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

Abstract

This paper compares Leontief's 1928 PhD thesis and Sraffa's work in Cambridge in 1927–1928 as reconstructed from Sraffa's unpublished papers. Both authors showed that relative prices and the interest rate can be determined exclusively in terms of the observable amounts of commodities produced and used up during a year – without any reference to demand and supply. While Sraffa continued to elaborate a comprehensive objectivist, surplus-based alternative to the marginalist theory, Leontief's interest shifted towards applying the new tool of input-output to practical problems. However, his assumption of given value added coefficients in his price equations cannot be sustained.