CHANGING WORLD
By DR. BERNARDO M. VILLEGAS
Dr. Bernardo M. Villegas
Another outstanding professor at Harvard at that time was Alexander Gerschenkron who taught a two-semester course on Economic History that was required for all Ph.D. students. Professor Gerschenkron, who passed away in 1978, was born in Russia, educated in Austria, and migrated to the US in 1938. He taught at Harvard for 25 years. He was a paragon of a multidisciplinary scholar, showing a mastery of many subjects from history of economic thought, to economic history, economics of the Soviet Union, statistics, and Greek poetry. He spoke many languages such as Latin, Greek, French, German, and of course, English. He pioneered in the study of economic backwardness, setting the foundation for subsequent studies by other economists of development economics or the study of Third World countries. He did not define economic backwardness but alluded to related factors such as income per capita, amount of social overhead capital, literacy, savings, and level of technology. With his distinct Russian accent when speaking English, there was never a dull moment in his classes. He was one of those who influenced me to always take a multidisciplinary approach in my teaching and writings.
The Harvard professor who had the greatest influence on me was my thesis adviser, Prof. Abram Bergson who passed away in 2003 at the age of 89 (it seems economists live long!). Professor Bergson was the proponent of the Social Welfare Function which allowed the determination of the optimum allocation of resources in society without the need for interpersonal comparisons of preferences. As the first Nobel Prize in Economics, Paul A. Samuelson, wrote in a biographical memoir about him, Bergson was the first protege of the great Wassily Leontief who will be described below. Samuelson himself, who obtained his Ph.D. from Harvard but taught at the neighboring Massachusetts Institute of Technology (MIT), was the second protege of Leontief. In addition to his being a pioneer in the field of Welfare Economics (an advanced subject in microeconomics which I took under him), Professor Bergson was the leading expert on Soviet Economics at Harvard. He guided me in my writing on “Investment Criteria for Industrial Development” in which I studied the various criteria that the Philippine government then should consider in giving incentives to the appropriate industries that will contribute most to the industrialization of the country. Because of his insights into the disastrous industrialization policies of Russia under communist rule, he kept on reminding me that although some incentives are necessary to encourage investments in sectors that would benefit society the most (e.g., labor-intensive or export-oriented), market forces should be allowed to operate as much as possible. I owe a lot to Professor Bergson for my bias in favor of the social market model that I describe in this essay.
Our batch was fortunate to have another champion for quantitative analysis who gave birth to the very important technique called input-output analysis. Prof. Wassily Leontief, a Russian-American economist, was well known for his research on input-output tables which enabled economists to determine how changes in one economic sector may affect other sectors. For his work on input-out analysis, Leontief received the Nobel Prize in Economic Science in 1973. Thanks to his works, a good number of our professors and students at CRC and later at UA&P have become known for their expertise in the use of input-output tables to analyze leading Philippine industries, such as the electronics, textile, steel, and automotive industries. It was partly due to the influence of Professor Leontief that Dr. Estanislao and I decided to focus on industrial economics as the competitive advantage of the School of Economics of UA&P in the Philippines.
Input-output analysis reveals the extensive process by which inputs in one industry produce outputs for consumption or final demand or for inputs in another industry. The matrix devised by Leontief is often used to show the effect of a change in production of a final good on the demand for inputs. The analysis assumes that input proportions are fixed (which, of course, can be valid over the short term). Thus, the use of input-output analysis is limited to rough approximations rather than predictions. Input-output was novel in the early sixties and inspired large-scale empirical work. Much later in 2010, its iterative method was recognized as an early intellectual precursor of Google’s PageRank. Leontief gave us a large dose of the use of quantitative data in the study of economics. I remember struggling with 50 by 50 matrix equations and feeding data into the humongous computers that filled whole rooms at that time, not to mention the numerous punch cards that were needed to operate the computers. Whatever preference I had for the more philosophical approach to economics (used by the founders of the study economics such as David Ricardo, Adam Smith and Thomas Malthus) was more than balanced by the insistence of professors like Leontief on the need for empirical evidence in the study of economic issues.
(To be continued).