows, however, that in his input-output analysis he preserved the classical concept of circular flow and did not, as is maintained by some interpreters, adopt the Walras–Cassel view of production. In the second edition of The Structure of American Economy, published in 1951, he even explicitly rejected the view of production as a one-way avenue that leads from the services of the ‘original’ factors of production: land, labour and capital – the ‘venerable trinity’ - to final goods (Leontief, 1951, p. 112)(4). Unlike the theories of Walras and Cassel, in Leontief there are no given initial endowments of these factors. (…) the change is more apparent than real. 1. Leontief, W. (1928) Die Wirtschaft als Kreislauf, Archiv für Sozialwissenschaft und Sozialpolitik, 60, pp. 577–623. 2. Sraffa, P. (1960) Production of Commodities by Means of Commodities. Prelude to a Critique of Economic Theory (Cambridge: Cambridge University Press). 3. Leontief, W. (1966) Input–Output Economics (New York: Oxford University Press). 4. Leontief, W. (1951) The Structure of American Economy, 1919–1939: An Empirical Application of Equilibrium Analysis (White Plains, NY: International Arts and Sciences Press). (Second enlarged edition of Leontief, 1941.) Heinz D. Kurz and Neri Salvadori 2015. „Input–output analysis from a wider perspective. A comparison of the early works of Leontief and Sraffa“. In: Kurz, Heinz; Salvadori, Neri 2015. Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). London, UK: Routledge._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Leontief I Wassily Wassilyevich Leontief Die Wirtschaft als Kreislauf, Archiv für Sozialwissenschaft und Sozialpolitik, 60, pp. 577–623. 1928 Kurz I Heinz D. Kurz Neri Salvadori Revisiting Classical Economics: Studies in Long-Period Analysis (Routledge Studies in the History of Economics). Routledge. London 2015 |
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