The economics profession recently lost one of our leading scholars, Dale W. Jorgenson of Harvard University. His passing leaves a void in the landscape of economic theory, measurement, and data collection. Professor Jorgenson, in so many ways, was a major architect of this landscape, beginning with his early work developing a model of investment. He realized the importance of having theoretically sound measures and accurate data. Throughout his career, Professor Jorgenson’s research, as John Fernald wrote, applied “clear theory, data consistent with that theory, and sound econometrics” to stubborn economic problems and in doing so, built the theoretical, measurement, and data frameworks that underpin economic analysis worldwide.
He was the first to develop a theoretically sound method of measuring capital cost and the rental price of capital, which replaced previous ad hoc empirical work. This early work, which is just a single thread of Professor Jorgenson’s prolific research, is woven into countless aspects of modern-day economics, including the “Solow-Jorgenson-Griliches” growth accounting framework used to measure productivity. Professor Jorgenson made crucial contributions that changed how economists think about investment and how economists understand and measure productivity growth. Innumerable additional threads from Professor Jorgenson’s work permeate modern economics. In his remarkable professional life, Professor Jorgenson’s research furthered economic theory, strengthened economic measurement, and improved and broadened data collection.
Professor Jorgenson’s contributions were particularly important in the areas of investment modeling, growth accounting, national account development, and econometric modeling. His work with Zvi Griliches on the importance of using chain-linked Divisia indexes to measure output and input quantities eventually led to the adoption of these indexes in the U.S. national accounts. In the 1967 classic paper “The Explanation of Productivity Change,” Professors Jorgenson and Griliches developed a model that uses service prices to account for shifts to more productive forms of capital and similarly uses data on labor skills to account for shifts towards more productive forms of labor hours. This model of capital and the work on capturing the heterogeneous nature of labor input are now integral to productivity measurement not only here at BLS but worldwide.
The Organization for Economic Cooperation and Development and the United Nations System of National Accounts have embraced and recommended Professor Jorgenson’s growth accounting system, and statistical agencies throughout the world have adopted it. In the last 40 years, Professor Jorgenson has played a key role in how the Bureau of Economic Analysis produces the National Accounts. Through his 2006 book, “A New Architecture for the U.S. National Accounts,” Professor Jorgenson moved national accounting towards a fully integrated set of accounts, identified gaps and inconsistencies in the accounts, and incorporated nonmarket activities into accounts. Using his ideal Jorgenson System of National Accounts, Professor Jorgenson developed new national accounting features that statistical agencies in many countries have adopted. His work has contributed substantively to the National Income Accounts methods used throughout the world.
Professor Jorgenson also worked to develop an internationally consistent “KLEMS” growth accounting framework by initiating projects to generate industry-level data on outputs, inputs, and productivity in the European Union in 2000, India in 2009, and Asia in 2010. By 2010, the World KLEMS project was underway to further broaden this effort, with a Sixth World KLEMS conference to be held in October 2022. The influence of his research on growth accounting and national accounts extended to the G7 countries and China.
Throughout his career, Professor Jorgenson supported the U.S. statistical community by serving in many capacities: president of the Econometric Society (1987) and the American Economic Association (2000); member of the National Academy of Sciences since 1978, Founding Member of the Board on Science, Technology, and Economic Policy of the National Research Council in 1991 and Chair from 1998 to 2006; member of the Bureau of Economic Analysis Advisory Committee for two decades, serving as Chair from 2004 to 2011; and member of the U.S. Commerce Secretary’s Advisory Committee on Measuring Innovation in the 21st Century Economy from 2006 to 2008.
Professor Jorgenson received numerous awards for his research and service to the statistical system, including the Julius Shiskin Award in 2010, the Adam Smith Award in 2005, and the prestigious John Bates Clark medal in 1971. Professor Jorgenson was never awarded the Nobel Prize in economics, although many people, including myself, view this as an oversight.
As a guiding light on the frontier of economics, particularly in the fields of productivity measurement and national accounting, Professor Jorgenson showed the U.S. and international statistical communities the path forward. His contributions were immense, and many here in the United States and worldwide will grievously feel his loss.
Note: Dr. Lucy Eldridge, Associate Commissioner for the Office of Productivity and Technology, contributed significantly to this post.