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Wassily Leontief and the Discovery of the Input-Output Approach A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Bjerkholt, Olav Working Paper Wassily Leontief and the discovery of the input- output approach Memorandum, No. 18/2016 Provided in Cooperation with: Department of Economics, University of Oslo Suggested Citation: Bjerkholt, Olav (2016) : Wassily Leontief and the discovery of the input- output approach, Memorandum, No. 18/2016, University of Oslo, Department of Economics, Oslo This Version is available at: http://hdl.handle.net/10419/165961 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu MEMORANDUM No 18/2016 Wassily Leontief and the discovery of the input-output approach Olav Bjerkholt ISSN: 0809 -8786 Department of Economics University of Oslo This series is published by the In co-operation with University of Oslo The Frisch Centre for Economic Department of Economics Research P. O.Box 1095 Blindern Gaustadalleén 21 N-0317 OSLO Norway N-0371 OSLO Norway Telephone: + 47 22855127 Telephone: +47 22 95 88 20 Fax: + 47 22855035 Fax: +47 22 95 88 25 Internet: http://www.sv.uio.no/econ Internet: http://www.frisch.uio.no e-mail: [email protected] e-mail: [email protected] Last 10 Memoranda Øystein Kravdal No 17/16 New Evidence about effects of reproductive variables on child mortality in sub-Saharan Africa Moti Michaeli and Daniel Spiro No 16/16 The dynamics of revolutions Geir B. Asheim, Mark Voorneveld and Jörgen W. Weibull No 15/16 Epistemically robust strategy subsets Torbjørn Hanson No 14/16 Estimating output mix effectiveness: A scenario approach Halvor Mehlum and Kalle Moene No 13/16 Unequal power and the dynamics of rivalry Halvor Mehlum No 12/16 Another model of sales. Price discrimination in a horizontally differentiated duopoly market Vladimir W. Krivonozhko, Finn R. Førsund and Andrey V. Lychev No 11/16 Smoothing the frontier in the DEA models Finn R. 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The paper sets out an account of Leontief’s life from his childhood and youth in St. Petersburg, his study years in Berlin, his research experience at the Institute of World Economics in Kiel, and the circumstances that brought him to the United States in 1931 and to Harvard shortly afterwards. Keywords: Leontief, input-output JEL: D57, B31 1 Contents Introduction The St. Petersburg heritage Berlin 1925-1927 The Kiel years 1928-1931 NBER as stepping stone to the United States Enchanted at Harvard Concluding remarks Acknowledgement References Introduction “Whoever thinks of Wassily Leontief thinks of input-output, and vice versa” (Dorfman 1973, p.431). The statement sounds like a truism. Dorfman added, however, that Leontief cannot be summed up in a single accomplishment. A dominant theme running through Leontief’s professional work providing the clue to the discovery of input-output economics is, according to Dorfman, that economics is an empirical and applied science. Fancy theoretical apparatus may sometimes seduce students into intriguing and sterile bypaths but the only valid test of economic research is its empirical and its practical significance. This paper is about Wassily Leontief’s path towards the discovery of input-output economics, which by wide consensus happened through two articles in Review of Economic Statistics in 1936 and 1937. The aim has more specifically been to look more closely into how Leontief arrived at his discovery. The question could be put whether there on his career path an “IO point” at which the input-output approach was discovered? It can be foreshadowed that it turned out to be difficult to identify such a point. Perhaps this attempt will appear as a very simplistic way of looking at the discovery process. A brief account of Leontief’s life is set out in the paper from birth until 1941 when his monograph The Structure of American Economy, 1919-1929 was published. 2 Others have touched upon the question of when and where Leontief arrived at his input-output approach. An account given by Ann Carter, a close associate of Leontief over many years from the late 1940s is the following: “When Wassily Leontief first came to the United States, he spent a year or so in New York working at the National Bureau for Economic Research. He was developing a new system, later to be called input- output analysis. One day he received an invitation to join the Harvard faculty. He replied with qualified interest: he would be pleased to come, but he required a grant of $1500 to cover the cost of a research assistant to help him with the implementation of his fundamental new study. They reviewed his project with considerable skepticism. What he proposed to do was probably impossible and certainly very strange. Still, they seemed to want him. The $1500 was granted on condition that he agree ‘to report his failure in writing’ at the end of the year.” (Carter 1976, p.57). Another long-time Leontief associate, Karen Polenske, places the origin slightly further back in time: “Leontief indicated that his development of the input-output model of an economy was influenced by Quesnay and Walras, not Marx, and that he conceived of the input-output structure in 1927 at the Institute for World Economics in Kiel” (Polenske 2004, p.11). Others have pointed to Leontief’s doctoral dissertation Wirtschaft als Kreislauf as the origin of his input-output approach. In the autobiographical note provided for his Nobel award in 1973 Leontief gave a brief account of the scientific logic in the path he followed: “Having come to the conclusion that so-called partial analysis cannot provide a sufficiently broad basis for fundamental understanding of the structure and operation of economic systems, I set out in 1931 to formulate a general equilibrium theory capable of empirical implementation.” (Leontief 2015). This paper thus aims at following the tracks from Leontief’s early life in St. Petersburg via Berlin, Kiel, New York to Harvard and in that biographical context look at how it happened that Wassily Leontief arrived at his input-output formulation. There is no comprehensive biography of Leontief but he spoke freely, often and with many about his life and experiences. In later years he gave interviews with fascinating details about his experiences. While always prepared to speak on his scholarly work and contribute his view on a wide range of current issues Leontief was reticent about being elevated and presented as an important personality in the field of economics. Invited in 1988 to contribute a chapter on 3 his “life philosophy” to an anthology with contributions from highly prominent economists Leontief declined without hesitation: “Unlike some of my professional colleagues, I would find it practically impossible to describe ‘My Life Philosophy’ on twenty, a hundred or even five hundred pages. I am not as self-conscious as they seem to be.”1 Later in the same year Leontief was asked by Samuelson whether he was willing to write an autobiographical piece. Leontief waved it away: “I do not feel self-important enough and I have more interesting things to do than to write about myself.”2 As Leontief was an eminently interesting personality whose reflections and biographical notes would have been of great interest, his reticence was unfortunate. It is surely true that Leontief always, even at high age, had interesting tasks ahead and seldom, if ever, looked back and reflected on what he had done in earlier periods of his life. Hence, it is perhaps not surprising that Leontief wrote next to nothing on the origin of input-output. Some of his key co-workers and many students of input-output economics have taken a natural interest in this issue. Some asked him and got answers but not sufficient to trace his steps. This has provided motivation to look a little bit closer into the issue.3 The origin of input-output analysis is, however, discussed also in a quite different meaning, namely as referring to scholarly work by pioneers of linear models with more or less similarity to an input-output model in formal structure.
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