MEMORANDUM - UiO

1 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. 1095 Blindern Gaustadalle n 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: Internet: e-mail: e-mail: Last 10 Memoranda ystein 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.

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4 The paper sets out an account of Leontief's life from his childhood and early youth in St. Petersburg. Then followed study years in St. Petersburg and Berlin, work as research associate at the Institute of World Economics in Kiel, an adventurous trip to China, and a further year in Germany during which circumstances and luck brought him to the United States in 1931. and to Harvard shortly afterwards. The aim has more specifically been to consider and how Leontief's discovery of an input-output approach was influenced by his earlier studies and research experience and by exchanges with Joseph Schumpeter, Ragnar Frisch, his Kieler colleagues and others.

5 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, ). The statement sounds like a truism. Dorfman added, however, that Leontief cannot be summed up in a single accomplishment but a dominant theme running through Leontief's professional work, providing an important clue for the discovery of input-output economics, was in Dorfman's view that economics is an empirical and applied science.

6 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. The paper is about Wassily Leontief's path towards the discovery of input-output economics, which was marked by two articles in Review of Economic Statistics in 1936 and 1937, followed in 1941 by the monograph The Structure of American Economy, 1919-1929. The organization of the paper is largely biographical covering Leontief's life from his childhood and early youth in St. Petersburg, followed by a relatively documentary account of his study years in St.

7 Petersburg and Berlin and his work as research associate at the Institute of World Economics in Kiel. His adventurous trip to China in 1929 is mentioned while his last year and a half in Germany in 1930-31 is set out in some detail including his exchanges with Joseph Schumpeter, Mordecai Ezekiel and others who advised or 2. influenced him. It was circumstantial luck which brought him to the United States in 1931. and to Harvard shortly afterwards. An attempt is made in the paper to look for clues of how Leontief arrived at his discovery. The question could be put whether there on Leontief's career path was an input-output moment at which the cumulated insight was brought to fruition and the input-output approach was discovered.

8 It can be foreshadowed that such a eureka point could not be clearly identified. Perhaps this attempt was a too simplistic way of looking at the discovery process. Others have touched upon the question of when and where Leontief arrived at his input-output approach. The account of 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.

9 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 agreed to report his failure in writing' at the end of the year. (Carter 1976, ). Another long-time Leontief associate, Karen Polenske, placed the input-output moment 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.

10 (Polenske 2004, ). Others have pointed to Leontief's doctoral dissertation Die 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). The paper thus aims at following Leontief's tracks from his early life in St.