WASSILY LEONTIEF AND INPUT-OUTPUT ANALYSIS (2006)

WASSILY LEONTIEF AND INPUT-OUTPUT ANALYSIS (2006)
Foreword by Paul A. Samuelson
                                                       Dr. K.Puttaswamaiah Editor,

Prof .Wassily Leontief received the Nobel Prize in economics in the 5" year (1973) after it was instituted in 1969.Since Leontief’s name is associated with input-output analysis, it's theory and applications are well brought out in this book and the contributions are mainly from authors of China and Japan who are connected with the Input-Output association (IIOA) and other Institutions and Universities in Beijing, China.. The article by G. Abraham- Frois and E.Lendjel, Professors in France have something new to say that the input-output analysis was founded much earlier than the contributions of Prof.Leontief.This is a matter to be debated. However, Prof Paul A. Sameulson, the second year Nobel Laureate (1970) in his foreword has said about Leontief that 'Leontief created quite a contemporary stir called Leontief Paradox --Leontief was affably genial'. 

FOREWORD By Paul A. Samuelson WASSILY LEONTIEF( 1906-1999 )

Along with Regnar Frisch, Jan Tinbergen and John Hicks, Leontief was a leading poineer in the post-1930 new economic discipline of econometrics. 1 am proud to have been along with Abram Bergson and Robert Solow, one of his proteges.

American science benefitted much from exiles in mathematics, physics and economics. (The names of Albert Einstein, John von Neurmann and Enrico Fermi come to mind, along with at Harvard my teachers Joseph Schumpeter, Leontief, and Gottfried Haberler). Before arriving permanently at Harvard in the early 1930s. Leontief was the precocious son of a St. Petersburg professor. When the 1917 Bolshevik revolution occurred, Leontief at 12 was a Menshevist moderate saved from the firing squad only because he was not yet in his teens.

A neck operation that he needed got him to Berlin in 1925. That was his way to exit the USSR. At the Berlin University he became the pupil of such diverse scholars as Werner Sombart and Ladislaus von Borkiewicz. The latter creative mathematical economist encouraged Leontief's first input/output paradigms in the mid-1920's. (At the same time in Cambridge, England, the Italian Piero Sraffa began his input/output explorations. It is not to the credit of either great scholar that neither one seems to have ever cited in print the research of the other!) It must have been Schumpeter, newly arrived at Harvard to succeed the venerable Frank Taussig, who engineered Leontief's transferring from the New York National Bureau of Economic Research to Harvard. Harvard was a bully pulpit for the half century he taught there. Why did he leave Cambridge to spend a final score of years at New York University in New York ? One reason was that in advanced years he sympathized with the rebellious students against the Harvard deans at the time of the Vietnam war and its compulsory military drafts. Also, Mrs. Estelle Leontief vastly preferred cosmopolitan New York to reserved New England. But perhaps his main gripe was that Harvard resisted setting up a permanent input/ output institution.

1 arrived for graduate study at Harvard from Chicago in autumn 1935. That was luck. Only then had Schumpeter taken over Taussig's famous first course. And then, for the first time, Leontief was allowed to teach his seminar in mathematical economics. We were a small group : Abram Bergson, Shigeto Tsuru, Sidney Alexander and I. Progress was thorough and slow. (Never did Leontief use cardinal marginal utility. Always, a la Pareto, he worked with ordinal preferences. No wonder I could discover "revealed preference" long before I finished my Ph.D. work.)

Let me describe my mentor. Wassily was young, handsome, and with a dark complexion. (In the next 50 years he changed re little.) He spoke and lectured in a low voice. Never did his distinct Russian accent fade away much. (Typically, one morning in 1946 he came to class to utter as his first words, "Alzo, Keynes is dead.")

Leontief was affably genial. But at his core he was a loner, with only guarded admiration for his equals. (May be that's why a great mind like Abraham Wald was never courted by Harvard?)

Apart from Leontief's well-known preoccupation with input/ output theory and measurements, here are a few of his other notable accomplishments. Early on in Germany he purported to measure from the same single statistical scatter both a dd demand curve and an ss suply curve. (This enamored him to Schumpeter. But not Ragnar Frisch!)

A 1934 Leontief paper went beyond the pioneering “cob-web” model of H. L. Moore, Jan Tinbergen and Henry Schultz. It came a bit close to post-poincare chaos topology, which Edward Lorentz later employed to revolutionize weather prediction methodology.

Like Viner and Lerner, Leontief advanced the modern necessary and sufficient conditions for functions to be "weakly separable," "strongly separable" and "linearly addable." [E.g., if and only if, a consumer's log (P•P2)=L(C•,C2function obeys •²L(C•,C2)/•C•C2=0 can this consumer possess additive marginal utilities of the form U=•²•Uj(Cj).]

In 1953 Leontief created quite a contemporary stir called the Leontief Paradox. Using his input/output methodology, he reported statistically that U.S. imports were less (!) labor intensive than U.S. exports. (This seemed to contradict the standard Heckscher-Ohlin dogma that under free trade a labor-poor U.S. would be importing labor-intensive goods in exchange for its capital- intensive exports.)1

It is fitting that in the same Connecticut cemetery plot are buried the couples Joseph and Elizabeth Schumpeter and Wassily and Estelle Leontief. Both scholars were acclaimed poineers. Although their political and ideological values differed, they were close friends and were Cambridge neighbors for decades. Both as teachers were precious to me.

'Professor Albert Kervyn, a deceased Belgian savant, during a sabbatical sojourn at MIT motored from the East Coast to the West Coast, visiting along the way such universities as Princeton, Chicago, Iowa State and Stanford. He graded each place's sophistication by use of the Leontief Paradox. At a place where no one knew of it, the grade was Zero. If someone at another place knew of it but had no clue as to is resolution, the grade was Five. Only if someone there purported to have resolved it were full marks of Ten earned.

I suspect that Wassily himself hypothesized that each one of U.S. labor had the productivity of N > 1 EU laborers. Then, even if the absolute population was thin in the U.S., for N large enough the U.S. would truly be a "labor-rich" region. That justified its exporting of labor intensive goods while importing capital intensive goods. Q.E.D Strictly speaking, this "solution" violates the Heckscher-Ohlin convention of "the same technologies in both trading places." A different resolution of the Paradox would hypothesize that U.S. consumers' tastes were very heavily biassed toward capital-intensive goods.

References
Leontiff, W 1934. "Pitfalls in the Construction of Demand and
Supply Curves :
A Reply, "Quarterly Journal of Economics 48(1):335-361
_____________.1934.”Verzoegerte Angebotsanpassung und partielle
Gleich-gewicht,” Zeitschrift fur nationaloekonomie 5(5):670-676
____________.1953. Studies in the Structure of the American Economy.

New york, Oxford University Press.

Prof. Wassily Leontief was one the earliest economists to receive the Nobel Prize in Economics in 1973 in the fifth year after the prize was instituted in 1969. He received the prize "for the development of input-output method and for its application to important economic problems". The input-output technique propounded by Prof. Wassily Leontief is being used by economists, planners and others interested in economic analysis all over the World and has been proved as an important tool for economic analysis.

Prof. Leontief was outspoken, spontaneous and quick in his correspondence. It pained me a lot when I learnt from Dr. Svehana Alpers, Leontief's daughter that her father passed away on Feb 5, 1999. She is Professor of History of Art in the California University, Berkely, U.S.A.

Prof. Wassily Leontief was a Member of the Editorial Advisory Board of the "International Journal of Applied Economics and Econometrics''. He had accepted that position spontaneously. His acceptance was the time when Prof. Jan Tinbergen, the founder of the Journal along with mc, had passed away. In his letter, Leontief wrote: "I am prepared to replace Tinbergen as Member of your Journal and happy to be with my other colleagues too".

The life and works of Leontief has been briefly presented in my paper as an introduction. A list of contributions of Leontief is appended at the end of this work.

The Input-output Association (IIOA) in Beijing, Peoples Republic of China, is doing very well in applying the input output technique to various areas. In this special work in memory of Prof. Wassily Leontief, as could be seen from the "Contents", various authors from China and from IIOA have contributed to this special work. The authors have taken special interest in applying the input-output technique to various areas. I wish to convey my sincere thanks to all these authors and particularly to Prof. Chen Xikang who assisted me in coordinating the various papers of his colleagues. I also wish to express grateful thanks to Prof.Abrahim Frois, University of Paris X and Professors Zaizhe Wang, Rissho University, Kozou Miyagawa, Keio University, Japan for their contr IIOA is having an annual conference on Input-Output analysis. The Association has also instituted Leontief Memorial Prize for the best conference paper of young authors (born after 1964). The Leontief Memorial Prize Committee of the IIOA will select the best paper for the Prize Award and the paper so selected will be published in Economic systems Research. The institution of this prize should be appreciated by all economics loving professionals.

I wish to convey gratitude to all the Members of the Editorial Advisory Board and to the Laureates in economics who are supporting and guiding the Journal by being members on the Editorial Advisory Board. They are respected Nobel Laureates, Paul A. Samuelson MIT, Cambridge, USA, Lawrence R. Klein, University of Pennsylvania, Philadelphia, Robert M. Solow MIT, Cambridge, USA, Robert C. Merton, Harvard University, USA. I wish to express my regards to Prof.M.S.Swaminathan, the greatest Agriculture Scientist, India, for his continued inspiratin to me, to do my work and admiratin too.

I am particularly greateful to Prof. Paul A. Samuelson, the first American Nobel Laureate in Economics for his continued support all these years and for his kind 'Foreword' which has enriched the value of this book and also provides lot of information about his association with Prof. Leontief and many other collegues and friends. This information is not available anywhere in the published form and are very valuable addition to modern economic history. This has made me happy and certainly be of interest to every economist.

This book is based on the papers published in International Journal of Applied Economics & Econometrics in Vol. 14, No. 1 - January-March 2006 and a few other papers published in 2005 in the same Journal. I now have the pleasure to place before the readers this special work in memory of Prof. Wassily Leontief. It is hoped that this work would kindle futher interest for research on the subject by economists & planners. It will also be of interest to all those who are interested in the contributions of Prof. Wassily Leontief and in particular, the input-output technique as a tool in their further research.

Bangalore,India.                                          K. Puttaswamaiah
June 15,2006                                                  Editor-in-Chief
                                                            International Journal of Applied
                                                                Economics and Econometrics

Forword by Paul. A. Samuelson                                                                 vii
Preface                                                                                                      xiii    
1.K.Puttaswamaiah, Wassily Leontief- Life and Contributions                    1
11. G. Abraham-Frois, E. Lendjel, Predecessors
to Leontief:« Father » Potron's early contributions to
input-output analysis                                                                                15
111. Liu Xiuli, CPE-IHO Model to Calculate the Direct,
Complete and Conjunct Impact of Unfair Importation
on Import Country's Economy                                                                   35
1V. Eryuan Wang, Xikang Chen, Input-Holding-
Output Analysis of Chinese Energy Consumption                                     45
V. Fu Xue, Chen Xikang, Chinese Education
Structure for Sustainable Development:
A Multiyear Lags Education - Economy
Extended Input-Output Model withAsset                                                  61
V1. Ju'e Guo, Kunfu Zhu,Financial Input-Holding-
Output Table of China and Its Application                                                97
V11. Zaizhe Wang ,Kozou Miyagawa ,Zuyao Hu,
The Regional Structure of Chinese Economy—
Some Analyses Based on the Multi-Regional Input-
Output Table of China, 1997-                                                                   97
V111. Xu Jian, Chen Xikang, Yang Cuihong,
Water Conservancy Input-Holding-Output Model
And Linkages between Water and Economy                                          113
1X. Chen Xikang, Gue Ju-e, Yang Chihong,
Economic Development and Input-
Output Extension                                                                                   127
X. Xiulu Liu, Xikang Chen, The nonlinear
important coefficients input-holding-output
model                                                                                                     173
K.Puttaswamaiah, Annex I, List of Life Time
Contributions of Wassily Leontief                                                          183
Contributors                                                                                          185

IMPRESSIONS ON THE BOOK
This book on Wassily Leontief provides interesting and useful technical applications of inputoutput modelling, referring to various topics, such as impact of unfair importations, energy consumption, sustainable development, financial input-ouput table, regional structure with particular applications to Chinese economy.

An excellent book concerning analysis and legacies of Wassily Leontief, a Nobel laureate in economics. Economists across the world will find it very useful and Dr.Puttaswamaiah's initiative and effort in bringing out this excellent work on Leontief and in particular input-output analysis and it's applications into various areas will remain as a landmark work in modern economic history.
                               -Gilbert Abraham Frois University of Paris-XNanterre,France.

This represents an excellent collection of articles honoring the contributions of the Nobel Laureate, Wassily Leontief. Particularly interesting are several articles by many Chinese economists applying Leontief s input-output contributions to the various aspects of the Chinese economy.
                              -Bala Batavia DePaul University, USA.

This book on Leontief is likely to surprise the reader in several ways. The opening chapter examines Leontief s at times stormy relationship with the Harvard economics department. One is astounded to hear that his colleagues were not enthusiastic about his input-output analysis and that he in turn objected to their concentration on orthodox theory at the expense of empirical work and alternative approaches. This was later to form the basis of his (in) famous article on 'Theoretical assumptions and non observed facts' and Leontief s departure from Harvard. The second surprise is the amount of attention that Chinese economists are devoting to inputoutput analysis. This special work documents in detail the work in that country applying Leontief s tools to trade issues, energy consumption, education, regional inequality and the financial sector. Indeed, it seems that in every vital aspect of Chinese economic development the quantitative approach that Leontief pioneered is seen as an essential input in deriving appropriate policy advice. The chapters in this book show that many of the fundamental contributions including inputoutput analysis of Wassily Leontief, Nobel Laureate continue to interest and motivate research to the present day.
                                -John Lodewijks University of New South Wales, Sydney, Australia.

The greatest Contribution in Wassily Leontief’s distinguished career was devising the theoretical framework and then appraising the quantitative basis for understanding the structure of an economy. Features of this contribution are spelt out in this Volume.
                                -Prof. Warren Hogan UTS, Sydney, Australia