Corresponding author: Natalia A. Makasheva ( nmakasheva@mail.ru ) © 2021 Nonprofit partnership “Voprosy Ekonomiki”.
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Citation:
Makasheva NA (2021) Kondratiev and a new methodological agenda for economics. Russian Journal of Economics 7(1): 5066. https://doi.org/10.32609/j.ruje.7.56826

This article addresses Kondratiev’s approach to the problems of economic dynamics, cycle and conjuncture in the context of a new methodological agenda which was formulated in the 1920’s in Europe and the USA by representatives of the “brilliant generation of economists,” mostly members of the econometric movement and its adherents among Russian economists. A distinguishing feature of this generation was that its representatives were striving to make economics an objective science penetrated by rigorous ways of thinking and based on a unification between the theoretical quantitative and the empirical quantitative approaches to the study of economic phenomena. This paper discusses Kondratiev’s project on the general theory of economic dynamics as an embodiment of that methodological agenda. It also highlights a free exchange of ideas between Kondratiev and economists from different countries as a breeding ground for the emergence of the project and a necessary condition for its implementation.
Kondratiev, economic methodology, economic dynamics, statistical approach.
Nikolai Dmitrievich Kondratiev (1892–1938), Russia’s most internationally renowned economist, who gained worldwide recognition mainly for his idea of large cycles (major cycles, long waves) in economic development, belonged to the generation whom he described regretfully thus: “The heavy chariot of history has passed our generation by” (
However, notwithstanding these and other circumstances, including those connected with the emigration of many talented economists and destruction of the prerevolution system of the research activities, the 1920s became the “Golden Age” of economic science in Russia — a fact recognized by the majority of those who study the history of Russian economic thought (
Russian economists of the 1920s faced similar circumstances and shared similar attributes. These included the diversity and complexity of their problems, their background competence in applying modern methods to economic analysis, including statistical and mathematical ones, and also their interest in the work of foreign colleagues. It was then that Russian economic science made the tangible leap forward to embrace what used to be known as modern economic science. And in that progressive movement, which, alas, lasted only for a short time, Kondratiev certainly was one of the leaders, both as a researcher and an organizer of scientific research — first and foremost, as the Director of the Conjuncture Institute, and also as an economist who manifested his skill in the work of several government organizations and agencies, and as a researcher who was integrated into world economic science.
A meaningful point is that changes taking place in Russian economics of the 1920s, and which were preconditioned to a considerable extent by practical tasks and foreshadowed by previous developments in Russian economic science, were taking place simultaneously and in parallel with changes initiated by the representatives of the “brilliant generation of economists” from different countries (
In terms of its methodology, one of the goals of the econometric movement was to bridge the gap between theoretical and empirical approaches as well as between deductive and inductive methods. The problems inherent in such a methodological gap had been grasped by economists as early as in the era of J. S. Mill. It is worth noting that Mill had also posed the problem of the gap between statics and dynamics, but had not been able to advance towards a possible solution solving this.
The idea that statistical studies and pure theory are complementary can be found in W. S. Jevons’s “The theory of political economy”: “The deductive science of Economy must be verified and rendered useful by the purely empirical science of Statistics. Theory must be invested with reality and life of fact. But the difficulties of this union are immensely great” (Jevons, 1871/1879, p. 24). J. N. Keynes, too, called upon bridging the gap between the empirical and theoretical approaches: “If pure induction is inadequate, pure deduction is equally inadequate. It is a mistake that is too common, to set up these methods in mutual opposition, as if the employment of either of them excluded the employment of the other. It is, on the contrary, by their unprejudiced combination alone that any complete development of economic science is possible” (
The attempt to find a methodological compromise can be found in works by A. Marshall, who also expressed the opinion of most economists when they said that economic theory needed quantitative as well as qualitative analysis. The approximate date of the ending of the debate concerning the appropriate methods of economics may be set, therefore, in 1890 with the publication of Marshall’s “Principles of economics” and J. N. Keynes’s “Scope and method of political economy.” The same date, 1890, marks also the approximate beginning of an era of pronounced expansion of statistical activities (
By the early 1920s, the old methodological dispute of the 19^{th} century — the Methodenstreit — was consigned to the past. In lieu of the true method issue, some economists, especially those engaged in statistical studies, raised the question of combining various methods and research techniques. For instance, W. Mitchell wrote: “We do not speak of qualitative versus quantitative analysis. We do not seek to prove even that one type should predominate over the other. Instead of dogmatizing about the method at large, we are experimenting with methods in detail. In the measure of our proficiencies, we all practice both qualitative and quantitative analysis, shifting our emphasis according to the task we have in hand” (
Many economists connected the hope for reconciliation between the theoretical and empirical approaches with advanced statistical methods, the application in economic studies of the correlation and regression analysis which earlier were being refined and applied actively in research of noneconomic phenomena and processes — first and foremost, biological and demographic ones (K. Pearson, G. U. Yule, et al.). Moreover, by that time application of such methods began to be considered — especially by representatives of statistical science — as evidence of the scientific status of any discipline (
In the 1920s, the idea that economics — just like any other discipline — must be logically strict and based on a solid empirical basis, found a considerable number of adherents in Russia. Prior to the revolution, Russia had some of the most internationally renowned schools of statistics, both descriptive (practical) and theoretical. The latter one, represented by such a prominent and internationally renowned scientist as A. A. Chuprov,^{4} was closely connected with the Russian mathematical school (P. L. Chebyshev, A. A. Markov, A. M. Lyapunov). In the 1920s, when the role of statistics grew tangibly in the light of new politicoeconomic goals, Russian economists relied on this to underpin their work. They could also rely on the work of Russian economists who at the very beginning of the 20^{th} century initiated the application of mathematics in economics — V. K. Dmitriev, M. I. TuganBaranovsky, N. A. Stolyarov, and on the work of those who somewhat later followed this path — A. V. Chayanov, E. E. Slutsky, N. N. Shaposhnikov, and some others.^{5} However, the process of adoption of mathematics as the language of economics was neither easy nor straightforward.
The contributions of the first generation marginalists had passed almost unnoticed by Russian economists, while representatives of the second generation (mainly the adherents of the Austrian school) were seen first and foremost as opponents of Marx’s labor theory of value and therefore their basic ideas and methods were rejected by most Russian economists who had fallen under the influence of Marx’s doctrine.^{6} And the work of Dmitriev, who adopted marginalism and used mathematics to conduct an organic synthesis of the labor theory of value and the theory of marginal utility and obtained some original results, as well as the works of Stolyarov who proved the theorem formulated by TuganBaranovsky on the proportionality of marginal utilities to labor values, and by some other authors,^{7} did not noticeably advance the process of mathematization. Most Russian economists remained committed to the nonrigorous way of thinking and nonmathematical methods of reasoning.
By the early 1920s, not only in Russia, but also in the West, economics was veering far from the standards of rigor and objectivity established by natural sciences. This might seem strange, because it could be expected that after the marginalist revolution the phase of the “narrative” economics was over and a resolute step made towards its quantification and mathematization. But this did not happen. In the early twentieth century it became clear that hopes that had been nourished in the last three decades of the nineteenth century, to make economics the “exact science,” “social mechanics,” “physique sociale,” or “mechanics of utility” (
Such a situation could have been explained by the fact that the audience lacked proper training in mathematics, or that universities had been without departments of economics for quite some time and as a rule, chairs of political economy were established in faculties of law. However, it is evident that there was a problem with marginalist economic theory as such, as its original hypotheses were too abstract, the basic notions were nonquantifiable, and the applied equilibrium approach represented “a disguised form of the classical form of ceteris paribus, the method of static state” (
Demand for the theory which could deal with economic change was satisfied partly by the historical school and institutionalism, which did not make claims for creating a general and strict theory, and partly by the economiccycle studies, which, however, “have never been integrated in the body of the deductive theory” (
So, although economic science in Russia and the West, especially in Europe, developed along different trajectories, conditioned by specific features of the economic development of countries and national schools traditions in economic thought, by the 1920s there appeared to be a shared demand for a new methodological agenda. Such an agenda was not supposed merely to assert an accepted correct method as sought by participants of the famous Methodenstreit, who contraposed the empiric and theoretical methods, but recognized the possibility and need to combine different methods as well as suggested the alliance among mathematics, statistics, and economic theory.
In the 1920s, a notable numbers of Russian economists connected the application of statistical and mathematical methods with the opportunity to make economics an objective and useful discipline and to depart from mixing — what was traditional for Russian economic thought — the analytical and social components of economic discourse. Kondratiev certainly shared the aforementioned point of view. He realized the need to have a new methodological program, although its outline was probably not entirely clear to him. All his activities provided evidence of his striving for economics as a true scientific discipline, framing the “battles” between proponents of different schools in the fields of mathematics, statistics and logic, rather than politics and ideology. We may say that he proceeded to implement such a methodological program through his (mostly empirical) studies of cycles and conjuncture.
Kondratiev’s name is associated in the West, and now in Russia, first and foremost with the concept of “long cycles” (major cycles, long waves).^{9} In the 1920s, just a few of Kondratiev’s works were available for Western researchers: in 1926, the German translation of “The major economic cycles” (1925); in 1925, the Quarterly Journal of Economics published the abridged translation of “The static and dynamic view of economics” (1924); in 1927, the partial version of the Problems of Forecasting (1926) was published in German, and in 1928, the abridged German version of the “Dynamics of industrial and agricultural prices” (1928) was published — the last publication during Kondratiev’s lifetime. This led Louçã to write that “the impact of Kondratiev’s few articles published in English and German was not only effective, but also quite surprising” (
The first two of the aforementioned works contained “the hypothesis of the long waves in capitalist development — named by Schumpeter and known thereafter as ‘Kondratiev waves’ — that for some time was an important topic in the research agenda of economics” (
The choice, made by Kondratiev regarding the subject of research,^{11} as well as the selection of his works to be published abroad, reflect the general trend in the economic studies of that period — the intense interest of economists in the problem of cycles, which had stirred as early as before World War I. In the prewar years, the two lines of research had been outlined — the empirical and the theoretical ones; the gap between those became most evident in the 1920s.
Those who may be referred to as adherents of the theoretical stream include L. Mises and F. Hayek, J. Schumpeter, D. Robertson, A. Pigou, R. Hawtrey, G. Myrdal, and others. These economists saw the cycle theory first and foremost as an abstract deductive theory. In such case, the most difficult problem was how to incorporate the phenomenon of cycle into the general theory of economic equilibrium because the former, according to a German economist A. Löwe, were in “obvious contradiction” with the latter (
Hayek, who was one of the most consistent adherents of the deductive method and equilibrium approach in the study of cycle, denied the need and possibility of statistical verification of the theory as built by the deductive method from the hypotheses of rationality. In particular, he wrote: “A priori we cannot expect from statistics anything more than the stimulus provided by the indication of new problems” (
Kondratiev turned to the methodological issues connected with the problem of dynamics in 1924 in his article “The concepts of economic statics and dynamics.” He presented the critical analysis of then existing ideas of the relation between statics and dynamics, and outlined his immediate task as conducting the conjuncture research, having described the method of the research as “concrete empirical” and, in particular, statistical (
While studying business cycles, the adherents of the empirical stream (
So, while Hayek believed that statistics would point out the phenomena to be theoretically studied, but would not evaluate theory, Mitchell, the leader of the empirical stream, assumed that theory would confirm results which were previously statistically obtained. In relation to the study of cycles and crises, this was formulated by H. Moore: “The development of the theory of crises illustrated the attempt to establish deductively results which have at first been reached empirically” (
In mid 1920s, Kondratiev focused his efforts mainly on the statistical analysis of conjuncture and was interested in the work of foreign economists in this field, and above all in the work of Mitchell, the head of the NBER (founded in the same year — 1920, as the Conjuncture Institute was established). The conformity of the two institutes’ research agendas and the similarity of Mitchell’s and Kondratiev’s approaches to the study of cycle predetermined the two scholars’ interest in one another, which manifested itself at personal meetings in the USA during Kondratiev’s business trip. As noted by Barnett, impressed by his meetings with Kondratiev, Mitchell agreed to publish his article in the Voprosy Koniunktury [Issues of Conjuncture] journal published by the Conjuncture Institute, and mentioned major cycles in his book “Business cycles,” on which he was working at that time, although he considered Kondratiev’s hypothesis of major cycles to be quite dubious (
While in the USA, Kondratiev also had meetings with S. Kuznets, then a young colleague of Mitchell, and maintained contacts with him afterwards. Kondratiev participated in the annual meeting of the American Economic Association in Chicago on December 30, 1924, attended by leading American economists, and “gave a summary […] of the collapse and subsequent stabilization of the Russian currency” (
The new methodological agenda, which promulgated the reconciliation between the theoretical and empirical approaches, the alliance of mathematics, statistics and economic theory, as well as the movement towards the theory of economic dynamics, raised such questions as to what kind of deductive theory could be seen as the embodiment of this “alliance.” The attempt to adapt pure theory to requirements of the methodological agenda was made by Moore in “Synthetic economics,” which, as he wrote, “comprises both the rational and empirical branches of economic science” (
In the review of Moore’s book, M. Ezekiel wrote that more than any other American economists, Moore contributed to the introduction of statistical methods into economics and to the connection between economic theory and facts of economic reality (
We do not know whether Kondratiev was familiar with this and another relevant article of Kuznets’s which was published the same year, but it is known that he was well aware of the “Secular movements in production and prices” (
We are not aware to what extent Kondratiev relied on Kuznets’ work, but in any case we may say that Kondratiev and Kuznets shared the interest in the problem of trend. The issue of trend was raised by Kondratiev in the course of discussion on the majorcycles problem, and at that time Kondratiev used to determine the shape of the curve and its characteristics empirically. While in Suzdal political prison, he theoretically derived trend and used it in a model of growing economy, parameters of which are to be determined empirically. Thereby, Kondratiev made a noticeable step towards reconciling theoretical and empirical approaches and building the theory of economic dynamics. Most of his works written between 1921 and 1928 may be considered as the preliminary stage of building such theory.
One can make assumptions about the logical structure of the general theory of dynamics as well as Kondratiev’s view of true economic science by relying on the quite limited number of materials, such as: the articles on statics and dynamics published before he was arrested; the unfinished (rather, interrupted) book “Basic problems of economic statics and dynamics,” written in 1930–1931;^{14} the macroeconomic model as drawn from his book on the trend, unfortunately lost,^{15} and letters to his wife, written from the Suzdal political prison in 1932—1936.^{16} These letters serve as evidence of his intensive research done in prison at least until 1936, and of his striving to be aware of the new publications issued in Russia and abroad, as well as of his correspondence with leading foreign economists — such as Kuznets, Mitchell, I. Fisher, and E. Wagemann.^{17}
In these letters, Kondratiev mentioned over 270 books, articles and booklets, to which he referred by memory, as well as those ones that he asked to send to him. These works can be divided into several groups: statistical studies of the longterm trends in the dynamics of prices, national income and wealth (W. I. King, G. M. Malhall, R. Pupin), capital (R. Giffen), population and employment (Moore, P. E. Levasseur);^{18} works on the theory of cycles and crises (Mitchell, J. B. Clark, A. F. Burns, C. T. Schmidt, A. Spiethoff, Fisher, et al.) as well as on the problems of statics and dynamics (Moore, Mitchell, E. H. Vogel, Kuznets, et al.); works by the leaders of marginalism (L. Walras, W. S. Jevons, R. Auspitz, K. Wicksell, et al.); books and textbooks on mathematics, statistics, and the theory of probability by Russian and foreign authors.
As for the plan regarding the general theory of dynamics, we come to know it from the letter to his wife of November 7, 1934: “As soon as I have finished this book, I shall start a book on large fluctuations, whose plan and contents are already completely clear to me. Then I shall write a book on short cycles and crises. After that I shall return to the introductory general methodological part which I handed over to you in draft. Finally, I shall finish everything with the fifth book on the synthetic theory of socioeconomic genetics or development” (
The first book mentioned in the above fragment is the work on the trend, which Kondratiev was writing in Suzdal — first, periodically and in parallel with studying mathematics and statistics, and then systematically. The same letter informs us about the titles of the first four chapters in the given book: Chapter I. “The basic problems of the theory of economic dynamics”; Chapter II. “Trend, or the problem of the theory of economic dynamics”; Chapter III. “The state of study of trend in the theory of socioeconomics”; Chapter IV. “Stochastic analysis of a time series and the problem of trend.”
In the letter of May 29, 1935 Kondratiev writes that the book is not yet finished and that he has to write the chapter “Abstract theory of trend,” and then 2 or 3 chapters of the empirical content, as well as that he is continuing to work on the chapter on the “Stochastic analysis of a time series and determination of the form of the trend” “devoted to a theoretical, probabilistic substantiation of techniques for establishing the trend from empirical data after the general form of the trend has been deduced” (
Describing the plan for the general theory of dynamics, Kondratiev writes that the last, fifth book will be focused on the synthetic theory of socioeconomic genetics or development. Here, the two terms are not quite clear — such as “synthetic” and “genetics,” the meaning of which may be only a subject for speculation. It seems most probable that Kondratiev, like Moore, understood the “synthetic theory” as the theory containing propositions drawn by deductive reasoning and subjected to verification, or drawn empirically but explained theoretically. As far as the term “genetics” is concerned, it might signify the endogenous nature of socioeconomic change under consideration. However, in order to reach this final stage of the project, it was necessary to resolve a good deal of various problems, ranging from those of philosophy and methodology to the statistical and mathematical ones.
Like many of his colleagues in the West, Kondratiev preferred to start building the theory of dynamics with statics as the theory of equilibrium. This allows us to assume that Kondratiev did accept the analogy between economics and mechanics, but was well aware of the limitations of statics. He wrote that “in studying equilibrium, statics cannot and does not study the class of economic phenomena whose economic essence amounts to rejection of equilibrium or a violation of it or what are a consequence of the absence of equilibrium. These include, for example, the phenomena of crises, industrial profits, etc.” (
Kondratiev realized the need for “reconciliation” between the static and dynamic theories: “The concepts of statics and dynamics can only supplement one another if they relate to the same object of cognition, i.e. they form part of the same science and, consequently, are either both general or both particular concepts” (
So, how could it be made possible to provide the generality of notions related to the theory of dynamics? For the adherents of methodological individualism, the answer is clear: it is necessary to turn to the behavior of individuals and to start building the theory of dynamics on this basis. However, the theories based on methodological individualism were static. Kondratiev associated the exit from such deadlock with the statisticprobabilistic approach to the analysis of social phenomena in general and economic ones in particular.
According to Kondratiev, the basic concept of the economic theory is the market system, the elements of which are demand, supply and prices, which are interconnected, their interconnection being expressed by the law asserting the “functionalcausal dependence” between these elements under certain conditions. This law represents the generalization of the empirical data in the abstract form, while the cause, which preconditioned the existence of the dependence, is to be found in the mass phenomena, such as the changes in the subjective valuations of commodities^{19} and activities of the great numbers of individuals who constitute a population. This can be seen as the first “brick” of the new theory. The second brick appears in the form of a claim that the equilibrium price is the statistical characteristic of the set of prices, at which transactions are carried out.
Meanwhile, market agents do not possess the perfect knowledge (as opposed to Walrasian model), the number of transactions is large, and the latter may be referred to as stochastic events. In such a case, the equilibrium price “is most closely characterized by its approximation to empirical mode, i.e., the price which occurs most frequently” (
The manuscript was given to Kondratiev’s wife, and he never returned to it after that.^{21} We may just make assumptions as to why Kondratiev decided to set aside the methodological part and attend to the macroeconomic dynamics and especially to the problem of trend. Probably, this happened under the influence of the growing interest, in the West, in the problems of economic dynamics in general and that of trend in particular; the latter has been fueled not least by applying the mathematical and statistical methods in economic theory.
It took over two years for Kondratiev to resolve theoretically the problem of trend. In March 1934, he quite proudly writes that he has arrived at rather unexpected and quite pessimistic conclusions related to the regularity of economic development, and that these conclusions, when published, may cause the “even stronger assault” than his other works did (
This model was innovative in many aspects, and according to some experts, its creation forestalled the appearance of similar models in the West at least for 20 years; in particular, he applied the CobbDouglas production function with Hicksneutral technical progress (
At the next stage, according to Kondratiev’s plans, it was necessary to undertake the stochastic analysis of the time series as being related to the trend. It appears most probable that in other works, too, which would have been focused on cycles, he planned to follow the same logic: the theoretical deductive method had to be combined with the statistical, or statisticalprobabilistic approach. Within the framework of that approach, the crucial notion was that of population, which was the major concept in A. A. Chuprov’s^{24} version of the “theoretical ground of statistics,” which deeply impressed Kondratiev (
Kondratiev certainly attempted to apply formal mathematical and uptodate statistical methods in economic research. His efforts corresponded to his perception of economic science as being close in terms of the methods and tools to natural science disciplines dealing with measurable values and verifying theories empirically, even in terms of the forecast reliability. We may say that Kondratiev was working according to the logic of the methodological agenda — i.e., the program, which was promulgated by the “brilliant generation” of economists, mathematicians, and statisticians in the West. At the same time, his vision of modern economic science was probably somewhat different from what it became in the end. In some sense, we may say that a pioneering and promising approach passed away together with Kondratiev.
M. Blaug wrote: “The development of economic thought has not taken the form of a linear progression toward present truths while it has progressed, many have been the detours imposed by the exigencies of time and place” (