Steven Pressman Fifty Major Economists (2006)

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.He also did this by measuring income distribution andexamining how the distribution of income in the US changed duringthe twentieth century.But the work of Kuznets went beyond mea-suring economic phenomena.He also sought to determine the causesof economic growth and changing income inequality, studied the cyclesof growth that economies go through, and attempted to understandthe consequences of economic growth on income distribution.Kuznets was born in Pinsk (then part of the Soviet Union, nowpart of Belarus) in 1901.His father was a skilled furrier, who movedthe family to Kharkov, a city noted for its intellectual life, at thebeginning of World War I.After graduating from the local publicschool, Kuznets enrolled at the University of Kharkov.There hebegan to study economics and was exposed to Joseph Schumpeter stheory of innovation and the business cycle.When the RussianRevolution closed the university and led to civil war in Russia, theKuznets family fled Russia, going first to Turkey and eventually tothe United States (Kapuria-Foreman and Penman 1995).Kuznets taught himself English over one summer and then enrolledat Columbia University.At Columbia, Kuznets studied under WesleyClair Mitchell, who trained Kuznets in empirical economic methodsand sparked his interest in business cycles.He received a BA fromColumbia in 1923 and a PhD in 1926.His dissertation (on fluctua-tions in wholesale and retail trade) involved questions of both eco-nomic measurement and cyclical variations in economic activity(Kuznets 1926).After receiving his doctorate, Kuznets worked at the NationalBureau of Economic Research (NBER) for around three years.Thenin 1931 he accepted a position at the University of Pennsylvania.Kuznets went to Johns Hopkins University in 1954, and then toHarvard in 1960, where he remained until his retirement in 1971.Allthe while, Kuznets maintained his connections with the NBER.181SIMON KUZNETS (1901 85)Over the course of his academic career Kuznets received manyprofessional accolades.In 1949 he was made President of the Amer-ican Statistical Association; in 1953 he became President of theAmerican Economic Association; and in 1971 he was awarded theNobel Prize for Economic Science.While the Nobel Prize committee singled out his work in the areaof economic growth and changing social structure, the most impor-tant contribution of Kuznets was probably his work developing asystem of national income accounting.Macroeconomics studies the overall performance of national econo-mies.To test hypotheses about macroeconomic relationships, or tofind the causes of good macroeconomic performance, it is necessaryto have some measure of overall economic activity.In the seven-teenth century, William Petty made some rudimentary attempts atcalculating economic activity in England, and national income esti-mates for Britain were made several times subsequent to the pio-neering work of Petty.However, no one attempted to make suchmeasurements on an annual basis, and few estimates were done care-fully or systematically.Still, in the 1920s, Britain was far ahead of theUS in compiling national income data.Kuznets was primarilyresponsible for changing this.He moved the US from the position oflaggard to being a world leader in national income statistics.At the NBER Kuznets was responsible for developing the firstestimates of US national income for the years from 1929 to 1932.Hethen went on to develop estimates of national income for all the yearsbetween 1919 and 1938, and to provide estimates of US economicactivity going back as far as 1869 (Kuznets 1941, 1946a, 1946b, 1952a).Kuznets (1933) carefully described the methodology that he usedin compiling measures of economic activity, as well as some of theproblems he encountered in making such estimates.As such, he setthe standards for measuring economic activity and developed theprocedures that are still employed today.For example, Kuznets was aware that estimates of national incomeexcluded goods and services that were not marketed and sold.Whenhouseholds cook their own meals, mow their own lawns, and cleantheir own houses, they are producing goods and services; but thesegoods and services are not counted in government figures of eco-nomic activity.Likewise, illegal activities like prostitution and thedrug trade are difficult, if not impossible, to measure and so cannotbe included in estimates of overall economic activity.Kuznets was also careful to distinguish final goods from inter-mediate goods, and was able to use this distinction to avoid the prob-182SIMON KUZNETS (1901 85)lem of double counting.An automobile, a final good sold to con-sumers, is assembled from intermediate goods such as tires, glass,engines, and brakes.To count the value of tires sold to the auto-mobile manufacturer and also the value of the whole car would be tocount twice the tires that are produced.In order to get a moreaccurate measure of economic activity it is necessary to subtract thevalue of all parts from the final price of the car sold to the consumer.Taking this difference, or computing the value added by the carmanufacturer, provides the foundation for measuring nationalincome [ Pobierz całość w formacie PDF ]

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