MEMORANDUM

What concerned Leontief at this time was the “antikritischen” essay he wanted to
write as response to his critics. Leontief now looked at it in the following way:
“The main task consisted of putting all polemics aside and find a basis for the
discussion on which one could build further. For this purpose I might try to exhibit
the connecting threads between the partial equilibrium – as used in empirical
market analysis – and the general equilibrium, to show when and under what
conditions general interdependence relates the supply and demand curves of
individual commodities, just as if a multidimensional body was projected on to a
plane. The real meaning of such a way of looking at it appears in the analysis of
economic changes, the data variations. Unfortunately, I must struggle rather much
with determinant theory.” (Leontief to Schumpeter, 23 June 1931, transl. by ob).
The passage confirmed that the Eisenaufsatz had caused the confinement to partial
equilibrium had been given up. What happened in one market was related to what
happened in other markets. This brought the problems into a general equilibrium context.
But how to structure and represent the general equilibrium relationships. Leontief was
searching for graphic or conceptual ways of representing such multidimensional entities.
His modeling structure was not linear.
The Eisenaufsatz
The Eisenaufsatz (Leontief 1932) built on and modified the Versuch paradigm. It had
been the intention in the Versuch treatise to apply the analysis to commodity markets over
a longer period It was attempted mainly the American iron market but had not worked out
well. Hence a motivation for the Eisenaufsatz was to resolve these problems. Of the 50
pages of the Eisenaufsatz the last 30 pages were devoted to show that the new conceptual
tools developed in the paper made sense in the analysis of the American pig iron and steel
markets from 1879 to 1915. The empirical analysis was limited to that. The motivation
thus came from the poor results achieved for iron in the Versuch. An aim was to adapt and
develop the elasticity method to make it work well for intermediate industrial goods, not
only for consumption and agricultural goods. Iron was in this context a particularly
important commodity. The remaining part of the paper was an attempt to construct a more
general approach the analysis of supply, or more precisely as the title indicates to the
supply elasticity, and thereby transcend the narrow partial equilibrium approach of the
Versuch.
The new approach to supply analysis emphasized the vertical relation (p.67) between
the product markets and the markets of the major inputs or cost components
(Kostenelemente). The idea was that the supply curve for pig iron would be closely related
(in einem gesetzmässigen Zusammenhang) to the supply curves of iron ore and coke.
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