Leontief On Reswitching

An old puzzle is why do those who build on Leontief's empirical work not make more of Sraffa? And why do those who build on Sraffa's theory not interact more with those building on Leontief?

Sraffa implicitly refers to Leontief, von Neumann, and others in the preface to his 1960 book. Those, like Zambelli, that have done empirical work on capital-theoretical 'paradoxes' draw on Leontief matrices constructed from national income and product accounts. So do those who are exploring empirical data to test a simple labor theory of value or Marx's law of the tendency of a declining rate of profits.

But consider ten Raa (2022), which I recently stumbled upon. This is a short reflection on Leontief and an exchange of letters in 1985 and 1986. Apparently, Leontief wrote a paper about then exploring if reswitching was likely to arise empirically in the United States economy. He asserted a simple example could be constructed with three produced commodities. This example would include (an approximation for) fixed capital. The editors of the American Economic Review rejected it as of being of no interest to their readers. Leontief published it as a chapter in the second edition of his book on input-output analysis. (By the way, I attended a guest lecture by Leontief a few years before that.)

Thijs ten Raa says that in his exchange of letters, he developed an explicit two-good example. He notes that a few empirical examples of reswitching have been found, for example, by Han and Schefold. He concludes this paper by quoting Samuelson (1966) and Pasinetti (2003) on how "current neoclassical economists do not seem to like Samuelson's 'facts of life.'"

Those who say, "economics is fake", have a point.

Selected Reference

• Thijs ten Raa. 2005. The economics of Input-Output Analysis, Cambridge University Press.
• Thijs ten Raa. 2022. Reswitching and capital models. Journal of Economic Structures 11 (1).