
14 October 1975
The
Royal Swedish Academy of Sciences has decided to award the
Prize in Economic Science in Memory of Alfred Nobel for 1975 in
equal shares to
Professor Leonid Kantorovich, USSR,
and
Professor Tjalling C. Koopmans, USA,
for their contributions to the theory of optimum allocation of
resources.
Optimum Allocation of
Resources
Leonid Kantorovich and Tjalling Koopmans have
both done their most important scientific work in the field of
normative economic theory, i.e., the theory of the optimum
allocation of resources. As the starting point of their work in
this field, both have studied the problem - fundamental to all
economic activity - of how available productive resources can be
used to the greatest advantage in the production of goods and
services. This field embraces such questions as what goods should
be produced, what methods of production should be used and how
much of current production should be consumed, and how much
reserved to create new resources for future production and
consumption.
Improved Economic Planning
As they have formulated
the problems and described the connection between production
results and productive inputs in new ways, these two scholars
have been able to achieve highly significant results. Early in
his research, Professor Kantorovich applied the analytical
technique of linear programming to demonstrate how economic
planning in his country could be improved. Professor Koopmans,
for his part, has shown for instance that on the basis of certain
efficiency criteria, it is possible directly to make important
deductions concerning optimum price systems.
Leading Soviet Economist
Professor Kantorovich is
today the leading representative of the mathematics school in
Soviet economic research. He made his first contributions in the
field of economic research as early as 1939 when he wrote an
essay on the meaning and significance of an efficient use of
resources in individual enterprises. In a number of publications,
one being his book, The Best Use of Economic Resources,
Professor Kantorovich has analyzed similar efficiency conditions
for an economy as a whole, and there, particularly demonstrated
the connection between the allocation of resources and the price
system, both at a certain point in time and in a growing economy.
An important element in this analysis was to show how the
possibility of decentralizing decisions in a planned economy is
dependent on the existence of a rational price system, including
a uniform accounting interest rate to form a foundation for
investment decision.
Activity Analysis
Professor Koopmans has in a series
of works, primarily, Analysis of Production as an Efficient
Combination of Activities, developed the so-called activity
analysis. Within this theory, new ways of interpreting the
relationship between inputs and outputs of a production process
are used to clarify the correspondence between efficiency in
production and the existence of a system of calculation prices.
This shed a new and interesting light on the connection between
the normative allocation theory and the general equilibrium
theory. During the sixties, Professor Koopmans studied the
problem of finding criteria for an optimum growth rate for an
economy. In this work, he has paid particular attention to
factors which, in a more fundamental sense, determine the value
individuals and society place on consumption at different times -
such as population growth and technological advance. In addition
to the contributions he has made to the normative theory of
allocation of resources, Professor Koopmans has done
distinguished work in the field of econometric methods.
To sum up, Professor Leonid Kantorovich and Tjalling Koopmans, largely independent of one another, have renewed, generalized, and developed methods for the analysis of the classical problem of economics as regards the optimum allocation of scarce resources.