Chapter 5 explores variations to the commodity-by-industry input–output framework introduced in Chapter 4, expanding the basic input–output framework to include distinguishing between commodities and industries, i.e., the supply of specific commodities in the economy and the use of those commodities by collections of businesses defined as industries. The chapter introduces the fundamental commodity-by-industry accounting relationships and how they relate to the basic input–output framework. Alternative assumptions are defined for handling the common accounting issue of secondary production, and economic interpretations of those alternative assumptions are presented. The formulations of commodity-driven and industry-driven models are also presented along with illustrations of variants on combining alternative assumptions for secondary production. Finally, the chapter illustrates the problem encountered with commodity-by-industry models, such as non-square commodity–industry systems, mixed technology options, or the interpretation of negative elements.

Chapter 4 deals with the construction of input–output tables from standardized conventions of national economic accounts, such as the widely used System of National Accounts (SNA) promoted by the United Nations, including a basic introduction to the so-called commodity-by-industry or supply-use input–output framework developed in additional detail in Chapter 5. A simplified SNA is derived from fundamental economic concepts of the circular flow of income and expenditure, that is, as additional sectoral details are defined for businesses, households, government, foreign trade, and capital formation, ultimately result in the basic commodity-by-industry formulation of input–output accounts. The process is illustrated with the US input–output model and some of the key traditional conventions widely applied for such considerations as secondary production (multiple products or commodities produced by a business), competitive imports (commodities that are also produced domestically) versus non-competitive imports (commodities not produced domestically), trade and transportation margins on interindustry transactions, or the treatment of scrap and secondhand goods.