Treatment of Fixed Capital in the Sraffian Framework and in the Theory of Dynamic Input–Output Models

Abstract

This paper is concerned with a comparison of the treatment of fixed capital in some multi-sectoral models. First, the dynamic Leontief model is investigated. Scrutiny shows that this model suffers from conceptual misconceptions which result from restrictive assumptions concerning full-capacity production and the transferability of capital in place, and from the definition of technical coefficients. Whereas most input–output (IO) models are based on the assumption of infinite life of fixed capital, the Sraffian concept is to treat used fixed capital items as ‘intermediate’ goods, which appear as joint products until they are worn out. To compare that approach with some IO models, an application of the concept of a ‘plant’ is provided. Finally, it is demonstrated that Leontief's model, as well as some recent generalizations, are special cases of a Sraffa-von Neumann type of model.