A KEY ROLE FOR INPUT-OUTPUT-ANALYSIS IN POLICY DESIGN

Input-output analysis becomes indispensable for rational policy formul ation where two conditions hold: (1) inputs as well as outputs enter s ociety's objective function directly las in the case of employment, li mited energy resources or pollution); and (2) where the economy in que stion is open, so that macroeconomic policy is largely powerless to in crease employment or to influence the use of other inputs. Three issue s will be used as examples: attempts to reduce petroleum use through s ubsidies for other energy sources, attempts to reduce the polluting em issions of production processes, and attempts to stimulate employment in Puerto Rico.