The Nobel Prize

Simon S. Kuznets (1901–85)

Simon Kuznets was born in Pinsk, Russia in 1901. After emigrating to the United States in 1922 (later becoming a US citizen), he studied economics at Columbia University where he obtained his BA (1923), MA (1924) and PhD (1926). In 1927 he joined the National Bureau of Economic Research (NBER) where he was a member of the research staff until 1961. During his career Kuznets held chairs at three universities. In 1930 he joined the teaching staff at the University of Pennsylvania and was subsequently appointed Professor of Economics and Statistics at the university, a position he held from 1936 to 1954. His period at the University of Pennsylvania was temporarily interrupted during the Second World War, when he became associate director of the Bureau of Planning and Statistics of the US War Production Board from 1942 to 1944. In 1954 he moved from the University of Pennsylvania to Johns Hopkins University, where he held the post of Professor of Political Economy from 1954 to 1960. Moving again, this time to Harvard University in 1960, he held the position of Professor of Economics until his retirement in 1971.

Among his many offices and honours, Kuznets was elected president of the American Statistical Association in 1949 and the American Economic Association in 1954. In 1971, he was awarded the Nobel Memorial 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’ (Nobel Foundation, 2004).

Kuznets’s main contributions to economics roughly coincide with the focus of his work in the three main periods of his life. In the prewar period, working at the NBER, he became best known for his pioneering work measuring the size of, and changes in, national income and its principal components (such as consumption, saving and investment) in the United States over extended periods. Founded in 1920, the NBER is a private, non-profit, non-partisan research organisation whose aim is ‘to promote a greater understanding of how the economy works’ by ‘understanding and disseminating unbiased economic research among policymakers, business professionals, and the academic community’ (National Bureau of Economic Research, 2004). At the time Kuznets joined the Bureau in 1927, its director was Wesley Mitchell, who had supervised Kuznets’s doctoral dissertation on cyclical fluctuations in retail and wholesale trade (Kuznets, 1926). At the Bureau, Kuznets was responsible for producing estimates of national income in the United States, initially dating back to 1929, then 1919 and eventually back to 1869. His research results, published in a series of influential books (Kuznets, 1934; 1937; 1938; 1946a; Kuznets et al., 1941; 1946b), provided a wealth of time-series and cross-section data for economists and econometricians to test various elements of the Keynesian revolution in macroeconomic thought. Interestingly, Kuznets’s (Kuznets et al., 1946b) findings that in the long run the average propensity to consume in the United States had not changed significantly since 1869 contradicted Keynes’s view, embodied in the absolute income hypothesis, that the relationship between consumption and income is non-proportional. This led to subsequent attempts to reconcile seemingly conflicting evidence from various types of study in terms of a unified theory, including the relative income, permanent income and life-cycle hypotheses associated with, respectively, James Duesenberry, Milton Friedman and Franco Modigliani.

In the postwar period, Kuznets switched the main focus of his research to the study of modern economic growth. In a series of books (Kuznets, 1959; 1961; 1964; 1965; 1966; 1968; 1971; Kuznets and Thomas, 1957) he examined the characteristics and determinants of economic growth both in the United States and in a number of other major industrial countries. Part of this work involved an interpretation of the relationship between cycles and trends, which he had already examined in earlier research (Kuznets, 1930; 1933). Kuznets (1930) identified 15–20 year-long cycles of economic fluctuations, which subsequently came to be referred to in the literature as the ‘Kuznets cycle’, a term coined by Arthur Lewis. Kuznets identified a number of contributory factors to the process of economic growth including: population change, structural change, technological advance, the role of capital formation, changes in the quality of the labour force and changes in the political and social fabric. In particular, he emphasised the significance of technological advance as a major contributory factor to increased productivity and economic growth. His books, Modern Economic Growth (Kuznets, 1966) and the Economic Growth of Nations (Kuznets, 1971) – a comparative study of economic growth of different countries – together provide a survey of his main research findings in this area.

Following his retirement in 1971, Kuznets again redirected the main focus of his research, this time to the fields of population and income distribution (Kuznets, 1973; 1979). In the former case he focused much of his writing on the relationship between population growth and economic development. In the latter he concentrated his analysis on the relationship between income inequalities and economic development. This involved an extension of earlier work undertaken in the 1950s (Kuznets, 1955 – his presidential address to the American Economic Association; Kuznets and Jenks, 1953) which examined the connection between changes in the distribution of income and business cycles and economic growth. His finding that income inequality increases in the early stages of economic development as income per capita levels rise, then levels off, before it decreases in the later stages of economic development has become popularly known as the ‘Kuznets inverse-U relationship’. His final book, Economic Development, the Family and Income Distribution, (Kuznets, 1989), was published after his death in 1985.

Above all else, Kuznets will be remembered for the approach which informed all his research: the detailed and careful gathering, measurement and interpretation of statistical data relevant to understanding the process of social and economic change.

Main Published Works
(1926), Cyclical Fluctuations: Retail and Wholesale Trade, United States, 1919–1925, New York: Adelphi.
(1930), Secular Movements in Production and Prices: Their Nature and their Bearing upon Cyclical Fluctuations, Boston, MA: Houghton Mifflin.
(1933), Seasonal Variations in Industry and Trade, New York: National Bureau of Economic Research.
(1934), National Income, 1929–1932, New York: National Bureau of Economic Research.
(1937), National Income and Capital Formation, 1919–1935, New York: National Bureau of Economic Research.
(1938), Commodity Flow and Capital Formation, New York: National Bureau of Economic Research.
(1941), National Income and its Composition, 1919–1938 (with E. Jenks and L. Epstein), New York: National Bureau of Economic Research.
(1946a), National Income: A Summary of Findings, New York: National Bureau of Economic Research.
(1946b), National Product since 1869 (with E. Jenks and L. Epstein), New York: National Bureau of Economic Research.
(1953), Shares of Upper Income Groups in Income and Savings (with E. Jenks), New York: National Bureau of Economic Research.
(1955), ‘Economic Growth and Income Inequality’, American Economic Review, 45, March, pp. 1–28.
(1957), Population Redistribution and Economic Growth: United States, 1870–1950 (ed. with D.S. Thomas), Philadelphia, PA: American Philosophical Society.
(1959), Six Lectures on Economic Growth, Glencoe, IL: Free Press.
(1961), Capital in the American Economy: Its Formation and Financing, Princeton, NJ: Princeton University Press.
(1964), Postwar Economic Growth: Four Lectures, Cambridge, MA: Harvard University Press.
(1965), Economic Growth and Structure: Selected Essays, New York: W.W. Norton.
(1966), Modern Economic Growth: Rate, Structure and Spread, New Haven, CT: Yale University Press.
(1968), Toward a Theory of Economic Growth: With Reflections on the Economic Growth of Modern Nations, New York: W.W. Norton.
(1971), Economic Growth of Nations: Total Output and Production Structure, Cambridge, MA: Harvard University Press.
(1973), Population, Capital and Growth: Selected Essays, New York: W.W. Norton.
(1979), Growth, Population and Income Distribution: Selected Essays, New York: W.W. Norton.
(1989), Economic Development, the Family and Income Distribution: Selected Essays, Cambridge: Cambridge University Press.
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