Siting the New Economic Science: The Cowles Commission's Activity Analysis Conference of June 1949

Abstract

In the decades following WWII,

Nicholas Georgescu-Roegen, Development Economist

“…As Leontief told him, he could contribute to the work being developed at the center Georgescu-Roegen, May 26, 1948;NG-RP, Box 23, Folder 'Leontief, Wassily 1948-49, 64-74'. 4 For a discussion of the importance of the 1949 Activity Analysis conference, see Düppe & Weintraub (2014). 8 as "an experienced and qualified witness of the events and developments which took place in Rumania since the end of the war." 5 In an internal report from January 1949, his study of the Romanian economy was thus summarized:…”

Koopmans in the Soviet Union: A Travel Report of the Summer of 1965

“…Also Koopmans contributed to military war planning as a statistician for the British Merchant Shipping Mission in Washington by analyzing efficiency problems of the transportation of tanks (1939, 1942). It was in this research that he formulated the principles of what he would, after the war, call “activity analysis” (Koopmans 1951; Düppe and Weintraub 2014a).…”

“…Specifically delicate was the interpretation of the Lagrange multiplier in terms of marginal costs, which could be, but did not have to be, interpreted as market prices. Koopmans himself was uncertain as to how to interpret the multiplier, and wavered between the concepts of “values” and “prices.” He finally called them “shadow prices” (Düppe and Weintraub 2014a). It was clear to Koopmans that his model could be used as a tool for production planning with shadow prices as the objective variable, even though he thought of “planning” as an organizational necessity rather than a political option.…”

“…Anticipating the critique that mathematical methods could be seen as apologetic of Western economics “forced me … to avoid the term ‘economic’ as much as possible when talking about the organization and planning of production; the role and meaning of the Lagrange multipliers [the “shadow prices”] had to be given somewhere in the outskirts of the second appendix and in the semi Aesopian language” (Kantorovich 1990, p. 31). 28 Koopmans, when propagating his equivalent theory in the US, had a similar problem, since he also had to downplay the meaning of prices as understood by market socialists (Düppe and Weintraub 2014a).…”

“…Koopmans was the research director of what was the hotbed of mathematical economics in the US, the Cowles Foundation of Research in Economics hosted at Yale University. Cowles represents a profound transformation of the intellectual culture of economics during the decades following World War II from a policy-oriented discipline into a modeling science (Düppe and Weintraub 2014a). Koopmans’s trip led him to the Central Economic–Mathematical Institute (CEMI, also TSEMI), founded two years before in 1963.…”