New School
for Social Research: Profile - Wassily Leontief
Wassily
Leontief's name has been associated with a particular
type of quantitative economics:
input-output analysis.
Input-output was partly inspired by the
Marxian
and
Walrasian
analysis of
general equilibrium via interindustry flows - which
in turn were inspired by
Quesnay's
Tableau
Economique, and was the outgrowth of the "multi-sectoral"
approach followed by the
Kiel
School. Although of
fluctuating popularity, input-output analysis has been a
mainstay of economics and economic policy and planning
throughout the world for the past half-century.
Raised in
Russia, Leontief obtained his Ph.D in Berlin. Although
the seeds of input-output analysis were already in his
work at the
Kiel
Institute, he would
have to wait until he reached
Harvard
in 1932 to begin
constructing an empirical example of his input-output
system - an effort which gave rise to his 1941 classic,
Structure of American Industry. Leontief followed
up this work with a series of classical papers on
input-output economics (collected in 1966). Input-output
was novel and inspired large-scale
empirical
work. It has been
used for economic planning throughout the world, whether
in Western, Socialist or Third World countries.
It was also of
crucial theoretical importance. Input-output inspired
the analysis of linear production systems, which were
instrumental in the development of modern
Neo-Walrasian
theory. Unusual for
most economic contributions, Leontief's system was also
crucial for the revival of
Classical
Ricardian theory.
The structure of input-output (albeit with some critical
differences) was employed by Piero
Sraffa
and the
Neo-Ricardians
in the 1960s to
resurrect the theories of
Ricardo
and
Marx.
Leontief's
contributions to economics were not limited to
input-output. His 1936 article on "composite
commodities" made him, together with
Hicks,
the father of that famous microeconomic theorem. His
early reviews of
Keynes's
General Theory
(1936, 1937, 1947, 1948) were important stepping
stones to the
Neo-Keynesian
synthesis's stress on fixed nominal wages in
interpreting Keynes's theory. His 1933 article on the
analysis of international trade is still learnt today
and his 1946 contribution on the wage contract outlined
what is now a classical application of the
principal-agent model before that term was invented. One
of his more stirring contributions has been his 1953
finding that Americans were exporting labor-intensive
rather than capital- intensive goods - the "Leontief
Paradox" - which brought into question the validity of
the conventional factor-proportions theory of
international trade.
After having
presided, together with
Schumpeter,
as a teacher over the
Harvard
generation of the
1930s which was to develop much of post-war economics,
Leontief moved to the C.V. Starr Center at New York
University. As a critic, Leontief's repeated
admonishment of economics for its misuse of mathematics
and quantitative methods and the lack of relevance and
realism in its theorizing (e.g. 1938, 1954, 1959, 1971)
are both lucid, sharp and still pertinent. It was for
his development of input-output that Wassily Leontief
won the
Nobel
memorial prize in
1973.
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