The Leontief-BLS Partnership: A New Framework for Measurement

Abstract

“The Department of Labor,” according to Wassily Leontief, “was the first government agency to take an active interest in the ‘input-output’ approach to the study of the American economy and the continual cooperative relationship with its Bureau of Labor Statistics has benefited our work most decisively.” The specifics of the Bureau’s role, however, are not well known. Referring to the forecasts the Bureau made during the last year of World War II that the postwar demand for steel would be strong, contrary to the opinion of many experts, Leontief held that the accuracy of this forecast provided evidence that input-output analysis was a useful tool for decisionmakers. Although he cited this episode, Leontief never provided a comprehensive account of the Bureau’s role in the development of input-output analysis, thus leaving the door open for a number of interpretations. Robert Dorfman pointed out that the Bureau’s resources made it possible for the Agency to formulate and develop “very large and detailed input-output tables.” 3 Tjalling C. Koopmans described the early work on interindustry economics as “initiated, developed, and stimulated largely by Leontief and given statistical expression by measurements and tabulations produced by the Bureau of Labor Statistics,” thereby distinguishing between the intellectual work accomplished by Leontief and the presumably routine data gathering done by the Bureau. These accounts suggest that the Bureau’s relationship with Leontief was significant largely because the Agency supplied the resources needed to transform his ideas from an academic curiosity into an operational tool for policymakers. Indeed, a closer examination shows that the Bureau did more than just supply resources. This article proposes that the Department of Labor’s interest stimulated the development of tables that were more useful for policymakers than Leontief’s first formulation was. While the Battelle Memorial Institute summarizes many of the key facts, it gives short shrift to the Bureau’s conceptual contributions. The Bureau’s work with Leontief also had a number of effects on the Agency itself. When a still-being-assembled UNIVAC computer inverted a 1947 matrix, the Bureau found itself at the vanguard of computing technology. However, neither the Battelle study nor the history of Government statistics from 1926 to 1976 by Joseph W. Duncan and William C. Shelton examined how the input-output work affected the relationships among the Bureau’s programs. Such an examination, undertaken in this article, shows that, as a result of its input-output work, the Bureau attempted to treat some of its measured price, quantity, and value magnitudes as part of a new framework—a consistent system of national economic accounts—and this approach revealed inadequacies in at least one BLS program. The Leontief-BLS partnership: a new framework for measurement

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