A Sweeping New Non-substitution Theorem: Kaldor’s Discovery of the von Neumann Input-Output Model

Nicholas Kaldor is rightly famous for his many theoretical and empirical researches in the fields of microeconomics and macroeconomics. Among many other accomplishments, he independently discovered the von Neumann time-phased system, in which there are no primary (non-producible) factors of production and in which goods as outputs are produced out of themselves as inputs. This remarkable 1937 contribution is little known,1 much less known for example than Kaldor’s 1940 intuitive derivation of a unique limit cycle of determinate amplitude and period, that is asymptotically approached from any perturbed initial business-cycle position.