Who Was Wassily Leontief?
Wassily Leontief was a Nobel Prize-winning Russian-American economist and professor contributing several insightful theories to the economic world. Wassily’s Nobel Prize research focused on input-output analysis, which made the first inroads into sector analysis and discussed how changes in one sector of the economy can affect other sectors.
Leontief also developed the Leontief Paradox and the Composite Commodity Theorem. The Leontief Paradox furthers input-output analysis in the area of international trade stating that a country with higher capital has a lower capital/labor ratio in exports when its exports are labor-intensive.
The Life of Wassily Leontief
Wassily Leontief was born in Germany in 1906 and died in New York City in 1999 at the age of 93. As an economist, he made several contributions to the world of economics. Wassily Leontief’s research into sectors led to his divulgence of input-output analysis which won him the Nobel Memorial Prize in Economics in 1973. Wassily is also credited for his discovery of the Leontief Paradox and the Composite Commodity Theorem.
Throughout his professional life, Leontief was one of the earliest lobbyists promoting the use of quantitative data in economics. Leontief campaigned for broader and deeper developments in the area of quantitative data analysis throughout his career.
Wassily taught at Harvard for 44 years and then New York University. Four of Wassily’s doctoral students were also awarded the Nobel Prize including Paul Samuelson (1970), Robert Solow (1987), Vernon L. Smith (2002), and Thomas Schelling (2005).
- Wassily Leontief was a Russian-American economist who made several contributions to the world of economics.
- Leontief won the Nobel Prize in 1973 for his research on input-output analysis.
- Leontief was also credited for the Leontief Paradox and the Composite Commodity Theorem.
The Nobel Prize
Wassily studied at Harvard University where he was one of the first economists to use computer science in economics. Using computer science, he created and broke down the U.S. economy into 500 sectors, providing one of the first establishments of economic sector classification.
Through his studies at Harvard University, Wassily developed input-output tables for sector analysis that estimated the impact a change in production of a good has on other industries and their inputs – also establishing the interdependent relationships of economic sectors.
Wassily’s input-output analysis has been used by the World Bank, the United Nations, and the U.S. Department of Commerce. Entities can use input-output analysis to estimate the impacts of positive and negative economic shocks, also helping to analyze ripple effects throughout an economy.
The Leontief Paradox
Wassily also studied the breakdown effects of variables in trade flows in the 1950s. Leontief discovered that countries with a great deal of capital, import capital-intensive commodities, and export labor-intensive commodities. Therefore, the Leontief Paradox states that a country with higher capital has a lower capital/labor ratio in exports since exports are labor-intensive.
The Leontief Paradox, as it came to be known, led many economists to question the Heckscher-Ohlin Theorem, which states that countries produce and export what they can, most efficiently, depending on their factors of production. Moreover, they import goods that they cannot produce as efficiently.
Some other models have also been used to explain export and import relationships. The Linder Hypothesis attempts to address problems with the Heckscher-Olin Theorem by suggesting that countries will specialize in the production of certain high-quality goods, and will trade these goods with countries that demand these goods.
Composite Commodity Theorem
Composite Commodity Theorem was a third major development credited to Wassily Leontief who fathered the concept with John Hicks. In 1936, Wassily wrote an article on composite commodities which analyzed the collective movement of a basket of commodities suggesting their prices followed the pattern of a single commodity.