Nurkse at 100
5 June 2007 at 1:31 pm Peter G. Klein 2 comments
| Peter Klein |
Reader G. V. Varma reminds me that Ragnar Nurkse was born 100 years ago today, June 5. I don’t have anything to add to this earlier post except to share these funky diagrams from Nurkse’s 1935 Review of Economic Studies article on the structure of production. Each is supposed to illustrate a circular process in which fixed capital reproduces itself. (Neither, I’m afraid, will win an award for pedagogy.)
The spout-and-ring diagram is explained as follows: “The ‘ring’ is equivalent in meaning to Dept. I [which produces capital goods] and the ‘spout’ to Dept. II pouring forth its output of consumable goods. The output of Dept. I divides itself as the dotted line: part of it flows back into the ring (to maintain fixed capital in Dept. I itself). This picture, though less informative than the departmental scheme [pictured below] in bringing out the internal exchange relationships of a capitalist economy, may nevertheless be useful in illustrating the circular process of capital reproduction as lying, in a sense, behind the purposive orientation economic activity directed toward the creation of consumable income.”
Hopefully there is a Nurkse specialist out there who can help us make sense of the larger diagram.
Organizations and Markets 
1.
Nicolai Foss | 6 June 2007 at 1:14 am
Aren’t the “larger diagram” “simply” two Hayekian triangles, illustrating two sectors that provide inputs to each other? So, Dept I produces, say, tractors under the application of land and labor to Dept II which produces bread which is used to feed the labor in Dept I.
2.
Peter Klein | 6 June 2007 at 9:48 am
Yes, I think so, though there are many peculiarities. I think is point is not that workers build tractors and tractors make bread which feeds workers, but that the bread goes to workers in both sectors, and the tractors are not only an input into the production of bread, but also a replacement for existing tractors that wear out, making the entire process self-contained and “automatic.” Oddly, though, for an analysis that begins with a Hayekian stages-of-production diagram, there doesn’t seem to be much capital heterogeneity. For example, some of the output of Dept I is said to replace worn-out capital goods used in Dept I. But to make tractors you need not other tractors, but machines and tools that are of a still “higher” order (to use the Mengerian language). Maybe the diagram makes sense only with a single homogeneous capital good and a single consumption good.