|Pinsk Home Page
|Pinsk Stories Menu
Simon Smith Kuznets
Simon Smith Kuznets (April 30, 1901 – July 8, 1985) was an American economist at Wharton School of the University of Pennsylvania who won the 1971 Nobel Prize in Economics "for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development".
Born April 30, 1901(1901-04-30)
He was born into a Jewish family at Pinsk, Russia (now in Belarus) and was educated in Kharkiv, Ukraine, but moved to the United States in 1922 and was educated at Columbia University, receiving his B.Sc. in 1923, M.A. in 1924, and Ph.D. in 1926.
From 1925 to 1926, Kuznets spent time studying economic patterns in prices as the Research Fellow at the Social Science Research Council. It was this work that led to his book Secular Movements in Production and Prices, published in 1930.
From 1931 until 1936, Kuznets was a part-time professor at the University of Pennsylvania and as professor of Economics and Statistics from 1936 until 1954. He was elected to the Pi Gamma Musocial science honor society chapter at the University of Pennsylvania and actively served as a chapter officer in the 1940s. In 1954, Kuznets moved to Johns Hopkins University, where he was Professor of Political Economy until 1960. From 1960 until his retirement in 1971, Kuznets taught at Harvard University.His work and its impact on Economics
Kuznets is credited with revolutionising econometrics, and this work is credited with fueling the so-called Keynesian "revolution". An important book of his is National Income and Its Composition, 1919–1938. Published in 1941, it contains a historically significant work on Gross National Product. His work on the business cycle and disequilibrium aspects of economic growth helped launch development economics. He also studied inequality over time, and his results formed the Kuznets Curve.
Another important development was Kuznets' empirical examination of Keynes' 1936 Absolute Income Hypothesis. The hypothesis gave birth to what would become the first formal consumption function. However Kuznets shook the economic world by finding that Keynes' predictions, while seemingly accurate in short-run cross-sections, broke down under more rigorous examination. In his 1942 tome Uses of National Income in Peace and War, published by the National Bureau of Economic Research, Kuznets became the first economist to show that the Absolute Income Hypothesis gives inaccurate predictions in the long run (by using time-series data). Keynes had predicted that as aggregate income increases, so will marginal savings. Kuznets used new data to show that, over a longer span of time (1870's - 1940's) the savings ratio remained constant, despite large changes in income. This paved the way for Milton Friedman's Permanent Income Hypothesis, and several more modern alternatives such as the Life-cycle Income Hypothesis and the Relative Income Hypothesis.
There are two developments at Kuznets time: the emergence of econometrics and the Keynesian Revolution, both of which found in Kuznets's data an important resource for their advancement. Kuznets, however, was neither a Keynesian nor an econometrician - he took his cues from Mitchell's Institutionalism - as exemplified in his 1930 methodological pieces. Whereas Mitchell devoted his life to the study of business cycles, Kuznets turned to other fluctuations – seasonal ones and secular movements – then to national income estimation, and later to studies of economic growth. As a result, his initial work was on the empirical analysis of business cycles (1930) - a 15-20 year cycle he identified was later attached to his name, the "Kuznets Cycle".
Kuznets's life work was the collection and organization of the national income accounts of the United States (1934, 1941, and 1946). Kuznets was interested in statistical fact finding focusing specifically on seasonal fluctuations, secular movements, national income estimation, and economic growth. He computed national income back to 1869. He broke it down by industry, by final product, and by use. He also measured the distribution of income between rich and poor. Although Kuznets was not the first economist to try this, his work was so comprehensive and meticulous that it set the standard in the field.
Kuznets helped the U.S. Department of Commerce to standardize the measurement of GNP. In the late forties, however, he broke with the Commerce Department over its refusal to use GNP as a measure of economic well-being.
Kuznets was also one of the earliest workers on development economics, in particular collecting and analyzing the empirical characteristics of developing countries (1965, 1966, 1971, and 1979). His major thesis, which argued that underdeveloped countries of today possess characteristics different from those that industrialized countries faced before they developed, helped put an end to the simplistic view that all countries went through the same "linear stages" in their history and launched the separate field of development economics - which now focused on the analysis of modern underdeveloped countries' distinct experiences.
Among his several discoveries which sparked important theoretical research programs was his discovery of the inverted U-shaped relation between income inequality and economic growth (1955, 1963). In poor countries, economic growth increased the income disparity between rich and poor people. In wealthier countries, economic growth narrowed the difference. By noting patterns of income inequality in developed and underdeveloped countries, he proposed that as countries experienced economic growth, the income inequality first increases and then decreases. The reasoning was that in order to experience growth, countries had to shift from agricultural to industrial sectors. While there was little variation in the agricultural income, industrialization led to large differences in income. Additionally, as economies experienced growth, mass education provided greater opportunities which decreased the inequality and the lower income portion of the population gained political power to change governmental policies. He also discovered the patterns in savings-income behavior which launched the Life-Cycle-Permanent-Income Hypothesis of Modigliani and Friedman
Simon Kuznets died on July 8, 1985, at the age of 84.
SIMON KUZNETS (1901-1985).
Economist, statistician, demographer, and economic historian. Born in Pinsk, Russia,
Kuznets was educated in Kharkov, and headed a section of the bureau of labor statistics
there under the Soviet government before emigrating to the United States at the age of
twenty-one. He took up studies at Columbia University, receiving his B.A. in 1923, M.A. in
1924, and Ph.D. in 1926. In 1927 he became a member of the research staff of the National
Bureau of Economic Research (NBER) where he conducted his seminal work on the
estimation of national income. Both at Columbia and the NBER, he was strongly influenced
by his mentor, economist Wesley C. Mitchell. Although he remained an active member of
the NBER until 1960, from the 1950s onward the primary base for Kuznets' research was
the Committee on Economic Growth of the Social Science Research Council, where he
spearheaded an international program on the comparative study of economic growth.
Kuznets held faculty appointments at the University of Pennsylvania (1930-1954), Johns
Hopkins University (1954-1960), and Harvard University (1960-1971). He served the
United States government as a consultant on national income estimation, chiefly in the
1930s, and associate director of the Bureau of Planning and Statistics, War Production
Board, 1942-44. He was president of the American Economic Association (1954),
American Statistical Association (1949), and was the third recipient of the Nobel prize in
economics (1971) for his work on the comparative study of economic growth.
Kuznets' best-known contributions to population fall under three main heads: (1)
measurement of population change, (2) analysis of interrelations between long swings in
population growth and economic activity(Kuznets cycles), and (3) analysis of the long term
effect of population growth on economic growth.
Kuznets contributed to the development of new demographic data for the United
States. His NBER Occasional Paper with Ernest Rubin gives estimates of net immigration
by decade, 1870-1940, and of the foreign born white population by sex, annually, 1870-1939
(Kuznets and Rubin, 1954). In 1951, Kuznets initiated with demographer and sociologist
Dorothy S. Thomas a study of population redistribution and economic growth (Kuznets and
Thomas,1957, 1960b, 1964). Under their joint direction, this work developed benchmark
estimates of state internal migration (by Everett S. Lee), labor force (by Ann R. Miller and
Carol Brainerd), and state income and manufacturing activity (by Richard A. Easterlin).
This work demonstrated conclusively that between 1870 and 1950 both international
and internal migration in the United States fluctuate markedly over roughly twenty year
periods. Kuznets had earlier identified similar long swings in economic time series
(Kuznets, 1930). In a major paper, Kuznets (1958) brought together these two strands of
work pointing out a possible causal mechanism in which a swing in the growth rate of
consumer goods output induced a corresponding movement in migration and this, in turn,
caused a swing in population-sensitive capital formation (see also Kuznets 1961). An
outgrowth of this research on what came to be called Kuznets cycles was an NBER study of
long swings in population and economic growth (Abramovitz 1959, 1961, Easterlin 1968,
Demographers typically stress the adverse effects of population growth on economic
growth. Kuznets adopted a more questioning stance. Based on evidence for 63 developed
and developing countries from the early 1950s to 1964, he concluded that there was little
empirical association between growth rates of population and output per capita, especially
within the developing country bloc (Kuznets 1967, 1973). Kuznets saw the basic obstacles
to economic growth as arising from delays in adjusting social and political institutions, and
viewed population growth, though an impediment, as of secondary importance (ibid., p. 39).
For developed countries he was even more skeptical of the adverse effect of population
growth, and argued that more rapid population growth might promote economic
development via a positive impact on the state of knowledge, the crucial factor underlying
modern economic growth (Kuznets 1960a, pp. 328-30). This, along with Kuznets' empirical
results, stimulated Julian Simon's assault on the premise of mainstream demography that
population growth inevitably hinders economic development (Simon, 1977, 1996, 2000).
Most comparisons of the economic well-being of rich and poor use the distribution
of income among families or households. But rich and poor families differ in size and age
composition, and a meaningful comparison of economic welfare needs to allow for such
differences. Beyond this, there is the question of how differences in mortality and fertility
among income classes affect and are affected by the size distribution of income. These
issues became the primary focus of Kuznets' research following his retirement from Harvard
in 1971 (Kuznets 1979,1980,1989). This strand of Kuznets' work in demography has yet to
be fully followed up.
In the discipline of economics, where theory reigns supreme, Kuznets, though
himself an original and creative thinker, was notable for his insistence on careful
measurement and a respect for facts. In this regard he was, at heart, a demographer.