Nonsubstitution Theorem, Leontief Model, Netputs: Some Clarifications

Fabio Petri ()
Additional contact information
Fabio Petri: Università degli Studi di Siena (University of Siena)

No CSWP20, Centro Sraffa Working Papers from Centro di Ricerche e Documentazione "Piero Sraffa"

Abstract: The nonsubstitution theorem concerns long-period technical choice and relative prices, and was so understood in its first (1951) formulations, but the modern advanced micro textbooks that present it do not make this clear, rendering the theorem impossible to understand for students. These modern presentations derive from a reinterpretation of the Leontief model as a ‘timeless’ economy in Walrasian equilibrium, capable of positive pro-duction in spite of zero initial endowments of all inputs except labour: an unacceptable interpretation, made pos-sible by a use of netputs, to describe the economy’s production possibilities, that is illegitimate in this case even from a strictly neoclassical perspective. The notion of a ‘timeless’ economy disappears from the textbook presen-tations of the Leontief model and of the nonsubstitution theorem, but the result is that the nature of the model and of the prices to which the theorem refers is not clarified, inevitably leaving students utterly confused. This note remembers the true nonsubstitution theorem, points out that it had been correctly enunciated by Samuelson (1961), and suggests that the current inability to present it in a correct way is due to the absence of the notion of long-period prices from the theoretical horizon of contemporary neoclassical value theory. The paper opens with clarifications on the meaning of the Leontief model which prepare the ground for the discussion of the problem with netputs.

Keywords: Nonsubstitution theorem; Leontief model; long period; netputs (search for similar items in EconPapers)
JEL-codes: B21 D24 D57 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2016-05
New Economics Papers: this item is included in nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.centrosraffa.org/public/7676a207-9a23-4ba2-ac1b-78f5bd21a194.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:sraffa:0020

Access Statistics for this paper

More papers in Centro Sraffa Working Papers from Centro di Ricerche e Documentazione "Piero Sraffa" Contact information at EDIRC.
Bibliographic data for series maintained by Saverio M. Fratini ().