Because central planning is so out of fashion, we have mostly forgotten how to do it well. Yet there are little known historical methods that could be applicable in the current crisis, such as input-output analysis, as Steve Keen writes:
One key tool that has fallen out of use in economics is input-output analysis. First developed by the non-orthodox economist Wassily Leontief (Leontief 1949; Leontief 1974), it used matrix mathematics to quantify the dependence of the production of one commodity on inputs of other commodities. Given its superficial similarity to Walras’ model of tatonnement, it was rapidly adopted by Neoclassical economists, and it became an integral part of mainstream macroeconomics back when “general equilibrium” meant “equilibrium of all the markets in a multi-market economy at one point in time”. It was known as CGE: “Computable General Equilibrium”. When I did my PhD on modelling Minsky’s “Financial Instability Hypothesis” (Keen 1995), virtually every other Economics PhD student at the University of New South Wales was building a CGE model of his or her national economy.
If economists were still skilled today in CGE analysis, then they could easily have answered some vital questions for policymakers during the Coronavirus crisis. The most pressing economic is, “if we identify which products are critical, and the level of output needed to sustain the population during 4-8 weeks of lockdown, can you tell us which other products are critical to maintaining that output, and how many workers are needed?”
Because central planning is so out of fashion, we have mostly forgotten how to do it well. Yet there are little known historical methods that could be applicable in the current crisis, such as input-output analysis, as Steve Keen writes: