Capital Ideas - Summer 2013 - page 40

Summer 2013 | Capital Ideas
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38
for most of these nations and urged Kuznets to con-
tinue his prior emphasis on trends in the US economy.
Mitchell’s unwillingness to have the bureau spon-
sor his project, which Burns later rejected out of hand,
led Kuznets to seek other auspices. This he found at
the Social Science Research Council (SSRC) with
funding supplied by the Rockefeller Foundation.
Although the shift to the SSRC took place in 1949,
Kuznets continued to work at the bureau to complete
the projects under his supervision that were still in
progress.
1
These included a book presenting estimates
of US wealth, national product, and capital formation
going back to 1880
2
and his supervision of a series of
monographs dealing with long-term trends in capi-
tal formation in various sectors of the US economy.
3
Kuznets’s final task for the bureau was a monograph
that integrated the various sectoral studies into an
integrated overview of the marshaling of capital for
economic growth: Capital in the American Economy.
4
With his obligations to the NBER complete, he turned
to his project on comparative long-term growth.
Kuznets set out to gather statistics on the growth
of nations over a period of at least a half century in
order to have secular trends dominate short-term
cycles. The data had to be capable of being decom-
posed in various ways (such as economic sectors and
subsectors) in order to study structural changes in the
economy during the course of economic growth. The
demands of the data meant that his study of growth
would be focused on the score or so of nations that
had achieved high levels of industrialization by the
mid-twentieth century. He characterized the modern
industrial system as one in which entrepreneurs ap-
plied the empirical findings of science to the solution
of problems and the organization of production.
Ten Monographs on Quantitative
Aspects of Economic Growth
This research agenda guided Kuznets as he pro-
duced ten monographs that were published as sup-
plements to the journal
Economic Development and
Cultural Change
under the general title “Quantitative
Aspects of the Economic Growth of Nations.” The first
of these monographs
5
brought together data on the
growth of national product and its components, of
populations, and of per capita growth for nineteen na-
tions during the first half of the twentieth century. The
text revolved around the discussion of thirty-one very
detailed tables. The collection of the data involved ef-
forts of Herculean proportions, and the analysis of the
information in the tables was probing and insightful.
Kuznets sought to explain the wide variations in the
growth rates of per capita income, from a low of 5.6
percent per decade for Spain to a high of 29.2 percent
per decade for Sweden (which means that, in half a
century, Sweden’s per capita income quadrupled while
Spain’s increased by only 30 percent).
After carefully pointing out various problems and
limitations in the assembled data, Kuznets discussed a
number of findings that transcended their limitations.
One was the deceleration in growth rates after World
War I—not only among the losers but also among
the winners—which he attributed to institutional
destabilizations produced by the war. Another find-
ing was that high rates of population growth did not
undermine the growth of per capita income, as some
neo-Malthusians believed. Quite
the contrary: the available data in-
dicated that high rates of growth in
per capita income were positively
related to population growth, al-
though the sample size was not
large enough to establish statistical
significance.
The second monograph in the
“Quantitative Methods” series was
subtitled “Industrial Distribution
of National Product and Labor
Force.”
6
Here, Kuznets sought to characterize differ-
ences in the industrial structure of rich and poor na-
tions in the late 1940s. This portion of the monograph
series relied on data collected by the United Nations.
Kuznets was able to describe long-term changes in the
industrial structure of twenty-eight countries, going
back a whole century in two of the countries and be-
tween half and three-quarters of a century in most of
the others.
For purposes of analysis, Kuznets sometimes di-
vided the economy into twelve sectors and sometimes
compressed those sectors into three, that he identified
as A (agriculture, forestry, and fishing), M (manufac-
turing, mining, and construction), and S (transpor-
tation, communications, commerce, public utilities,
government, and other services). His analyses of both
the cross-sectional data and trends over time revealed
that, as countries got rich, the agricultural share of
the labor force declined. Since the output of agricul-
ture increased more rapidly than population and the
share of the labor force in agriculture declined, labor
productivity in agriculture was rising. Indeed, ris-
ing labor productivity in agriculture was necessary
to have the labor shares of the M and S sectors rise
as rapidly as they did. However, during the first half
of the twentieth century, the rate of growth of labor
productivity among developed nations was generally
‘‘How to organize research
into long-term trends of
economic growth? One
issue was the unit of
observation.’’
Robert W. Fogel
won the
1993 Nobel Memorial Prize in
Economic Sciences.
Photo: Dustin Whitehead
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