Classical roots of Interdependence in Economics

 

When did economists start thinking systematically?

Where do we find it now in Economics?

  • Systems Thinking
  • Interdependence
  • Interconnectedness

 

From  Structural Interdependence in Monetary Economics: Theoretical Assessment and Policy Implications

 

Acknowledgment of the existence of structural interconnections in a sufficiently developed country is not a novelty in the literature of economics. It has been present since its very beginning, in Quesnay’s Tableau Économique and Petty’s and Cantillon’s descriptions of production and consumption as a circular flow. Significant evidence of structural interdependence is provided by Walras’s general equilibrium model, by Marx’s reproduction schemes and by his circuit of capital, by Keynes’s dismissal of the ‘classical’ assumption of a dichotomic economic system, by Leontief’s inter-industry input-output analysis, and by other analytical approaches (von Neumann and Morgenstern strategic game theory, Copeland’s flow-of-funds tables, Koopmans’s activity analysis of production and allocation).

 

Relevant contributions to the literature on structural interdependence in economics have been made by Tobin, Davidson, Meade and Stone, Godley and Cripps, Lavoie, Lance Taylor and others, with reference to specific institutional frameworks. In the last decades this branch of research has attracted increasing attention. Sectoral flows of funds connecting balance sheets have been analyzed. Some controversial issues, however, regarding the integration of money and finance in the theory of value and the structural relations between stock and flow variables, are still partially unsettled.

 

From ‘Classical’ Roots of Input-Output Analysis: A Short Account of its Long Prehistory

 

According to Wassily Leontief, ‘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’ (Leontief, 1987, p. 860).

 

The key terms in this characterisation are ‘classical theory’, ‘general interdependence’ and ‘directly observable basic structural relationships’. In this overview of contributions that can be said to have prepared the ground for input-output analysis proper, ‘classical theory’ will be interpreted to refer to the contributions of the early classical economists from William Petty to David Ricardo; further elaborated by authors such as Karl Marx, Vladimir K. Dmitriev, Ladislaus von Bortkiewicz and Georg von Charasoff; and culminating in the works of John von Neumann and Piero Sraffa. ‘General interdependence’ will be taken to involve two intimately intertwined problems, which, in a first step of the analysis, may however be treated separately. First, there is the problem of quantity for which a structure of the levels of operation of processes of production is needed in order to guarantee the reproduction of the means of production used up in the course of production and the satisfaction of some ‘final demand’, that is, the needs and wants of the different groups (or ‘classes’) of society, perhaps making allowance for the growth of the system. Secondly, there is the problem of price for which a structure of exchange values of the different products or commodities is needed in order to guarantee a distribution of income between the different classes of income recipients consistent with the repetition of the productive process on a given (or increasing) level. It is a characteristic feature of input-output analysis that both the independent and the dependent variables are to be ‘directly observable’, at least in principle. The practical importance of this requirement is obvious, but there is also a theoretical motivation for it: the good of an economic analysis based on magnitudes that cannot be observed, counted and measured is necessarily uncertain.

 

From ‘Classical’ Roots of Input-Output Analysis: A Short Account of its Long Prehistory

We shall see that input-output analysis can indeed look back at a formidable history prior to its own proper inception, which is often dated from the early writings of Wassily Leontief. These include his 1928 paper ‘Die Wirtschaft als Kreislauf’ (The economy as a circular flow) (Leontief, 1928) and his 1936 paper on ‘Quantitative input-output relations in the economic system of the United States’ (Leontief, 1936); because of its applied character, the latter is occasionally considered ‘the beginning of what has become a major branch of quantitative economics’ (Rose and Miernyk, 1989, p. 229). The account of the prehistory of input- output analysis may also throw light on wider issues which played an important role in the past, but are commonly set aside in many, but not all modern contributions to input- output analysis. This concerns first and foremost the subject of value and distribution. While in earlier authors and also in Leontief (1928) that issue figured prominently, in modern contributions it is frequently set aside or dealt with in a cavalier way. This raises a problem, because production, distribution and relative prices are intimately intertwined and cannot, in principle, be tackled independently of one another. Scrutinizing the earlier literature shows why.

 

Key Sources of Research:

 

‘Classical’ Roots of Input-Output Analysis: A Short Account of its Long Prehistory

By Heinz D. Kurz and Neri Salvadori

https://static.uni-graz.at/fileadmin/sowi-zentren/Schumpeter-Centre/Download/Paper/Kurz/2000_Classical_Roots_of_Input-Output_Analysis__in_Economic_System_Research_.pdf

 

 

Who is Going to Kiss Sleeping Beauty? On the ‘Classical’ Analytical Origins and Perspectives of Input–Output Analysis

HEINZ D. KURZ

 

https://static.uni-graz.at/fileadmin/sowi-zentren/Schumpeter-Centre/Download/Paper/Kurz/2011_Who_Is_Going_To_Kiss_Sleeping_Beauty__On_the_‘Classical’_Analytical_Origins_and_Perspectives_of_Input-Output_Analysis__in_Review_of_Political_Economy_.pdf

 

Wassily Leontief: In appreciation

William J. Baumol and Thijs ten Raa

 

http://thijstenraa.nl/leontief%20ejhet.pdf

 

Wassily Leontief and L ́eon Walras: the Production as a Circular Flow

Akhabbar, Amanar and Lallement, J ́eroˆme Lausanne University, Centre Walras-Pareto, Centre d’Economie de la Sorbonne

https://core.ac.uk/download/files/153/6706370.pdf

 

Input–Output Analysis from a Wider Perspective: a Comparison of the Early Works of Leontief and Sraffa

HEINZ D. KURZ􏰀 & NERI SALVADORI􏰀􏰀

https://static.uni-graz.at/fileadmin/sowi-zentren/Schumpeter-Centre/Download/Paper/Kurz/2006_Input–Output_Analysis_from_a_Wider_Perspective__in_Economic_Systems_Research_.pdf

 

 

Impact Studies without Multipliers: Lessons from Quesnay’s Tableau Economique

Albert E. Steenge and Richard van den Berg

 

https://www.iioa.org/conferences/intermediate-2008/pdf/2b2_Steenge.pdf

 

 

Causality and interdependence in Pasinetti’s works and in the modern classical approach

by Enrico Bellino  and Sebastiano Nerozzi

https://mpra.ub.uni-muenchen.de/52179/1/MPRA_paper_52179.pdf

 

Three centuries of macro-economic statistics

Frits Bos

 

https://mpra.ub.uni-muenchen.de/35391/1/MPRA_paper_35391.pdf

 

The Circularity of the Production Process

 

http://terna.to.it/tesi/piccinini.pdf

 

Modeling the Economy as a Whole: An Integrative Approach

By FREDERIC S. LEE

 

http://heterodoxnews.com/micro/Readings_files/Lee.pdf

 

Structural Interdependence in Monetary Economics: Theoretical Assessment and Policy Implications

Duccio Cavalieri

2015

 

https://mpra.ub.uni-muenchen.de/62403/1/MPRA_paper_62403.pdf

 

The agents of production are the commodities themselves On the classical theory of production, distribution and value

Heinz D. Kurz

https://www.researchgate.net/profile/Heinz_Kurz/publication/222532576_The_agents_of_production_are_the_commodities_themselves_On_the_classical_theory_of_production_distribution_and_value/links/00b7d51824f248b1e4000000.pdf

 

 

ECONOMIC INTERDEPENDENCE AND INPUT-OUTPUT THEORY

Ángel Luis Ruiz Pedro F. Pellet

 

http://kalathos.metro.inter.edu/Num_10/ECONOMIC%20INTERDEPENDENCE%20MM.pdf

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Author: Mayank Chaturvedi

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