Soviet Economist Leonid Kantorovich – Economy Works Regardless of Politics

Substantial research works of the Soviet economist Leonid Kantarovich contradicted the Marxist economic theories, which angered the Soviet leadership.

The Soviet government, despite rejecting the ideas of Leonid Kantarovich, still rewarded his contribution to economics and mathematics with highest government awards and prizes. Leonid Kantarovich received wide international recognition, one proof of which was a Nobel Prize in economics from the Royal Swedish Academy.

Wunderkind

1930 – Leonid (18 years old) graduated from the Mathematics Department of the University of Leningrad, and stayed on as a teacher.

1930 –his first research work on the theory of series, which aroused great interest.

1934 – Kantarovich received the title of professor.

He received a Doctoral Degree of Physical and Mathematical Sciences without defending a thesis.

“Basic economic problems can be studied scientifically,

regardless of the political organization of the society in which they are examined”.

L. Kantorovich (a fragment of the speech for the Royal Swedish

Academy during the award ceremony for the Nobel Prize in economics)

Leonid Kantorovich

Leonid Kantorovich, Moscow, 1976 / Andrei Bogdanov

Linear Programming Model

Kantarovich created a linear programming model to optimize the approach to the process of using resources.

In the problem of optimizing the production, Leonid Kantarovich described that the main idea was reviewing the production plan not as a whole, but as constructed from individual production processes.

Each process was described by different parameters: the norms of output or the costs of certain products, labor, equipment, etc.

Kantarovich made ​​an assumption that the process can change, while product yield and costs increase or decrease proportionally.

Kantarovich took into account some restrictions, such as restrictions on expenses. Or restrictions on the amount of work by one worker (the length of his working day). Or restrictions on the result – the production plan for a month.

Moreover, Kantarovich set the goal to not just make plan calculations for each process, but to make an overall plan adequate to a set goal. The goal could be to reduce total costs of manufacturing the planned volume of products. Or vice versa, under strictly limited resources to ensure manufacturing of a larger volume of products.

It is important that the linear programming model is suitable not only for an individual production, but also for the economy of an entire country.

Amazing Soviet Reality

Kantarovich was invited as a consultant to a manufacturing plant. The task was to improve the effectiveness of equipment for cutting industrial materials. And this non-trivial problem was solved by using the linear programming methods.

But the degree of value added use of the materials increased from 91% to 96%. That is, if the output for the next period was planned with an increase of 5%, then you got an incredible 101% of the planned use of the metal. And the Soviet economy was built on a notion of achieving and overachieving a target. That meant that the workers and the factory management would not receive their bonuses!

In addition, waste reduction made it impossible to achieve the target for scrap metal. Again, another miss from the point of view of the Soviet system – the administration didn’t get their bonuses and received a reprimand, because they didn’t hit the plan for collecting scrap metal.

Would the Soviet economy still collapse causing the collapse of the USSR, if the works of Kantarovich received widespread implementation in the Soviet Union?

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