Leibenstein, Harvey

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LEIBENSTEIN, HARVEY

(1922–1994)

Harvey Leibenstein was an American economist and economic demographer. Born in Yanishpol, Russia (now Ukraine), educated in Canada and the United States (Ph.D. from Princeton University, 1951), he served on the faculties of the University of California, Berkeley (1951–1967) and Harvard University (1967–1992). A disabling automobile accident in 1987 forced his retirement. Leibenstein's early work focused on demographic determinants in economic development; later his attention turned to extra-rational calculations in human decision-making.

Influenced by Frank Notestein (an empiricist) and Oskar Morgenstern (by contrast a theorist), Leibenstein's 1954 book, A Theory of Economic-Demographic Development, an outgrowth of his dissertation, explains in the then-emerging algebraic abstraction how economic development worked to destabilize Malthusian population equilibria. Besides a conventional presentation (economic statics), he developed the topic according to several types of dynamics–as found in Samuelson's Foundations of Economic Analysis (1947). These involved interactions at critical time-points among such variables as the composition of the initial population, varying injections of new capital, and fortuitous changes in personal income (consumption)–involving different socioeconomic sectors.

Leibenstein's second book, Economic Backwardness and Economic Growth (1963), introduces his "critical minimum effort thesis" and further details the breakdown of Malthusian equilibria in developing nations. Again the language is often algebraic, but there are important data insertions: Leibenstein pioneered using nutritional inputs as a cause and a consequence of economic growth–indeed, Leiben-stein increasingly employed the term growth to refer to higher average incomes rather than capital inputs.

As his career developed, Leibenstein's skepticism about using rational maximization as the explanation of economic behavior grew (he had Herbert Simon, the theorist of bounded rationality, as a quondam colleague). This skepticism, appearing in a 1974 article, "An Interpretation of the economic theory of fertility: Promising path or blind alley?," took issue with Gary Becker's view that couples would (or even could) actually calculate their preference functions before deciding to conceive an additional child.

Instead, Leibenstein turned to insights found in behavioral psychology and worked throughout his remaining career to develop a 'micro-micro' system in which individual workers operated within the framework of three, successively smaller, output levels: what they could produce, what was required to hold their jobs, and what they would have preferred. He used the term "X-efficiency" to describe the increment of the highest over the lowest. Of course, the critical area involves not only the attitudes of single workers but also how groups of workers, each capable of making his or her own choices and reacting to the difference between the three identified levels of output, will influence the stint. Leibenstein handled this set of interactions as illustrative of the well-known Prisoners' Dilemma problem.

Although X-efficiency underlay the reasoning in Beyond Economic Man (1976), the idea, after being ridiculed by the economist George J. Stigler in a 1976 article (to which Leibenstein replied in kind: "XInefficiency Xists: Reply to an Xorcist"), was further elaborated and fortified in General X-Efficiency Theory and Economic Development (1978), and in Inflation, Income Distribution, and X-Efficiency (1980). It culminated with Inside the Firm (1987).

bibliography

selected works by harvey leibenstein.

Leibenstein, Harvey. 1954. A Theory of Economic-Demographic Development. Princeton, NJ: Princeton University Press.

——. 1963. Economic Backwardness and Economic Growth: Studies in the Theory of Economic Development. New York: John Wiley.

——. 1974. "An Interpretation of the Economic Theory of Fertility: Promising Path or Blind Alley?" Journal of Economic Literature 12: 457–479.

——. 1976. Beyond Economic Man. Cambridge, MA: Harvard University Press.

——. 1978. General X-Efficiency Theory and Economic Development. New York: Oxford University Press.

——. 1978. "X-Inefficiency Xists: Reply to an Xorcist." American Economic Review 68: 203–211.

——. 1979. "A Branch of Economics is Missing: Micro-Micro Theory." Journal of Economic Literature 17: 477–502.——. 1981. "Economic Decision Theory and Human Fertility Behavior: A Speculative Essay." Population and Development Review 7: 381–400.

——. 1987. Inside the Firm. Cambridge, MA: Harvard University Press.