Co-founder of the Soviet economic-mathematical school who bridged Marx's value theory with mathematical optimization
In 1942, trapped in German-occupied Pyatigorsk, he enrolled as a violinist in the city theater orchestra to avoid forced labour conscription. When the German economist-officer Heinrich von Stackelberg offered him the post of head of the Caucasus Statistical Bureau, Novozhilov refused, citing his duty as first violinist of the quartet.
With Kantorovich and Nemchinov, a founder of the Soviet mathematical-economics school. He formalised 'differential costs', rooted in Marx's labour theory of value yet responsive to resource scarcity, laying the theoretical ground for optimal socialist planning. Awarded the Lenin Prize in 1965.
Career Timeline
- 1892Born in Kharkov (father a state councillor)
- 1911–1915Graduated Kiev University law faculty (gold medal), retained as professorial fellow in political economy and statistics
- 1922–1951Professor, Leningrad Polytechnic Institute; head of machine-building economics, 1938–1951
- 1941Doctoral dissertation on methods of co-measuring economic effectiveness of plan variants
- 1951–1966Head of statistics, Leningrad Engineering-Economic Institute
- 1961Awarded the Order of Lenin
- 1965Lenin Prize jointly with Kantorovich and Nemchinov for linear programming and economic models
- 1966–1970Head, Laboratory of Systems of Economic Evaluations, Leningrad branch of TsEMI
Related historical events
Differential Costs and the Theory of Optimal Planning
The core of Novozhilov's economics is the concept of 'differential costs.' Just as prices coordinate supply and demand in a capitalist market, he argued, a socialist planned economy also needs objective valuation criteria that reflect resource scarcity. His differential costs combine the direct labour cost of producing a good with the 'costs of inverse relationship' (zatraty obratnoy svyazi), that is, the opportunity cost of using scarce resources that could have been employed elsewhere. Novozhilov proved mathematically that in an optimal plan, prices must be proportional to marginal labour values, and that such 'planned prices' are the path to integrating Marx's labour theory of value with modern mathematical economics. His 1959 paper 'The Measurement of Outlays and of Their Results in a Socialist Economy' and his 1967 book Problems of Measuring Costs and Results in Optimal Planning gave the theory its systematic form. Together with Kantorovich's 'objectively determined valuations,' Novozhilov's differential costs became a theoretical cornerstone of the Soviet economic-mathematical school. His formula incorporated not only the labour value of a single product but society-wide accumulation and resource allocation, a general-equilibrium vision that has invited productive comparison with Western neoclassical economics.