From Pinsk to Kharkov
Simon Smith Kuznets was born on 30 April 1901 in Pinsk, a town with a large Jewish population in the Minsk province of the Russian Empire, today in Belarus. In the short autobiography he wrote for the Nobel Foundation he described himself simply: he was born in Russia in 1901, “of Jewish parents”. His father left for the United States before the First World War, and the family he left behind, including Simon and his brothers Solomon and George, would not be reunited with him for many years.
Simon went to school first at the Realschule in Rovno and then in Kharkov, in Ukraine. In 1918, in the middle of revolution and civil war, he entered the Kharkov Institute of Commerce. There he studied economics, statistics, history and mathematics, and first encountered the ideas of Joseph Schumpeter on innovation and the business cycle. The Kharkov teachers encouraged their students to see an economy as part of a wider web of history, population and society, and to test ideas against data. That habit of mind stayed with him for life.
A young statistician in revolutionary Ukraine
The civil war disrupted the institute, and it is not certain whether Kuznets completed his studies there. He went to work instead in the labour statistics office of the trade union bureau for southern Russia, where he briefly headed a section. At nineteen he published his first scientific paper, a study of the money wages of factory workers in Kharkov in 1920, examining how pay differed between industries and how wage systems affected the spread of incomes. It was already, in miniature, the kind of patient measurement that would make his name.
In 1922, aged twenty-one, he emigrated to the United States to join his father. He arrived as one of the hundreds of thousands of Jews who had left the Russian Empire for America in the decades around the First World War, and he never lost his interest in what such migrations meant for the people who made them.
Columbia, Mitchell and the National Bureau
Kuznets enrolled at Columbia University and moved through it with remarkable speed: a bachelor’s degree in 1923, a master’s in 1924 and a doctorate in 1926. His teacher and lifelong mentor was Wesley Clair Mitchell, a founder of the National Bureau of Economic Research and a champion of building economic theory up from carefully assembled facts. Kuznets’s master’s thesis was a critical study of Schumpeter’s economic system, which he had first written in Kharkov.
A fellowship from the Social Science Research Council in 1925–26 led to his first book, Secular Movements in Production and Prices (1930). Working through long statistical series for the United States and other countries, he identified swings in economic activity lasting roughly fifteen to twenty-five years, longer than ordinary business cycles but shorter than the “long waves” proposed by Nikolai Kondratiev. Economists came to call them Kuznets cycles.
In 1927 he joined the research staff of the National Bureau, where he stayed until 1961. There he met Edith Handler, a fellow researcher. They married in 1929 and had two children, Paul, who became an economist, and Judith.
Measuring a nation in the Great Depression
When the Great Depression struck, nobody in Washington could say with any precision how much the American economy was producing or how far it had fallen. Estimates of national income existed, but they were rough and no government agency compiled them systematically. In 1931 Mitchell asked Kuznets to take charge of the National Bureau’s work on national income, and in 1932–34 he worked with the Department of Commerce to construct the first official estimates of United States national income.
The result, National Income, 1929–1932, was presented to the Senate in 1934. It measured income by industry, by type of payment and by use, and showed in hard numbers how deeply the economy had collapsed. Kuznets then pushed the estimates back, eventually to 1869, and broke them down further by final product and by how income was shared between rich and poor. He was not the first to attempt such accounts, but his work was so comprehensive and meticulous that it set the standard for the field and laid the basis for the national accounts that the United States, and later almost every country in the world, would keep.
From the start he warned against asking these numbers to do too much. In the 1934 report he pointed out that national income said nothing about how income was distributed, or about the effort and unpleasantness that went into earning it, and concluded that a nation’s welfare could scarcely be inferred from such a measure. In 1936 he helped found the Conference on Research in Income and Wealth, bringing government statisticians and academic economists together, and in 1947 helped establish its international counterpart.
An economist’s war
National income accounting proved its power in the Second World War. Robert Nathan, a former student of Kuznets, used the new accounts to estimate how far American industry could expand military production, and from 1942 Kuznets joined him at the War Production Board as associate director of its Bureau of Planning and Statistics. Using the national accounts together with a rough form of linear programming, they measured the potential for increased output, where it would come from, and which materials were the binding constraints.
After Pearl Harbor the military set ambitious new production targets. Kuznets concluded that they could not be met in the time specified, and that trying to do so risked severe shortages of parts and unacceptable pressure on the civilian economy. According to Robert Fogel’s memoir for the National Academy of Sciences, his analysis was adopted as the basis for both military and civilian targets.
His wartime and postwar work also reshaped economic theory. In Uses of National Income in Peace and War (1942) he used long-run data to show that Americans’ saving rate had stayed roughly constant from the 1870s to the 1940s despite huge increases in income, a finding that challenged a key prediction drawn from Keynes and helped open the way for Milton Friedman’s permanent-income hypothesis and the life-cycle theory of saving. Income from Independent Professional Practice (1946), written with Friedman, developed age-earnings profiles and an early form of the idea of human capital.
The anatomy of modern economic growth
After the war Kuznets turned to the biggest question in economics: why some nations grow rich. As chairman of the Social Science Research Council’s Committee on Economic Growth from 1949 to 1968, he recruited economists in many countries to reconstruct their own long-run statistics, and between 1956 and 1967 he published ten long monographs on the quantitative aspects of growth. He studied fourteen nations in Europe, America and Japan with series reaching back at least sixty years.
Out of this came Modern Economic Growth (1966) and Economic Growth of Nations (1971). Kuznets argued that a new epoch had begun in north-western Europe in the late eighteenth century, defined by a sustained rise in income per person alongside population growth, and driven above all by the systematic application of science to production. Growth, he showed, was never just “more”: it transformed where people lived and worked, how families earned and spent, and how industry and government were organised. He also insisted that poor countries in his own time faced conditions quite unlike those of the early industrialisers, an idea that helped launch development economics as a separate field.
In his 1954 presidential address to the American Economic Association, published in 1955 as “Economic Growth and Income Inequality”, he proposed that inequality tends first to widen and then to narrow as countries industrialise. This inverted U, the Kuznets curve, became one of the most debated hypotheses in economics. Kuznets himself offered it cautiously, as a conjecture drawn from thin data. He taught at the University of Pennsylvania from 1930 to 1954, at Johns Hopkins from 1954 to 1960 and at Harvard until his retirement in 1971.
Jewish roots and work for Israel
Kuznets wrote little about his own life, but his Jewish origins shaped his path: the Pinsk of his birth, the emigration that split and then reunited his family, and the American universities that opened to a young immigrant from the Russian Empire. In the Nobel autobiography he named his Jewish parentage in his very first sentence.
He also lent his skills to the new Jewish state. He was one of the economists who advised the governments of China, Japan, India, Korea, Taiwan and Israel on setting up their national systems of economic information. From 1953 to 1963 he chaired the Falk Project for Economic Research in Israel, which studied the young country’s economy, and from 1963 he served as a trustee and honorary chairman of its successor, the Maurice Falk Institute for Economic Research in Israel, in Jerusalem.
The Nobel and the man
In 1971 Kuznets received the third Nobel Memorial Prize in Economic Sciences, “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.” He had already served as president of the American Statistical Association in 1949 and of the American Economic Association in 1954, and he was a member or fellow of many learned bodies, from the Econometric Society to the Royal Swedish Academy and the British Academy.
Colleagues and students regarded his mastery of measurement as his most compelling gift: the ability to take incomplete and biased data and still draw reliable estimates from it, while knowing exactly how far those estimates could be trusted. He was deeply sceptical of grand theories untested by evidence, yet he never dismissed theory, insisting that it was needed to decide what to measure. Over his career he produced 31 books and more than 200 papers. He believed that unless the poor shared in the gains of growth at least as fully as the better-off, the stability of society was at risk.
Legacy
Kuznets spent his last years in Cambridge, Massachusetts, with his wife Edith, and died in July 1985 at the age of 84. Every time a government announces a quarterly GDP figure, or a newspaper compares the size of two economies, it relies on the system of accounts he did more than anyone to build. His warnings about what those numbers cannot show have, if anything, grown more relevant as debates over well-being, inequality and the environment have challenged GDP as a measure of progress.
His larger achievement was to help turn economics from a largely speculative discipline into an empirical social science, and to found quantitative economic history. In 2013 the economics university in Kharkiv, where his studies began, was renamed the Simon Kuznets Kharkiv National University of Economics.
Sources & further reading
Simon Kuznets, Biographical, NobelPrize.org · Robert W. Fogel, Simon S. Kuznets 1901–1985, National Academy of Sciences Biographical Memoir · Simon Kuznets, Concise Encyclopedia of Economics (Econlib) · Simon Kuznets, Jewish Virtual Library · Simon Kuznets, Wikipedia · Researched from the sources above and checked against them. Spotted an error? Tell us.
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