Commodities are Not Industries! A Value Chain Example

Randall Jackson (jackson@econalyze.com) and Patricio Aroca

Working Papers from Regional Research Institute, West Virginia University

Abstract: Wassily Leontief received the 1973 Nobel Prize in Economics for his 1936 introduction input-output accounts and laying the foundations for decades of studies of economic structure and analyses of systemwide impacts of economic shocks (Leontief, 1936). In 1961, Richard Stone published “Input-Output and National Accounts,” which recognized and dealt explicitly with the realities of secondary production (?), and for which he received the 1984 Nobel Prize in Economics. Despite these recognitions and widespread use and acceptance internationally and in other disciplines and public sector planning applications, the Leontief and Stone framework gained little traction in mainstream U.S. economics. However, inputoutput modeling frameworks have attracted new attention in a variety of problem domains, including environmental attribution, water use, life-cycle assessment, and supply and value chains. Yet many – if not most – contemporary economists continue founding their work directly the Leontief framework, eschewing the power and versatility of Stone’s enhancements. Moreover, many are failing to understand and appreciate the conceptual differences between the two frameworks and as a result are failing to match constructs to variables in their their newly developed analytical metrics, even in top economics journals. In this paper, we use an increasingly common approach to value chains analysis as one of many possible examples that demonstrate such conceptual misunderstandings, and by developing and implementing properly formulated value chain metrics, we demonstrate both the extent of the consequences of neglecting the Stone enhancements and the important role of reproducing results in advancing scientific knowledge.

Keywords: Input-Output; SNA; Value Chains; Primary and Secondary Products (search for similar items in EconPapers)
JEL-codes: C67 F10 F14 L16 L23 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2020-10-12
New Economics Papers: this item is included in nep-his, nep-hme, nep-hpe and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:rri:wpaper:2020wp06

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