Production commitments and the financial foundations of specialized economies

Production commitments are the financial underpinnings of the productive system. All productive systems that involve specialization require the formulation, tacit or explicit, of production commitments. This paper explains how production commitments are related to the financial and productive sides of the economy. The article has two main objectives: First, to introduce the notion of production commitment as a credit/debit relation that exists (and must exist) between specialized producers. Second, use this notion to bridge the gap between the inter-industry and intersectoral analyses. This connection can also be used to complement Keynes’ General Theory and other Post Keynesian approaches. The connection between the inter-sectoral and inter-industry sides of the productive system allows for the inclusion of multiple types of financial assets. Correspondence can be established between the existing production commitments and the required outstanding financial assets. In addition to the interaction between currency and bonds traditionally analyzed in the Post Keynesian literature, the present analysis offers a path for the inclusion of other types of financial assets like stocks and derivatives.