Loyal readers of the Gazette know by now, that the quality of the social sciences in the Leninist states was poor. Due to censorship and the enormous amount of pseudo-scientists the serious practice of science in this field is impossible. This fate has also hurt the economic science. However, one discipline remains protected from this political corruption, namely the modelling of the economy by means of input-output matrices. Its aim is to mathematically compute the material flows between all branches. In this field the Soviet-Union succeeded in matching the western science. Some Russians have become globally famous, such as Leonid Kantorovich, Vasili Nemchinov, and to a lesser extent Viktor Novozhilov. Incidentally, these leading economists were the subject of various naggings under the rule of J.V. Dzugashvili (also called Stalin).
Incidentally, the method of the input-output tables has been invented by Vasili Leontief, who worked for some time in Russia, and then emigrated to North-America. The regimes gave relatively much freedom to this discipline, because it gives a useful contribution to the central planning of the economy. The Leninist rulers were engaged in a system's race with the capitalist west. They became aware that political deliberations alonbe are not sufficient for an efficient planning, and hoped that scientific methods would solve the problems. The input-output tables (called intertwined balances in Leninism) have the advantage, that they give an extra insight in the allocation of the production factors and in the output of products. The book Ökonomisch mathematische Methoden und Modelle by V.S. Nemchinov (W.S. Nemtschninow in the German language) is a standard work in this field.
Nemchinov was the rector of an agricultural academy. In 1948 he was dismissed because of his scientific insights, and subsequently was no longer allowed to work or publish1. After the abolition of Stalinism he was rehabilitated. He starts working at the Russian Academy of the Sciences. There he contributes significantly to the introduction of mathematical methods in economic planning. After the late sixties this discipline becomes enormously popular. Many books are published, and large mainframe computers become available. The Leninist rulers have the illusion to yet efficiently control their system, which stagnates and has got stuck in a political morass. Your reviewer even possesses a book by N.P. Fedorenko, who wants to place mainframe computers in all large enterprises, and to connect them into a single large national management system of stocks2. That is too optimistic.
For, although the idea is interesting, it does not take into account sufficiently the inevitably now and then occurring large disturbances in the production. Then the existing plan becomes useless, and a new optimal plan must be developed and executed. During the eighties one was forced to conclude, that unfortunately such corrections fail in practice. The central planning is simply too rigid. It is too ambitious. Moreover, the input-output approach discourages investments, because these have an unpredictable effect on the production3. Nonetheless, the models remain a useful instrument for analyzing the economic performances, and to make indicative predictions. This type of studies has been applied, for instance by the Dutch economist Jan Tinbergen. Incidentally, Tinbergen prefers global models at the macro level, which aggregate all branches.
What does the contents of Ökonomisch mathematische Methoden und Modelle have to offer? In the introduction Nemchinov tells that for a long time the quantitative analyses had been rejected in the Soviet-Union, for ideological reasons. However, they are indispensable for an effective planning, and thus the party changed her mind. Modelling requires, that various statistical data are collected. Nemchinov calls this planometry. This task must not be underestimated, because the whole national consumption must be estimated in advance, in all of its diversity, and preferably for several decades. Only then the optimal growth path of the economy can be determined. Nemchinov advocates some decentralization, by delegating the elaboration of the plans to the Soviet republics, and to the enterprises. The plans are commonly expressed in physical quantities, and not in roubles. The problem is the the product prices are determined at the central level, and insufficiently represent the true costs.
The Soviet-Union has only since 1962 begun to establish intertwined balances. It is true that previously attempts have been made. Nemchinov presents an historical summary, and describes the tableau économique by François Quesnay, the scheme for expanded reproduction by Karl Marx, and a somewhat more complex variant, which is attributed to the cruel dicator V.I. Ulianov (also called Lenin). Incidentally, that variant has also been presented by Sam de Wolff. Next a number of mathematical models of the pioneer S.G. Strumilin are discussed, for instance with regard to the demographic development. Here the most important hallmark is the application of advanced mathematical methods.
After this historical discussion, Nemchinov introduces the matrix calculus. The production must be calculated in terms of the physical quantities, or of the quantities of necessary labour time. Nemchinov calls the latter case a product-labour model. He gives an example of a scheme, which calculates the quantity of raw materials, that are needed for creating a certain end-product. Furthermore, he elaborates on the intertwined balance. The main table is supplemented with specifications for the added value and for the nett end-product. When the prices and wages are inserted, then the value balances must agree. Nemchinov shows, that detailed tables of all branches can be aggregated (that is to say, compressed and made homogenous) into a more general model. Thus models can be made with different degrees of detail.
Nemchinov explains the models fairly accurately and completely. However, his arguments are succinct and limited to the essence, so that somebody who truly wants to perform such calculations may prefer to consult another book. Ökonomisch mathematische Methoden und Modelle mainly tries to give a summary. The contents is enlivened by regular descriptions of model applications in the Soviet economy. For instance, Nemchinov elaborates on the regional planning in the Soviet republics. Here he also briefly discusses the dynamic modelling, including an investment term. He even mentions (very briefly) the linear programming. At the end the book contains an extensive list of relevant scientific literature, for further study.
Ökonomisch mathematische Methoden und Modelle is a remarkable book for several reasons. First, it illustrates the different path of the Leninist economy, in comparison with its capitalist equal. The differences were profound. And yet there remain similarities, for instance with the work of Tinbergen. It is impressive to observe the enthusiasm, when the Russians attempt to apply their analytical models in the daily practice. And finally, it is encouraging, that in such a repressive system some integer scientists yet succeed in getting their knowledge and insights accepted. Economists who want to apply input-output calculations may benefit from buying this book of Nemchinov.