MEMORANDUM

In his fundamental scheme of economic circulation according to pure physical
relationships between costs and benefits, Leontief lets these essentially quite
distinct elements combine with each other and mutually dissolve. On the basis of
this construction production and consumption are identified in a consequent and
conscious way. This sounds like well-known trains of thought, such as the notion
of reproduction of the commodity of labor power through the consumption of
means of subsistence by the laborer. Also more recent theoreticians, the Marxists
(e.g. Karl Renner) need hardly be mentioned, have tried to let the processes of
consumption and production merge into one flow (e.g. Seligman in his “Economics
of instalment selling”). But so far hardly anyone who has held the view in question
here has pursued it as seriously as the candidate. He in particular rejects any
distinction between so-called productive and non-productive consumption and
heaps irony on those of a different opinion, of course without showing how one can
transform a ball dress back into the required production goods and work effort
needed to produce from the viewpoint of the causal relation between cost and
benefit. According to … those who reject any sharp distinction between production
and consumption, the alternative is to insert money links (Geldgliedern) in the
relevant place in the “chain”. This alternative is however unacceptable for the
candidate, as he in his fundamental scheme allows neither money nor barter. After
all, this scheme should apply to any economy, even the isolated economy, to the
same extent. Barter trade and money circulation appear only later as complications
of the plan, and have even been dealt with in an excursus.
It mustn’t surprise that a consideration of the economic circulation abstracted
from any social conditions, yes, from any relations between economic agents and
from the motives of economic transactions also reveals itself as fruitless, when it is
about to investigate how certain changes of some or other data will impact the
problem. In this way the candidate e.g. deals with the question of what
consequences it will have when a(n) (unintended) productivity increase occurs at
any point in the circuit. For simplicity it is assumed that there are only three
elements in play. These are produced in inalterable quantities in each period, and in
such a way that for production of each of the three goods the other are required in
fixed proportions. For the case now that the yield of the first good increases by a
certain percentage, it is shown that because this excess must be find usage in the
production of the other two goods, in the next period correspondingly more of these
goods, and therefore less of the first good will be produced, which again leads to
that in the following period, the yield of the first good increases while that of the
other two decreases, and that such a “pendular movement” continues until in the
end a further use of the good with increase productivity becomes impossible.
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