Economics Dictionary of ArgumentsHome
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| Input-output analysis: Input-output analysis is an economic method that examines the relationships between industries within an economy, showing how the output of one industry serves as input for another. Developed by Wassily Leontief, it uses a matrix to analyze production, consumption, and interdependencies, helping policymakers and researchers understand economic structure and plan resource allocation efficiently._____________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 Input–Output Analysis - Dictionary of Arguments
Kurz I 11 Def Input–output analysis/Leontief/Kurz: Input–output analysis is a practical extension of the classical theory of general interdependence which views the whole economy of a region, a country and even of the entire world as a single system and sets out to describe and to interpret its operation in terms of directly observable basic structural relationships.(1) Objectivism/Leontief/Kurz/Salvadori: According to this statement, input–output analysis is based exclusively on magnitudes that are directly observable and that can be measured, using the ordinary instruments for measurement in economics. This objectivist concern is already present in Leontief’s Berlin PhD thesis, his 1928 paper ‘Die Wirtschaft als Kreislauf’ (Leontief, 1928, an abridged English translation of which was published as ‘The economy as a circular flow’, Leontief, 1991)(2) and permeates his entire work. In the 1928 essay, the objectivist approach to economic phenomena is counterposed with the then dominant Marshallian analysis and its stress on subjective factors. Subjectivism: Marshall, it should be recalled, had tried to patch over what was a major breach with the objectivist tradition of the English classical economists, especially David Ricardo and Robert Torrens. >Subjectivism/Alfred Marshall, >D. Ricardo. Kurz I 12 In his 1936 paper(3), Leontief follows Quesnay closely in that he also takes distribution and prices to be given and reflected in the available national accounting system. He is actually forced to do so, because there is no statistical description of the production process of the economy during a year in purely material terms. Kurz I 13 Clearly, the analytical potentialities and practical usefulness of an approach that starts from a description of the production process of the economy as a whole in material terms - a ‘circular flow’ - go beyond conventional input-output analysis. To see this we may start from Paul Samuelson’s (1991)(4) commentary on the abridged English version of Leontief’s 1928 paper, because in it Samuelson places Leontief’s contribution in a wider theoretical context. >Input-Output Analysis/Samuelson. Kurz I 17 In his essay ‘Die Wirtschaft als Kreislauf’(2) Leontief put forward a two-sectoral input-output system. Throughout his investigation he assumed single production and constant returns to scale; scarce natural resources are mentioned only in passing. In much of the analysis it is also assumed that the system of production (and consumption) is indecomposable. Much of his analysis focuses on the case of a stationary system characterized by constant technical coefficients. LeontiefVsMarginalism: Leontief premised his analysis on the conviction that economics should start from ‘the ground of what is objectively given’ (Leontief, 1928, p. 583)(2); economic concepts are said to be meaningless and potentially misleading unless they refer to magnitudes that can be observed and measured. He adopted explicitly a ‘naturalistic’ or ‘material’ perspective ([p. 211] p. 622). The starting point of the marginalist approach, homo oeconomicus, he considered inappropriate because it is said to give too much room to imagination and too little to facts (pp. 619–620). Economic analysis should rather focus on the concept of circular flow (…). Kurz I 19 Input-Output/prices/Leontief: „One may vary at will the exchange proportions and consequently the distribution relationships of the goods without affecting the circular flow of the economy in any way“ ([p. 194] pp. 598–599)(2). In other words, the same physical input–output schema can accommodate different price systems reflecting different distributions of income. He related this finding to the classical economists who are explicitly said to have advocated a ‘surplus theory’ of value and distribution ([p. 209] p. 619(2). Hence the exchange ratios of goods reflect not only ‘natural’, that is, essentially technological, factors, but also ‘social causes’. For example, assuming free competition, as the classical economists did in much of their analysis, the surplus is distributed in terms of a uniform rate of return on capital across all industries of the economy. With this specification, the general rate of profit together with relative prices can be determined in terms of the system of production in use and given real wages. ‘But this is the “law of value” of the so-called objective value theory’ ([p. 196] p. 601)(2), Leontief insisted. 1. Leontief, W. (1987) Input–Output analysis, in: J. Eatwell, M. Milgate and P. Newman (Eds) The New Palgrave. A Dictionary of Economics, vol. 2, pp. 860–864 (London: Macmillan). 2. Leontief, W. (1928) Die Wirtschaft als Kreislauf, Archiv für Sozialwissenschaft und Sozialpolitik, 60, pp. 577–623. 3. Leontief, W. (1936) Quantitative input and output relations in the economic systems of the United States, Review of Economics and Statistics, 18, pp. 105–125. 4. Samuelson, P.A. (1991) Leontief’s ‘the economy as a circular flow’: an introduction, Structural Change and Economic Dynamics, 2, pp. 177–179. 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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