A note on the calculus for physical Input-Output analysis and its application to land appropriation of international trade activities
Suh S (2004)
Ecological Economics 48(1):9-17
In a recent paper in this journal, embodied land appropriation in international trade activities was analysed using a physical input–output table (PIOT) (Ecological Economics 44 (2003) 137). The authors stated that there are significant differences between the physical and the monetary input–output tables in their results, which the authors argued to be due to the fact that the results from the monetary table are determined mainly by the monetary structure of final demand, while the structure of a physical table more closely resembles the ‘physical realities’ of an economy. In the present paper, it is argued that the methodological foundation that the authors based their analysis on is misleading and does not satisfy the overall material balance requirement. It is shown that the differences in the results between the monetary and physical tables presented by the authors have nothing to do with the resemblance to the physical realities. I also tried to further clarify a number of critical issues in applying physical input–output tables, related to double counting, treatment of wastes and the effect of closing the system toward direct material inputs. A number of consistent but different approaches to cope with these issues are presented, including their proofs. The embodied land appropriation of international trade activities is calculated and compared by applying those approaches. There are many advantages of using physical input–output tables, however, their superiority should not be exaggerated nor be regarded as absolute. Depending on how it is constructed and used, it is also possible that the results from a physical input–output table do not tell us more than that indeed some commodities are cheaper, or more costly, per unit of their mass.