MEMORANDUM

Frisch to Leontief, 8 February 1934.
“Dear Professor Leontief,
Thank you for yours of Jan. 26, with which was enclosed the revision of your ms.
I am sorry to say that I find that your corrections do not adequately take account of the
objections I formulated in my last letter. I found therefore that if the material should be
utilized at all I had to work through the details myself. This I have done. On doing so I
find that your formula regarding the effect on the output x
i
is actually correct, but it is
developed in an all too cumbersome way. (…) In reality the whole thing can be
developed rather simply by using the classical rules for the derivation of implicit
functions. This I have done and changed the manner of presentation accordingly.
In the latter part of your paper, more precisely in the part discussing prices, there is
a fundamental mathematical error which makes it necessary to scrap this whole part.
The error is this: You assume that all the processes work under the application of the
marginal remuneration principle. But this assumption is inconsistent with the very
basis of all the previous formula, indeed if the marginal remuneration principle is
generally applied the system of equations by which the derivatives are determined
becomes singular.
Instead of the last part of the paper I have therefore written a short section pointing
out the true connections between the assumptions. I have also formulated the
conclusions in terms of elasticities (not only in terms of marginal productivities) in
order to get a statement that is invariant under a change in the units of measurement.
If you care to have the ms. appear in Econometrica in this new form I shall be glad
to accept it. In this case I think there should be added a footnote where you make an
acknowledgement to me for instance something like this:
‘The author is indebted to the editor of Econometrica, Professor Ragnar Frisch, for
certain corrections and simplifications in the mathematical derivations as well as for
many suggestions for improvements in the manner of presentation in general.’”
Frisch was an inexperienced editor in 1933 and would have done better if he had left
to Leontief to write the acknowledgment note. Two weeks later Leontief answered:
Leontief to Frisch, 27 February 1934.
“Dear Professor Frisch:
I appreciate very much the trouble you have taken with my ms. and I am glad to
know that you have found that the formula describing the quantity changes is correct.
Your remark about the impossibility – under the given assumption – of applying the
marginal pricing principle universally is very pertinent, but I do not think this can
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