Scarcity of resources as a determining factor of value in input-output models (objectivist concept of capital)

Abstract

<abstract> <p>Conducting global trade in national currencies greatly increases complexity and fragility of the modern financial system and, therefore, requires creation of new, much more accurate methods of macroeconomic and monetary regulation than those available today. The current practice of macroeconomic regulation relies on the system of national accounts (SNA) based on the Leontief input-output method. Its analytical tools are explained by the possibility of calculating the volume of output of a product and its cost in natural units. Moreover, it offers no explanation to the relationship between the composition of the output and relative prices. This disadvantage significantly complicates practical application of the Leontief method, since primary accounting reports operate with cost rather than physical indicators, forcing the introduction of various kinds of simplifications into the input-output model, which significantly reduces its analytical capabilities. The article presents a physical concept of value, on the basis of which the input-output model is supplemented by the definition of the material law of relative price formation. This addition turns the input-output method from an applied analysis tool into a complete theory of production, and in the future opens up fundamentally new, previously non-existent opportunities for the empirical studies of economic development and creation of highly effective methods of macroeconomic regulation. The price formation model, methodologically explained in the article, is a synthesis of the W. Leontief's concept of economy as a circular flow and P. Sraffa's model of the price mechanism of income distribution. It is basically our own concept of economic reproduction viewed as sharing by the producers of the common material resource of the production system. We claim that our findings regarding single-product industries in W. Leontief's and P. Sraffa's models can be generalized and applied to J. von Neumann's model of the balanced economic growth in multi-product industries.</p> </abstract>