Web Book of Regional Science Regional Research Institute 2020 The Elements of Input-Output Analysis William H. Miernyk Follow this and additional works at: https://researchrepository.wvu.edu/rri-web-book Recommended Citation Miernyk, W.H. (1965). The Elements of Input-Output Analysis. Reprint. Edited by Randall Jackson. WVU Research Repository, 2020. This Book is brought to you for free and open access by the Regional Research Institute at The Research Repository @ WVU. It has been accepted for inclusion in Web Book of Regional Science by an authorized administrator of The Research Repository @ WVU. For more information, please contact [email protected]. The Web Book of Regional Science Sponsored by The Elements of Input-Output Analysis By William H. Miernyk (deceased) Professor Emeritus of Economics Director Emeritus of the Regional Research Institute Published: 2006 Updated: February, 2020 *This version of The Elements of Input-Output Analysis which first appeared in The Web Book of Regional Science series was edited by: Randall Jackson Director, Regional Research Institute West Virginia University This work was originally published by Random House, copyright 1957 and 1965. In 2006, copyright was transferred from Random House to the Regional Research Institute. In 1965, Dr. Walter Isard, Wharton School of Finance and Commerce writes, “I welcome the publication of Miernyk’s textbook on input-output analysis. This clear and lucid presentation of the basic elements of input-output will be extremely valuable to my students in Regional Science. It will greatly facilitate my teaching them ’know how’ of this approach.” i <This page blank> ii The Web Book of Regional Science is offered as a service to the regional research community in an effort to make a wide range of reference and instructional materials freely available online. Roughly three dozen books and monographs have been published as Web Books of Regional Science. These texts covering diverse subjects such as regional networks, land use, migration, and regional specialization, include descriptions of many of the basic concepts, analytical tools, and policy issues important to regional science. The Web Book was launched in 1999 by Scott Loveridge, who was then the director of the Regional Research Institute at West Virginia University. The director of the Institute, currently Randall Jackson, serves as the Series editor. When citing this book, please include the following: Miernyk, W.H. (1965). The Elements of Input-Output Analysis. Reprint. Edited by Randall Jackson. WVU Research Repository, 2020. iii <This page blank> iv William H. Miernyk was Professor of Economics and Founding Director of the Regional Research Institute at West Virginia University from 1965-1981. He was Professor of Economics and Director of the Bureau of Economic Research at the University of Colorado. He also taught at Northeastern University and at the Massachusetts Institute of Technology and has served as an economic consultant for private and government agencies. Professor Miernyk received his B.A. (1946) and M.A. (1947) from the University of Colorado, and an M.A. (1952) and Ph.D. (1953) from Harvard University. He was the author/co-writer of twelve books, contributed to twenty-eight additional books, authored more than 144 monographs, articles, and reviews. He received the first Distinguished Scholar Award presented by the Regional Science Association, an international organization with members in 67 nations. Miernyk’s interests and contributions to knowledge focused on a broad set of topics within and beyond regional science. His research interests included such topics as pollution abatement, energy prices, unemployment, labor force participation, and migration in the Appalachian states. He has served as a consultant for, among many others, U.S. Senate committees, the Appalachian Regional Commission, and The World Bank. Known for his critical insight, rigor, and excellence in research, his writing was clear and concise. In addition to numerous contributions to the academic literature, Miernyk extended his sphere of influence to the general public through weekly columns in the Charleston Gazette. v Preface When Wassily Leontief published his “Quantitative Input-Output Relations in the Economic System of the United States” in The Review of Economics and Statistics (August 1936), he launched a quiet revolution in economic analysis that has steadily gained momentum. That the article, which represents a turning point in the development of economic thought, did not at first attract wide attention was partly a matter of timing. The nations of the free world were in the midst of the Great Depression. And John Maynard Keynes had just published his General Theory of Employment, Interest, and Money, a treatise that immediately attracted worldwide attention since it was focused on the problem of chronic unemployment in the capitalist economies of that day. Unlike Keynes, Leontief was not concerned with the causes of disequilibrium in a particular type of economic system during a particular phase of its development. He was interested in the structure of economic systems, in the way the component parts of an economy fit together and influence one another. Leontief fashioned an analytical model that can be applied to any kind of economic system during any phase of its development. As he himself noted, input-output analysis is above all an analytical tool. It can be used in the analysis of a wide variety of economic problems, and as a guide for the implementation of various kinds of economic policies. Input-output analysis is a branch of econometrics, and the technical literature in the field draws heavily on the arcana of mathematics. For the beginning student of economics, and perhaps even for some professional economists, the mathematical nature of the literature has been a barrier. The present book covers the essentials of input-output analysis entirely in nonmathematical terms, although a certain amount of arithmetic is used to illustrate various steps in the analysis. For those who are interested, the last chapter includes a description of the model in elementary mathematical terms and the rudiments of matrix algebra needed to understand the description. The final chapter is largely independent of the remainder of the book - it can be read first or last, or it can be ignored entirely if one is content to accept some of the conclusions reached in earlier chapters without a mathematical demonstration. It should be emphasized that this volume deals with input-output analysis rather than with the statistical problems involved in the construction of an input-output table. It is designed to give the reader an understanding of how the input-output system works; it is not a guide to the construction of an interindustry transactions table. Most of this book deals with a static, open input-output model. This is the model upon which the 1947 tables for the United States were based. These tables were published by the Bureau of Labor Statistics of the U. S. Department of Labor and have been described in detail by W. Duane Evans and Marvin Hoffenberg in “The Interindustry Relations Study for 1947,” The Review of Economics and Statistics (May 1952). A more recent input-output study, based on 1958 data, has been completed by the Office of Business Economics of the U. S. Department of Commerce. A report on this study has been published by Morris R. Goldman, Martin L. Marimont, and Beatrice N. Vaccara in “The Interindustry Structure of the United States,” Survey of Current Business (November 1964). The major difference between the 1947 and 1958 studies is that the latter has been integrated, both conceptually and statistically, with the national income and product accounts regularly published by the U. S. Department of Commerce. The present volume is a complete revision and a substantial expansion of my earlier Primer of Input-Output Economics published by the Bureau of Business and Economic Research, Northeastern University, in 1957. I am grateful to the administration of Northeastern University for permission to use copyrighted material from this publication. Thanks are also due the Harvard University Press for permission to reproduce an illustrative table from the November 1951 issue of the Review of Economics and Statistics. Parts of an earlier draft were read by Professors Walter Isard of the University of Pennsylvania, Charles M. Tiebout, of the University of Washington, and David Rearick, a former colleague at the University of Colorado. I am grateful for their helpful and encouraging comments. The entire manuscript of the earlier vi draft was read by Professor William Letwin of M.I.T. and by two of my graduate research assistants, Mr. John H. Chapman, Jr., and Mr. Kenneth Shellhammer. I wish to thank them for a number of helpful editorial and substantive suggestions. Finally, it is a pleasure to acknowledge the efficient secretarial services provided by Mrs. Mig Shepherd and Mrs. Suzanne Roberts. Needless to say, I alone am responsible for any errors or omissions that remain. Boulder,Colorado WILLIAM H. MIERNYK January, 1965 vii <This page blank> viii Contents Preface vi 1 Introduction 1 Approaches to Economic Analysis....................................1 Economic Interdependence.........................................1 2 Input-Output Analysis 4 The Make-up of the Table.........................................5 Tracing through a Set of Transactions..................................8 Industries and Sectors...........................................8