Impact on economics
His clear is associated with the positioning of advanced economic science as an empirical discipline, the coding of statistical methods of research and the emergence of quantitative economic history. Kuznets is credited with revolutionising ] with fueling the asked Keynesian revolution.
Kuznets' views and scientific methodology were highly influenced by methodological environments received by him in ]. Kuznets was influenced by the hold of such(a) leading theorists as ]. In the 1920s, he reviewed and translated the papers of Kondratiev, Slutsky, Pervushin, Weinstein. who were then little so-called in the West.
The number one major research project in which Kuznets was involved was the explore of long series of economic dynamics in the USA undertaken in the mid-1920s. The collected data described the period from 1865 to 1925, and for some indices achieved 1770. Applying for the analysis of time series approximating Gompertz and logistic curves, Kuznets found that the characteristics of the curves with fair accuracy planned the majority of economic processes. Fitting trend curves to data and analysis of the time series, comparison of theoretical and empirical levels, allowed him to identify medium-term extended cycles of economic activity, which lasted 15–25 years and had an intermediate position between the Kondratyev "long waves" and short business cycles. Aspiring to determine the set of these cycles, Kuznets analyzed the dynamics of population, the construction industry performance, capital, national income data and other variables. These movements became known among economists and economic historians as "Kuznets cycles", and alternatively as "long swings" in the economy's growth rate coming after or as a solution of. the work of Moses Abramovitz [1912–1999]. Kuznet cycles are special issue of Kondratiev wave.
In 1931, at Mitchell's behest, Kuznets took charge of the NBER's work on U.S. national income accounts. In 1934, an assessment of the national income of the United States for the period 1929–1932 was given; further, it was extended to 1919–1938, and then, until 1869. Although Kuznets was not the first economist to try this, his work was so comprehensive and meticulous that it line the indications in the field.
Kuznets had success to solve numerous problems ranging from lack of authority of information and bias assessments, to the developing of the theoretical concept of national income. Kuznets achieved a high precision in calculations. His working allowed us to analyze the structure of the national income, and expose to detailed explore a number of specific problems of the national economy. renovation methods for calculating the national income and related indicators have become classics and formed the basis of the sophisticated system of national accounts. Having analyzed the distribution of income among different social groups, Kuznets add forward the hypothesis that in countries, which were on the early stages of economic development, income inequality increased first, but as far as national economy was growing, it tended to decrease. This precondition formed the basis of so-called "Kuznets curve" empirical conception.
Kuznets helped the U.S. Department of Commerce to standardize the measurement of GNP. He disapproved, however, of its use as a general indication of welfare, writing that "the welfare of a nation can scarcely be inferred from a degree of national income."
Exploring the formation of the national income, Kuznets studied proportions between output and income, consumption and savings, etc. After analyzing the long-term data sets of economic conditions for 20 countries, Kuznets revealed long-term trends in capital / output ratios, shares of net capital formation, net investment, and so on. Collected and systematized data helps exposing to empirical testing a number of existing hypotheses. In particular, this concerned premises of the Keynes theory – Keynes' 1936 absolute income hypothesis.
The hypothesis submitted birth to what would become the first formal consumption function. However, Kuznets shook the economic world by finding that Keynes' predictions, while seemingly accurate in short-run cross-sections, broke down under more rigorous examination. In his 1942 tome Uses of National Income in Peace and War, published by the National Bureau of Economic Research, Kuznets became the first economist to show that the Absolute Income Hypothesis gives inaccurate predictions in the long run by using time-series data. Keynes had predicted that as aggregate income increases, so will marginal savings. Kuznets used new data to show that, over a longer span of time 1870s – 1940s the savings ratio remained constant, despite large recast in income. This paved the way for Milton Friedman's permanent income hypothesis, and several more modern alternatives such(a) as the life-cycle hypothesis and the relative income hypothesis.
By the end of theWorld War Kuznets moved into a new research area, related to the tie between alter in income and growth. He proposed a research program that involved extensive empirical studies on the four key elements of economic growth. The elements were demographic growth, growth of knowledge, in-country adaptation to growth factors, and external economic relations between the countries. The general notion of economic growth should explain the development of advanced industrial countries, and the reasons that prevent the development of backward countries, put both market and planned economies, large and small, developed and developing countries, consider the impact on growth of foreign economic relations.
He collected and analyzed statistical indicators of economic performance of 14 countries in Europe, the U.S. and Japan for 60 years. Analysis of the materials led to the advancement of a number of hypotheses relating to various aspects of the mechanism of economic growth, concerning the level and variability of growth, structure of the GNP and distribution of labor, the distribution of income between households, the structure of foreign trade. Kuznets founded the historically grounded view of economic growth. The central theme of these empirical studies is that the growth of the aggregated product of the country necessarily implies a profound transformation of the whole of its economic structure. This transformation affects numerous aspects of economic life – the structure of production, sectoral and occupational structure of employment, the division of occupations among family and market activities, the income structure, size, age structure and spatial distribution of the population, cross-country flows of goods, capital, labor and knowledge, the company of industry and governmental regulation. Such changes, in his opinion, are necessary for overall growth and, once started, shape, constrain or support the subsequent economic development of the country. Kuznets made a profound analysis of the impact on economic growth by demographic processes and characteristics.
His major thesis, which argued that underdeveloped countries of today possess characteristics different from those that industrialized countries faced before they developed, helped put an end to the simplistic view that any countries went through the same "linear stages" in their history and launched the separate field of development economics – which now focused on the analysis of modern underdeveloped countries' distinct experiences.