ABSTRACT
This chapter describes the first step in removing the unreasonable restriction to “perfect thrift”. It desires to allow for discretionary consumption levels ci of commodity i within the theoretical model. Neoclassical growth theories introduce “capital” as an explicit input. This procedure runs up against the Cambridge controversy, of which the outcome has been that it is impossible to give a consistent definition of a “quantity of capital” independent of prices and the rate of return. With Leontief technology and given consumption demands, all price ratios are the same as for the “perfect thrift” system. Thus, consumption levels have no effect on relative prices. Quantities produced, and input quantities needed for this production, are affected by the need to meet consumption demands. In common sense, peculiar solutions should be rejected. The producers of necessary goods, corn and iron, buy their inputs at zero prices and sell their output at zero prices.
