David Warsh: Those missed Nobel Prizes
Front side of a Nobel Prize.
Photo by Jonathunder
SOMERVILLE, Mass.,
When Dale Jorgenson died last summer, of long Covid, at 89, sighs were heard throughout the worldwide community of measurement economists. Had the Swedish authorities at long last been preparing to recognize the founder of modern growth accounting? Did the Reaper rob the Harvard University econometrician of his Nobel Prize?
Probably not. It seemed that, barring exigency, the Nobel panel had decided long ago to pass him by. It was left to Martin Baily, a senior fellow at the Brookings Institution, to tell The Wall Street Journal’s James Hagerty that Jorgenson “should have been awarded a Nobel Prize….” The same has been said of many other often-nominated candidates, including, for example, American novelists Philip Roth, of Connecticut, and John Updike, of Massachusetts.
On a memorial service yesterday, in Harvard’s Memorial Church, it almost didn’t matter. The talk was of families, friendships, skits (including one in which Jorgenson was portrayed as Star Trek’s Mr. Spock): the old days, when the Harvard Economics Department’s youngers members and their students were housed in a converted hotel across the street from IBM’s mainframe computers. Colleagues Barbara Fraumeni, Mun Sing Ho and Benjamin Friedman spoke; so did Jorgenson’s former student Lawrence Summers. Another former student, Ben Bernanke, whose undergraduate thesis Jorgenson supervised, missed the service, on his way to Stockholm to share a Nobel Prize; the two had remained in life-long touch.
Still, the question remained, why not Jorgenson?
Certainly it was not for lack of dominating achievements in his chosen field, of growth and productivity measurement. Born in 1933, Jorgenson grew up in Montana, attended Reed College, in Portland, Ore., and, in 1959, received his PhD from Harvard, where future Nobel laureate Wassily Leontief had supervised his thesis. He took a job at the University of California at Berkeley, where he taught the graduate theory course.
In 1963 Jorgenson published “Capital Theory and Investment Behavior.” When a committee selected the 20 most important papers that the American Economic Review had published in its centenary celebration, Jorgenson’s article was among them – the only contribution to have appeared in print immediately, without the customary wait for referee reports. The 13-page paper was revolutionary in two ways, according to Robert Hall, of Stanford University:
It combined finance with the theory of the firm to generate a coherent theory of the firm’s purchase of capital inputs, an area of considerable confusion prior to Jorgenson’s work. And it also laid out a paradigm for empirical research that called for serious economic theory to provide the backbone of the measurement approach. Jorgenson showed how to integrate data and theory.
As Berkeley boiled over with student protests in the 1960s, its best economists began to leave for Harvard: first Richard Caves and Henry Rosovsky, then David Landes, and, in 1969, Jorgenson. They were part of Harvard’s response to having been eclipsed in economics beginning 25 years earlier, by the Massachusetts Institute of Technology. Kenneth Arrow, Zvi Griliches, Martin Feldstein, and John Meyer were recruited as well, from Stanford, Chicago, Oxford and Yale respectively.
In 1971, Jorgenson won the bi-annual John Bates Clark Medal, awarded for contributions to economics before the recipients turned 40, as had Griliches, in 1965, and Arrow, in 1957. Feldstein would be similarly recognized in 1977.
Jorgenson’s contributions continued at a steady pace for more than 50 years at Harvard. The most significant of these was a successful campaign to produce industry-by-industry input-output tables with which to elucidate national income accounts prepared in the 1930s. Aggregate growth accounting depended fundamentally on the concept of value-added, according to John Fernald, author of a comprehensive account of Jorgenson’s career.
But Evsey Domar had written as early as 1961 that value-added accounting was only “shoes lacking leather and made without power.” To identify the changes occurring in productivity a complete set of input-output tables would be required, disaggregated by industry, linking Leonief/Jorgenson accounting with the old national income accounts designed by Nobel laureate Simon Kuznets. .
Working with Ernst Berndt, Frank Gollop and Barbara Fraumeni, among others, Jorgenson gradually created a granular new account of the sources of growth, differentiating between inputs of capital (K), labor (L), energy (E), and materials (M). The purchase of services (S) were subsequently broken-out. Hence the KLEMS system of productivity and growth accounting, now used by governments around the world. Jorgenson served as president of the American Economic Association in 2000.
I knew Jorgenson as news people know their subjects, and I have known many of his students, too. I never followed growth accounting closely, though I read Diane Coyle’s beguiling little book GDP: A Brief but Affectionate History (Princeton, 2014), and I was sufficiently absorbed by Fernald’s Intellectual Biography of Jorgenson to suspect that a second golden age of nation income and productivity accounting, or perhaps one of platinum, already has begun. (For an especially artful introduction to the KLEMS system, see Emma Rothschild’s essay, “Where is Capital?” in Capitalism: A Journal of History and Economics).
Nor do I know much about early 19th Century naval history. There was, however, something in Jorgenson’s leadership style (and a leader he unmistakably was) that reminded me of the lore surrounding Admiral Horatio Lord Nelson – his precise and formal manner, clipped speech, wry humor, zest in explaining to friends the innovations he prepared, and the admiration and loyalty he elicited from his students and colleagues.
Hearing their stories over the years, I was reminded one day of the signal that Nelson sent his squadrons as the battle of Trafalgar was about to begin – “England expects that every man will so his duty.” Never mind that “the little touch of Dale in the night” sometimes meant wakefulness on nights before examinations. More often his most successful students spoke of encouragement and surprising warmth. Further evidence of the inner man: a 50-year marriage to a professionally successful wife, two children (he worked at home three days a week) and three grandchildren.
If Jorgenson’s sense was that the Swedes, too, would do their duty, apparently they did not conceive their duty quite the same way. Perhaps the pride he took in his work was too obvious to them. He was elected a foreign member of the Royal Swedish Academy of Sciences in 1989, sometimes seen as a consolation prize. Perhaps too much umbrage had been given MIT; there were those 13 volumes of Jorgenson’s collected papers, published with the author’s subvention, five more than those of Paul Samuelson; Griliches had been embarrassed to publish one. (The one-time collaborators (“The Explanation of Productivity Change,” in 1967) were often nominated together for their complementary work.)
Griliches died in 1999; Jorgenson soldiered on, adding to his portfolio the economics of energy, the environment, emerging nations’ development, and even pandemics, via the KLEMS system. He became embedded in the major tax debates of the day. But the attention that theoretical economists paid to increasing returns to scale beginning in the ‘80’s was of little interest to an apostle of neo-classically based empirical analysis.
Jorgenson was sometimes called a “Reedie,” after the selective college he attended, celebrated for a distinctive sort of intellectuality, rivaled by Cal Tech, Swarthmore College and St. Johns College. Some 1,500 undergraduates today, 175 faculty members, providing constant feedback but no grades in real time, a measure thought to encourage hard work and long horizons. Only after they had graduated and applied to graduate schools were their transcripts revealed. Legend had it that Jorgenson was among the handful who over the years had received straight A grades in all his courses, and perhaps a few beyond. Certainly he received encouragement from Carl M. Stevens, a 1951 Harvard PhD in economics then teaching at Reed.
Touring a plaza of his hometown library that had been named for him, the author Phillip Roth was asked if the cold-shoulder from the Swedish Academy bothered him. “Newark is my Stockholm,” Roth replied. Reed College was Jorgenson’s Newark; bi-annual KLEMS project meetings are his Stockholm.
David Warsh, veteran columnist and an economic historian, is proprietor of Somerville-based economicprincipals.com, where this column originated.