ABSTRACT
Input-output analysis and neoclassical economics seem to part as schools of thought, with little appreciation of each others’ contributions. Neoclassical economists criticize the rigidity of the input-output (I-O) model, particularly its assumption of fixed coefficients and the failure to explain factor rewards. Input-output analysis is perceived as a mechanical manipulation of data. On the other hand, the neoclassical concept of a smooth production function which maps factor inputs directly into some jelly output, and its associated marginal productivities, meets a cool reception in the world of I-O economists. Neoclassical economics is considered an elegant, but futile theory. I do not intend to contribute to the criticism, but will attempt to accommodate it. I take the neoclassical critique seriously and will rethink the methodology of I-O analysis. By relating I-O, including its statistical basis, to economic problems and applications, I hope to inject theoretical structure. Open issues, such as the choice of model in the construction of coefficients, the relationship with fixed proportions, the consolidation of the quantity and value systems in a unifying framework, and the foundation of productivity measurement, can be enlightened by an open-minded reconsideration of the relationship between data and economic objectives. The basic assumptions and equations of I-O analysis may emerge in the process, but possibly modified.
