Recollections of Wassily Leontief
In the early nineteen sixties I had the privilege of getting to know Wassily Leontief. Later we became friends. He visited Scotland twice in the nineteen seventies; I took him salmon-fishing on the Tay near Dunkeld. Standing waist-deep in the dark water he told me that it reminded him of his earliest attempts at fishing on a river on his grandfather’s estate in Finland, then part of Tsarist Russia. His childhood memories also included the deep mourning into which the country was plunged by the news of the death of Tolstoy in November 1910. Seven years later, Wassily heard Lenin addressing a crowd outside the Winter Palace in St Petersburg.
Life and Work :
Wassily was born in 1906. As the only child of adoring parents, he had a happy childhood. Following his graduation from the University of Leningrad, as it was then called, in 1925, he completed his PhD in 1928 at the University of Berlin under Werner Sombart and Ladislaus Bortkiewicz. The topic of his dissertation was The Economy as a Circular Flow. Postdoctoral research on supply and demand curves at Kiel convinced him that a general equilibrium approach to Economics was to be preferred to a partial equilibrium analysis. While at Kiel he visited China at the invitation of the Chinese Government to advise them on their railway system. Since Wassily was only 23 years old at the time, many people have speculated that the invitation was intended for his father, also named Wassily, who was`a professor of Economics at Leningrad University. If the Chinese were surprised by the youth of their visitor, they showed no sign of it, and Wassily enjoyed a lengthy tour of the country by train. In 1931 he moved to the NBER in New York; he became an assistant professor of Economics at Harvard in 1932.
It was there that he began the long and painstaking research that culminated ten years later in the publication of the book that set out the elements of his new system, The Structure of American Economy 1919-1929. What he had accomplished was the formulation of a general equilibrium theory capable of empirical implementation. This was a remarkable achievement in three respects. First, there was the creation of the theoretical system, a linear representation of the interdependence of the different sectors of a modern economy first proposed by Walras in 1874. Secondly, there was the collection and arrangement of the data, an immensely difficult and time-consuming task, resulting in the compilation of the first ever input-output table. Finally, he had to overcome the problem of trying to invert a 44 -dimensional matrix. In 1935 this was beyond the capability of the existing mechanical computing machines, so he was forced to aggregate his system to just 10 sectors to obtain a solution. For this work he was awarded the Nobel Memorial prize in 1973.
Although these computational constraints were relaxed after the War by the advent of electronic computers, even as late as 1962 anyone wanting to use the Harvard University computer – which occupied a very large room- had to learn how to write programs and submit them along with their data on punch cards to the computing centre staff. Many hours later a print-out of the results might be available. These results were sometimes sensitive to changes in temperature in the computer room.
At that time Wassily’s research team of about six people was located in an ancient frame house straight out of a Charles Addams cartoon. We were known as the Harvard Economic Research Project (HERP). It was in effect the world centre for input-output research, so we had a constant stream of visitors from other countries who gave seminars explaining what they were doing.
HERP has an important place in my memory for another reason. It was there on November 22nd 1963 that, huddled with colleagues round a radio, we heard the news that President Kennedy had been shot and, a few minutes later, that he was dead. It is difficult, even now, to exaggerate the effect that this shocking event had on all of us.
Although slight in stature, Wassily’s presence dominated any gathering. This was because of his innate dignity, courtesy and modesty of demeanour. He was warm and approachable, and he had a natural affinity with children. He was always immaculately dressed. One of his endearing features was his heavy Russian accent. In contrast, his written English was more elegant than that of any other contemporary economist, with the possible exception of his close friend John Kenneth Galbraith. Among his academic colleagues he enjoyed the greatest respect. Because he had mastered the whole range of economic theory before he began work on his input-output system, he was asked to teach the basic microeconomics course to graduate students. He was elected Chairman of the Society of Fellows, the elite academic group of the university.
As he made clear in his Presidential address to the AEA in 1970, Wassily always attached the highest priority to applying economics to the problems of the real world. In this respect he was swimming against the tide of mainstream theory which in the second half of the twentieth century was running ever more strongly away from reality. Its practitioners claimed that Economics was becoming more ‘scientific’, forgetting that empirical verification is one of the hallmarks of a genuinely scientific activity.
Of course, the empirical conditions do not exist for a conclusive statistical test of most economic theories, but perhaps Wassily came as close as anyone could to testing an economic theory when he applied his new technique to the Heckscher-Ohlin Theorem. Also known as the factor proportions theorem, it states that a country will tend to export those commodities that, relative to its imports, are intensive in the factor with which the country is most abundantly endowed. Everyone in the early 1950s supposed that the United States was more abundantly endowed with capital than any other country in the world. One would therefore have expected US exports to be more capital-intensive than its imports, but Wassily’s calculations found exactly the opposite. This finding that became known as the Leontief Paradox sparked a debate that continued for more than a decade, inspiring innumerable similar calculations for other countries.