Karaganov V. S. Leontief – is there a misunderstanding of Leontief’s model?

Abstract

Relevance of research topic: Cross-sectoral balance is a tool with unique qualities for analyzing and designing economic development. The evolution of economic systems also affects the very balance and attitude of researchers to it. Formulation of the problem: For this reason, the opinion of one of the famous economists – Prof. Karaganov regarding the basic assumptions of Leontief's model is of interest. These are the baseline indicators examined with the model whose nature is not subject to change. The purpose of this study is to substantiate the inconsistency of criticism of Leontief's cross-sectoral balance model by Professor Sergei Karaganov. Method or methodology for conducting research. Scientific literature analysis method and the method of comparison were used. Presentation of the main material (results of work). At the very beginning of the article by Prof. Karaganov an incorrect presentation of the structure of the model of Leontief is made. The balance of inter-branch connections simultaneously reflects each of the branches in a dual role – a producer of production and a supplier of own manufactured products for other industries to meet their production needs. Prof. Karaganov demonstrates a clear lack of knowledge of the balance of cross-sectoral links (input-output model) by misrepresenting each of the branches of a national economic system. According to him, the branches of the national economy are divided into producing and consuming industries. It is beyond the view of Prof. Karaganov that in the balance of inter-sectoral links, the industries are not divided into producing and consuming products. At each point in time, each industry is represented both in its role as a producer of production and in its role as a recipient of production from other industries in connection with the production of its own production. Conclusions according to the article. At present, Leontiev's model is used solely from its analytical capabilities. And the main reason for this is the presence of many methodological and informational problems. But it is particularly important to make it clear that these problems, existing outside and independently of the model, do not make the model itself wrong or inadequate to use. The circumstances presented by Prof. Sergey Karaganov are just some of the examples of misunderstanding the capabilities of the model, leading it to impute problems that do not actually exist.