Obituary: Wassily Leontief

THE COMPANY of economists who met at Adam Smith's graveside in Edinburgh to pay honour to the great man on the bicentenary of his death in 1990 was a remarkable one. From the United States came Franco Modigliani, Laurie Klein and five Nobel prize-winning colleagues. The British contingent was led by the late Sir James Meade, Sir Alan Peacock and Professor Andrew Skinner. Outstanding both in lecture and talk was a bustling dynamic figure with a great deal to say; this was the irrepressible Wassily Leontief.

On emigrating to the United States in 1931, his interest was narrowly focused on the development and refinement of input-output analysis. He was a promoter of the importance of raw data, which he used to show how the economy is broken into sectors. By systematically recording the flows of goods and services among industries, he explained their inter-relationships. Few doubted that in 1973 he deserved a Nobel prize for pioneering the field of input-output analysis.

Leontief was born in St Petersburg, as it then was, in 1906. His father was a university professor, who coached him from the age of three. Wassily was admitted to Leningrad University in 1921 at the age of 15. His early studies were carried out against the background of the 1917 Bolshevik Revolution and the civil war which dominated the years 1918-22, thereafter causing a period of slow economic recovery in Russia.

Leontief said that he was sympathetic to the revolution and described himself in those days as "a socialist of independent views, which differed from those of the Bolsheviks". It could be no surprise to those who knew him later that he spent some time in prison. He was a natural member of the awkward squad. In 1925, after a chest infection which nearly killed him, he left Russia for Berlin, taking advantage of family connections.

Once there he worked with the economic historian Werner Sombart, later the author of a best-selling book, Why There is No Socialism in the United States (1976). He also worked with the statistician Ladislaus Bortiewicz. This relationship was crucial to his later development and to the paramount importance he gave to statistics. Bortiewicz had also published (in 1907) an early solution to the so-called "transformation problem in Marxist economics".

His time in Berlin instilled in Leontief a healthy scepticism of Communist economics. In 1927, he moved to the Institute of World Economics at Kiel, a period to which he attached enormous significance as he did some work on demand and supply.

There in 1929, a chance conversation in a cafe with a party of Chinese visitors led to an offer of employment as advisor to the Minister of Railways in China. Leontief spent a fascinating year in southern China planning the railway network. This required him to travel throughout the country collecting data. In Edinburgh, he described his return to China 40 years later; his earlier experience gave him a wonderful capacity to compare old China and Mao's China. His heroes were enthralled, as he was a marvellous raconteur.

In 1931, Leontief received an invitation to join the National Bureau of Economic Research in New York. He quarrelled with a member of the faculty - Leontief's quarrels were colourful - and moved within months to the economics department at Harvard. At the beginning, his colleagues were less than enchanted but they soon realised that what was to be his lifelong research on input-output models was innovative and highly relevant.

By the time he moved to the US, Leontief had a clear notion of what he wanted to do and of the data required. However, it was only 10 years later during the Second World War that his monograph on the American economy was published.

The economic system it describes embraces the household sector, not as a recipient of consumer goods produced to satisfy final demand, but as an integral part of the model. Households, Leontief saw, form an additional sector or industry; the inputs of households are consumer goods and the output is labour supplied to other sectors. Investment and savings were similarly incorporated in the system.

If a sector was making a net investment its expenditure exceeded its revenues, while for a sector making net savings revenue exceeded expenditure. A separate saving coefficient was established for each sector, such that total expenditure was equal to total revenue divided by the coefficient. Sectors making a net investment was to have a savings coefficient of less than one (expenditure exceeding revenue). Sectors making net savings - the household sector for example would have a coefficient in excess of one.

During the war, Leontief worked for the US Treasury under the direction of Henry Morgan Ford Jnr and went with him as one his advisors to the Bretton Woods Hotel in lovely New Hampshire where his boss, along with Maynard Keynes, outlined the economic system of the post-war world.

My first memory of Leontief was when I and other Cambridge undergraduates were told by our supervisor, the late Harry Johnson, to attend a lecture by one of the most innovative economists of the day. It was not just the undergraduates who went. There sat Nicholas Kaldor and Richard Kahn, Dick Stone and Sir Dennis Robertson, Piero Sraffa, Austin Robinson and Joan Robinson. Later in the week, at Robertson's political economy club, the students had the benefit of the glittering conversation between Robertson, some of his colleagues and Leontief.

In 1975, having reached the age of 70, Leontief moved to the Institute of Economic Research specially created for him by New York University. Here he could work on practical solutions to practical problems and radical approaches to the changing challenges of the world.

He was a prolific writer, displaying demonic energy all his life. Among his famous books are Input-Output Economics (1966) and The Structure of the American Economy 1919-1929 (1941). At the age of 80, he produced the Future Impact of Automation on Workers (1986) and his contribution to economic and scientific journals flowed and flowed.

He played an important role in the debate in the US on economic planning. Along with Leonard Woodcock of the AutoWorkers Union, he was co-chairman of the Initiative Committee for national planning. In the Congress, legislation was proposed by Senators Humphrey and Javits to create an Economic Planning Board and a council on economic planning.

Leontief himself was cool about the particular form of legislation, which in his view concentrated too much on the elimination of unemployment and too little on planning the structural shifts which would inevitably take place as a result of technological advance. However, for all Leontief's caution, the then vice-president, Hubert Humphrey, when I visited him in 1965, opined that Wassily Leontief had contributed more than any of his contemporaries to economic action at government level in the US.

However, Leontief wasn't simply concerned with America. He was the leading contributor to a seminal document with Anne P. Carter and Peter A. Petri on "the future of the world economy" in 1978. It gave practical advice to primary producers and developing countries. As Amartya Sen, Master of Trinity and himself a Nobel Prizewinner in Economics, put it: "Wassily Leontief was one of the most innovative economists with a deep interest in the real world".

Wassily Leontief, economist: born St Petersburg 5 August 1906; Professor of Economics, Harvard University 1946-53, Henry Lee Professor of Political Economics 1953-75; Nobel Prize in Economic Science 1973; married 1932 Estelle Marks (one daughter); died New York 5 February 1999.