The Concise Encyclopedia of Economics

Leonid Vitalievich Kantorovich

Leonid Kantorovich shared the 1975 Nobel Prize with Tjalling Koopmans "for their contributions to the theory of optimum allocation of resources." Kantarovich was born and died in Russia and did all his professional work there. His first major breakthrough came in 1938 when he was consulting to the Soviet government's Laboratory of the Plywood Trust. Asked to devise a technique for distributing raw materials to maximize output, Kantorovich saw that the problem was a mathematical one: to maximize a linear function subject to many constraints. The technique he developed is now known as linear programming.

In a 1939 book, The Mathematical Method of Production Planning and Organization, Kantorovich showed that all problems of economic allocation can be seen as maximizing a function subject to constraints. Across the world John Hicks in Britain and Paul Samuelson in the United States were reaching the same conclusion at around the same time. Kantorovich, like Samuelson, showed that certain coefficients in the equations could be regarded as the prices of each input.

Kantorovich's best-known book is The Best Uses of Economic Resources. In it he developed points made in his 1939 book. He showed that even centrally planned economies had to be concerned with using prices to allocate resources. He also made the point that socialist economies have to be concerned about trade-offs between present and future and, therefore, should use interest rates just as capitalist ones do. Unfortunately, Hayek has shown that the only way to use prices is to have a price system—that is, markets and private property.

Besides winning the Nobel Prize, Kantorovich won the Soviet government's Lenin Prize in 1965 and the Order of Lenin in 1967. From 1944 to 1960, Kantorovich was a professor at the University of Leningrad. In 1960 he became director of mathematical economic methods at the Siberian Division of the Soviet Academy of Sciences. In 1971 he was appointed laboratory chief of the Institute of National Economic Management in Moscow.

Selected Works

The Best Uses of Economic Resources. 1965.

"The Mathematical Method of Production Planning and Organization." Management Science 6, no. 4 (July 1960): 363-422.

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