ABSTRACT
Leontief’s multisectoral input-output analysis has supplemented Keynes’ aggregative theory, just as the latter’s ‘Principle of Effective Demand’ has made it possible for the former’s ‘final demand’ variable to be treated as endogenously determined. Despite these com plementary developments, neither Leontief’s input-output analysis nor Keynes’ aggregative theory is in and by itself capable of providing optimal solutions to those employment and investment problems which involve alternatives and constraints. And yet there has been no attempt to make a systematic analysis of the necessary conditions for solving such optimization problems at the macro level. Such an attempt requires linear programming applications of
input-output analysis within the general framework of modern employment theory. We shall in this chapter construct linear programming models to illustrate the theoretical desirability and practical utility of optimizing employment and investment subject to certain constraints to be imposed on the optimal solutions involved. Specifically we shall take up {a) the multisectoral background, {b) programming optimal employment, and (c) programming optimal autonomous investment.
