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Presentation Speech - The Sveriges Riksbank (Bank
of Sweden) Prize in Economic Sciences in Memory of Alfred Nobel
KUNGL. VETENSKAPSAKADEMIEN THE ROYAL SWEDISH ACADEMY OF SCIENCES
October 1971
Speech by Professor BERTIL
OHLIN of the Royal Academy of
Sciences
Translation
Your Majesty, Your Royal Highnesses, Ladies and Gentlemen.
One of the tasks of economic science is to inquire into what is
really happening in a world where only certain things can be
directly observed. Let us consider the economic development during
the last few centuries. To undertake a critical scrutiny and an
intelligent collection of figures and other material - to make
estimates and measurements - and to find possibilities of
interpreting driving forces and connections, this is certainly a
tremendously difficult task, and one of immense scope. The scholar
who has accomplished more than anyone else in this field is the
Russian-born American economist Simon Kuznets, Professor
Emeritus of Harvard University,
Cambridge, Massachusetts.
In his scholarly work, Kuznets has consistently addressed himself to
giving quantitative precision to economic magnitudes which seem be
relevant to an understanding of processes of social change. He has
collected an extraordinarily large body of statistical material
which he has analysed carefully, and with a keen and screwd
intelligence, and he has used this to shed new light on economic
growth. In doing so, he has, among other things, developed methods
for calculating the size of, and changes in, national income. The
task has been not only to attain quantitative precision, where such
is possible, but also to elucidate the margins of uncertainty and
the indeterminateness which arises, among other things, from
qualitative changes in consumption and production.
Kuznets, of course, makes use of models which demonstrate the
connections between strategic elements in the economic system, but
he shows a very limited sympathy for abstract and generalizing
models which provide few opportunities of empirical testing. He
chooses and defines concepts which correspond as closely as possible
to what can be observed and statistically measured. In this way he
indirectly achieves a valuable - and often, critical - elucidation
of static and generalizing theories, thereby stimulating the
construction of new theoretical models with an enhanced
applicability. Within the framework of these models, regard is also
paid to institutional and non-economic factors - for example,
changes in population growth, technology, industrial structure and
market forms. In this way, also, he seeks to reach a coherent
interpretation of the growth phenomenon and of cyclical
fluctuations.
Permit me to mention a few of the many concrete and important
observations made by Kuznets. He has discovered the long growth
cycles with a period of about twenty years, and has shown that these
are influenced, to a high degree, by variations in the rate of
population growth. The aggregate propensity of individual households
to save a certain proportion of their income shows an amazing
stability, decade after decade, in the majority of industrial
countries. Another matter is that, in the short run, the propensity
to save varies with the cyclical fluctuations, a circumstance which
is of great importance for the course of the business cycle.
Perhaps, more surprising is the discovery that the quantity of real
capital which is needed for producing a certain volume of
commodities exhibits a clearly falling trend. Thus, in
industrialized countries, the need for growth of the physical
capital is less than proportional to the growth of production. On
the other hand, technological progress and the raising of the
quality of manpower play a very great part, as do also structural
changes in industry and commerce.
I may also mention that according to the calculations of Kuznets,
the volume of production per capita in Sweden has risen over a
period of one hundred years, so that at the end of the period, it is
about thirteen times as great as it was at the beginning -
admittedly, at a relatively low initial level in the middle of the
nineteenth century. For a long time this growth rate was higher than
in other industrial countries, but this does not apply to the
postwar period. Japan, with its sixfold increase of production per
capita in two decades, West Germany and the Soviet Union have
established a clear lead since the war.
In his latest major work, Economic Growth of Nations - which
appeared in the spring of this year, and, among other things,
analyses the changes in the distribution of income - Kuznets
presents new material and original interpretations of the course of
economic events, as well as many illuminating international
comparisons. To put it briefly, his empirically-based scholarly work
has led to a new and more profound insight into the economic and
social structure and the process of change and development.
Dr. Simon Kuznets, I congratulate you warmly to the Prize in
Economic Science, created by the Bank
of Sweden in memory of Alfred Nobel, and ask you to step down to
receive it from the hands of His Majesty, the King.
From Nobel
Lectures, Economic Sciences 1969-1980.
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