Input-Output in the United Kingdom

Proceedings of the 1968 Manchester Conference

W. F. Gossling

• Publisher: Taylor & Francis
• Year: 2018
• Print ISBN: 9780815354376
• eBook ISBN: 9781351131254
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Originally published in 1970. Input-output analysis has been described as the "lynch-pin of modern economic planning". Its purpose is to trace the consequences of any economic change through each sector of the economy; to measure, for example, the effects of an increase in fuel tax on the price of food, or of an expansion in car production on the country's import bill. This kind of knowledge is clearly essential for making economic predictions.

This book presents the proceedings of the 1968 Manchester Conference including six outline papers, each followed by discussion, and several summaries of ongoing and proposed research which were added afterwards. The speakers and participants constituted a representative sample of persons from Industry and Commerce, as well as the Universities and the Civil Service.

Session III

A Linear Model of Production, Distribution and Growth

by

A. Cigno¹

Lecturer in the Department of Mathematical Economics, University of Birmingham

(Summary)

The model of economic growth proposed in this paper closely resembles Schumpeter’s “vision” of the development process [9]. The basic assumption is that only one or a few firms in each industry are capable of adjusting their production plans, in time, with respect to changes in technical know-how, consumers’ preferences, and supplies of original factors. These leading firms make profits, which are used to finance innovatory Investments, while the other firms make losses, which force them, after a while, to modify their production plans or go out of business.

The general model is built up step by step. The first section of this paper describes a recursive programming model of the profit-maximising firm. In the second section the individual models are aggregated at the industry level and an exact definition of “industry” is provided; the Solution of the aggregate model is not the sum of the component firms’ optimal Solutions, because some of the firms are not optimising. In the third section the analysis is extended to the whole economic system: prices and income distribution are deter-mined within a general-equilibrium setting and profits appear as the remuneration of a very special factor of production, “entre-preneurship”, which becomes “scarce” only in times of change.

The programming approach adopted makes the model suitable for empirical application. The model can be used to forecast output, prices and technical change for a whole economic system or for a section of it. With minor modifications, the model can also be con-verted into a decision model for economic planning.

I. A Dynamic Model of the Profit Maximising Firm

Let us assume, in the first place, that all entrepreneurs make or revise their production plans at regulär intervals, so that the con-tinuous flow of time can be subdivided into finite periods, each period being defined as the length of time that elapses between any two production decisions. Then consider the case of any particular firm: at the beginning of period t, the entrepreneur disposes of a collection of inventories and capital goods purchased or produced in the course of period t–1. Capital goods of the same nature but of different age can be regarded as different commodities and I shall refer indifferently to all these factors of production as the capital Stocks of the firm in period t.

The entrepreneur knows that by combining the factors of production already available with others that he can buy on the market, according to certain fixed proportions dictated by his technical knowledge, he can produce certain fixed combinations of goods. He also knows that the same ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Contents
• List of Figures
• List of Tables
• Acknowledgements
• Introduction
• List of Participants
• Foreword Some Comments on Linear Models
• Session I Input-Output Applications for the Multi-activtty Firm
• Session II Developments in Input-Output Statistics
• Session III A Linear Model of Production, Distribution and Growth
• Session IV Production Models and Time Trends of Input-Output Coefficients
• Session V Input-Output and the Trading Economy
• Special Session Input-Output Studies of the Construction Industry
• Session VI The Use of Input-Output Methods in DEA
• Session VII Future Input-Output Research
• Index of Authors and Discussants
• List of General and Recent References
• Index of Subjects