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Political Arithmetic: Simon Kuznets and the Empirical Tradition in Economics

Author(s):Fogel, Robert William
Fogel, Enid M.
Guglielmo, Mark
Grotte, Nathaniel
Reviewer(s):Heston, Alan

Published by EH.Net (September 2013)

Robert William Fogel, Enid M. Fogel, Mark Guglielmo and Nathaniel Grotte, Political Arithmetic: Simon Kuznets and the Empirical Tradition in Economics. Chicago: University of Chicago Press, 2013. xiii +148 pp. $32 (hardcover), ISBN: 978-0-226-255661-0.

Reviewed for EH.Net by Alan Heston, Department of Economics, University of Pennsylvania.

Nobel-laureate Robert Fogel died June 11, 2013 at which time he was the Charles R. Walgreen Distinguished Service Professor of American Institutions and Director of the Center for Population Economics at the University of Chicago’s Booth School of Business.? His wife Enid, one of this volume?s co-authors (who died in 2007), had a long career as Associate Dean of Students at the Booth School.? Fogel has said that Enid was my ?most confident supporter and my keenest critic.? This short book sums up many of Fogel?s interests and views of the profession often shaped by Enid, as well as his mentor, Simon Kuznets, who also won the Nobel Prize in economics.

The organization of the book is chronological beginning with the rise of academic economists in the United States and following through with the contributions of Simon Kuznets and his legacy and impact.? The number of academic economists in the federal government rose from 5 in 1876 to 848 during the Hoover administration.? This growth paralleled the creation of data gathering agencies like the Bureau of Labor Statistics and the need for information in supporting the efforts of World War I.? Chapter 1 discusses some of the influential academics of the period including the Reverend John Bascom and his Social Gospel tenets.? Bascom?s social activist attitudes evolved from hostility to support of labor movements by the time he took a chair at the University of Wisconsin.? Robert LaFollette, Wisconsin?s governor from 1901 to 1906, sought the advice of Bascom and his associates in formulating protective labor legislation, illustrating the innovative role of state governments at the time.? Bascom?s successors like Richard Ely and John R. Commons furthered the Wisconsin tradition of active involvement in economic and social policies and the role of institutions.

The book devotes another chapter to the establishment of the National Bureau of Economic Research (NBER) beginning in 1914 with discussions with the Rockefeller Foundation about establishment of a social science research center.? Edwin Gay of Harvard proposed a non-teaching institute to the Rockefeller Foundation with Wesley Clair Mitchell as director focusing on prices, wages and rents, but the war stalled negotiations.? The book points out the support that Herbert Hoover provided for increasing collection of economic data both as Commerce Secretary and President.? As economists became involved with the war effort in terms of price controls, production planning, energy needs, and transport issues the need for better economic data became obvious.? This provided and impetus for the incorporation of the NBER in 1920 with Gay as president.? The involvement of universities on the governing board was formalized in 1927 and Mitchell was the first research director, a post he held until 1945.

An early project of the NBER was estimation of personal income and production, an area of research that Kuznets directed.? During the Great Depression, the Senate directed that the Department of Commerce provide national accounts estimates for the years 1929-31. Kuznets was invited to direct this project and he accepted.? Kuznets had been teaching part time at the University of Pennsylvania since 1930 and one of his students in Penn?s MA program, Robert Nathan, assisted him at Commerce.? They provided the Senate estimates on time and included calculations for 1932 as a bonus, and Nathan became the first director of national accounts at Commerce.? Another student of Kuznets, Milton Gilbert, joined Nathan in 1935 to work on national accounts and edit the Survey of Current Business.? In 1941 Nathan left Commerce to direct the War Production Board and Gilbert became director of National Accounts until 1951, the post-war period being a crucial time in development of the UN System of National Accounts.? Kuznets in 1935 initiated a cooperative research program, the Conference on Research in Income and Wealth (CRIW) that continues to bring together academics and practitioners to discuss major conceptual and measurement issues.

Kuznets put national accounts estimates to good use in his major study of comparative economic growth cited by the Nobel Committee in presenting his award in 1971.? The book discusses this study in Chapter 4, where its origin and results are described.? When Kuznets first proposed this study to the NBER in the late 1940s, the response was underwhelming so he turned to Social Science Research Council who supported the proposal and created their Committee on Economic Growth.? One can see Fogel?s own views in his exposition of Chapter 4 and his treatment of Kuznets? methodology in Chapter 5.? Kuznets? theory is set out in 14 interconnected relationships, described in tables and charts, and involving formal algebraic models.? The modeling is implicit in all of Kuznets? work and Fogel emphasizes the implicit theory, including the interactions between technology, production, per capita product, population growth, sectoral shifts out of agriculture and distributional shifts in income distribution.

Richard Easterlin, another student of Kuznets, has pursued a successful career eschewing algebraic formulations for tables, charts and ample explanation.? Easterlin?s current work on comparative studies of income and happiness follows studies of migration and regional growth and incomes within the United States historically.? The emphasis on regional growth has been incorporated in the regional income division within the Bureau of Economic Analysis.? Fogel?s own research has often used a more econometric approach, but always with attention to a logical narrative.? Kuznets was not against formal models but believed that they should emerge from a body of data and a problem to be addressed.? He would question empirical findings that apparently supported a formal model but produced results that did not have other plausible explanations.? In Chapter 5 Fogel argues that Kuznets was the most important theorist since Keynes, implicitly and often explicitly questioning trends in the economics profession over the last fifty years.

Chapters 6 and 7 are short summaries of the legacy of Kuznets in economics and what has happened since his death in 1985.? In addition to his many articles and books, Chapter 6 describes the role of Kuznets in organizing cooperative research umbrellas like the CRIW and the Committee on Economic Growth at SSRC.? Within the NBER tent a group of Kuznets? students were invited by Martin Feldstein in 1978 to establish a program to carry out the Kuznets tradition in economic research.? This became the Development of the American Economy (DAE) projects that took on subjects like nutrition and heights and the role of women in the U.S. economy.? This research went in new and much less aggregative directions, becoming a very successful initiative. Not surprisingly Chapter 7 is hastily written.

Let me note one other legacy of Kuznets in the tradition of comparative growth.? In addition to Milton Gilbert, Irving Kravis was a student of Kuznets at Penn.? When Gilbert left the BEA he became Director of Statistics at the OECD (then OEEC).? One early project was a study of purchasing power parities of the U.S. with respect to the four large European economies ? France, Germany, Italy and the UK.? At the time the exchange rate was a poor conversion factor because of exchange controls in Europe.? Gilbert asked Kravis to come to Paris to join him in the study, resulting in the Gilbert-Kravis study that was very well received.? It led the United Nations to lead an initiative to compare a set of more diverse economies, including Colombia, Hungary, India, Japan, Kenya and the five OEEC countries.? The Ford Foundation funded part of the project through Penn with Kravis a joint director with the UN Statistical Office.? The International Comparison Program (ICP) began in 1968, left Penn after the 1975 round of 34 countries; a derivative contribution ? the Penn World Table (PWT) ? continued academic involvement.? ICP has grown to involve 182 countries in its 2011 round.? This extension of comparative national accounts to employ PPP national currency conversions is another legacy of Kuznets.?

This is a very readable and informative book that provides a reminder of the many contributions that Kuznets has made to the field including students as influential as Robert Fogel.

Alan Heston is Emeritus Professor of Economics and South Asia Studies at the University of Pennsylvania where he taught from 1962 to 2003.?

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Subject(s):Development of the Economic History Discipline: Historiography; Sources and Methods
History of Economic Thought; Methodology
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII