Capital circulation and the explanation of economic change by Marschak, Frisch and Leontief

We analyze a series of macroeconometric models developed in the years of high theory by Marschak, Frisch and Leontief. These models share an explanation of growth, cycles and fluctuations (“economic change”), based on the analysis of the circulation of capital goods among producers. They disaggregate the macroeconomic production function so as to introduce multiple producers and capital goods. We show that these models offer two main explanations of economic change: one is based on the spread of technological change through the producers’ exchanges network; the other is based on the coordination problems between producers in the capital circulation process.