Presentation 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.