American economist, researcher, and author, Simon Kuznets (1901-1985) won the Nobel Prize in 1971 for pioneering the use of a nation's gross national product to analyze economic growth.
Simon Kuznets was born in Kharkov, Russia, in 1901. At an early age he and his family emigrated from Russia to the United States. Kuznets and his family settled in New York City, where he attended school. He received his bachelor's degree from Columbia University in 1923. He also attended Columbia University to do his graduate work, completing his master's degree in 1924 and his doctorate in 1926. His doctoral dissertation was entitled "Cyclical Fluctuations in Retail and Wholesale Trade." This work, in principle, set the stage for many of his future research efforts. In 1929 he married Edith Handler. They raised two children.
Kuznets' fields of specialization were economic growth, economic development, and economic planning theory and policy; the economics of technological change; and demographic economics. He taught in all of these areas and did research in them as well. He was especially interested in researching the relationship of population size and population traits to the process of long-term economic growth. His research was not restricted to the experience of the United States; quite to the contrary, he was interested in and did extensive analysis of the national income and growth data of a number of industrialized nations. In addition, Kuznets did a significant amount of research on secular movements in production levels and prices.
He was employed at the rank of professor in the Economics Department at the University of Pennsylvania from 1936 until 1954. He then joined the Economics Department at Johns Hopkins University as a full professor from 1954 until 1960. From 1960 until 1971, he was professor of economics at Harvard University and then professor of economics emeritus there until his death in 1985.
Kuznets was well known for his analysis involving national income data. Indeed, Kuznets was the intellectual "father" of modern methods of national income accounting. He was credited with having developed the basic format for studying both national income and product accounts and the composition of such accounts. In the process of his pioneering work on national income and related data, many important contributions to economic policy and economic understanding were developed. For example, digging back to the year 1870 Kuznets estimated national income and the components of national income for the United States for both the latter part of the 19th century and the early part of the 20th century. As a result, his studies involved him in a number of important national economic policy issues and debates. In point of fact, his involvement in such issues and debates won him recognition in a wide variety of economics textbooks.
One of the main issues in which Kuznets' studies played an important role involved the relationship among the levels of aggregate consumer spending, aggregate consumer saving, and aggregate household disposable income. For instance, the relationship between the level of aggregate consumer spending and the level of aggregate disposable income is critical to the effectiveness of public economic policy and to the formulation of public economic policy. Kuznets found that the proportion of per capita income that is saved had not significantly changed since the year 1870.
To many analysts, Kuznets' finding of a proportional relationship between the level of aggregate consumer spending and the level of aggregate disposable income was seemingly at odds with Keynesian theory and Keynesian policy analysis. In point of fact, the findings by Kuznets essentially related to the long run, whereas the theory of Keynes related essentially to the short run. The findings by Kuznets and the theories of Keynes actually supplemented each other. Indeed, the findings by Kuznets provided a most suitable format for the study of long-term economic growth. Among other things, Kuznets' findings helped to shape the evolution of modern theories of both macroeconomic growth and development and regional economic growth and development.
The work by Kuznets on national income accounting led to a myriad of other contributions. For example, Kuznets was apparently the first economist to observe a 15 to 25 year long business cycle involving business construction. As a result, Kuznets was able to contribute substantively to the study and the theory of business cycles in industrialized nations. In addition, Kuznets had several insightful observations to make regarding the components of the national income and product accounts. For instance, national defense expenditures are classified as "regrettable necessities."
Kuznets received recognition and honors on many occasions. For example, he was voted in as the president of the prestigious American Economic Association in 1954. In itself, this is an honor of enormous proportions, for only an economist of true distinction is ever awarded such recognition.
In 1971 Kuznets received the Nobel Prize for his empirically founded interpretation of economic growth. Kuznets' receipt of this honor is an example of a prize awarded for inductive analysis rather than deductive analysis. In point of fact, Kuznets' greatest strength had been to reveal new facts and new relationships about the real world. He was able to find "new truths" about the real world with the aid of common sense and rational thinking and with a minimum of the elegant, formal economic models with which most economic researchers are so enamored. An example of a "new truth" derived by Kuznets is his celebrated "law" of the relationship between long-term economic growth in a society and the distribution of income in that society.
In certain respects, the Nobel Prize to Simon Kuznets may be regarded as an award for interdisciplinary research. In integrating techniques from economic analysis, statistics, and history, Kuznets attempted to give quantitative precision to fields of study that were supposed to be pertinent to the understanding of the processes of economic development and social development. He was a pathbreaker in the integrated use of technology, population, marketing, and industrial structure.
Further Reading on Simon Kuznets
The work of Simon Kuznets is perhaps best represented in his two-volume work entitled National Income and Its Composition, 1919-1938 (1941). Kuznets also examined long-term economic growth in 14 Western industrial nations in his book Modern Economic Growth: Rate, Structure, and Spread (1966).