Market equilibrium (2)

Abstract

The nature and significance of input–output analysis or interindustry analysis, which was initiated by W. Leontief, can be interpreted in many different ways. It can be seen as the generalization of Keynesian multiplier theory, or as the modern version of Quesnay’s Tableau économique or Marx’s reproduction scheme, or as a degenerated linear programming model. From our point of view, however, it can be considered as an empirically oriented simplified version of the general equilibrium theory. While the importance of the analysis of interindustry input–output relations is duly emphasized, consumer demands are assumed to be given by outside information. The optimization and substitutability in production are assumed away by the use of the no-joint-output constant-coefficient production functions which are, however, numerically estimated by the data available from input–output tables. The input–output analysis can, therefore, provide numerical answers for a number of interesting problems of the general equilibrium of an economy.