ABSTRACT
The famous approach of interindustrial relationships or input-output (IO) was formulated by Wassily Leontief in his celebrated paper Quantitative Input and Output Relations in the Economic System of the United States (1936) and then impressively developed by worldwide scholars.1 Actually, the fundamental insight that an economy can be viewed as a set of interrelated actors was recognized by almost all classical economists. Cantillon (1755) and Quesnay (1758) are deemed the precursors, as they envisioned a society where social classes were interacting with each other. The former distinguished between landlords (the urban sector) and workers (the rural one), the first owning land and consuming luxuries, the second owning labour and consuming necessities, both exchanging commodities such that a balance was feasible. If workers’ wages cannot buy necessities they will starve and die and, in turn, goods, which use labour as an input, will not be produced, so that landlords cannot buy their luxuries and they will be deprived too. Cantillon believed it possible to balance income and expenditure in a ‘natural state’ with ‘natural prices’, but land, that is exogenous and cannot be enlarged, constrains equilibrium (‘The land is the source or matter from whence all wealth is produced’, Cantillon, 1755: p. 2). He even calculated the amount of land needed to sustain workers’ consumption putting the foundations of the so called ‘iron law of wages’. However, he also recognized that ‘it often happens that many things which have actually this intrinsic value {natural price} are not sold in the market according to that value: that will depend on the humours and fancies of men and on their consumption’ (Cantillon, 1755: ch. 10).
