WASSILY LEONTIEF AND I (May 4, 2014)
Search my Residua for Wassily Leontief, and you will find a great deal of interest. My two letters to The Economist that praise his work cover a lot of territory in a few words (“Forever Guessing: A Letter to The Economist,” February 26, 2007, and “On Industrial Policy: A Letter to The Economist,” October 5, 2011). In an earlier and much lengthier piece, I explore my relationship with the Nobel laureate (“Who is Afraid of Wassily Leontief?” November 21, 1990). It has been fraught, to say the least, for I have shut down two of his attempts at regional input-output analysis while also providing a viable alternative. For about twenty years, I was at the forefront of the field (“Pushing the Frontiers,” May 19, 2000). With Leontief’s stature, regional input-output analysis could easily have turned into world input-output analysis, and one of the two mathematical models underlying it would have been mine. Such an analytical framework would provide the basis for understanding and guiding the world economy as a whole. With proper data, one could say how a change in demand for something in one country would affect the production of everything else in all countries. This would require a square matrix of about twenty-thousand rows and columns, which is perfectly plausible nowadays. Updated from year to year, the four-hundred-million pieces of data would be a marvel to behold. In a rational world, my contribution to Leontief’s work would have been worth yet another Nobel prize. Much more important, it would be lots of fun experimenting with the data and the available models of economic behavior. Among other things, the global effects of climate change would be so much easier to assess and respond to. Input-output analysis is in the doldrums, though. Alas, humans are too stupid for even attempting to understand how the world economy works, let alone trying to guide it to their collective advantage.