Abba P. Lerner
Encyclopedia
Abba Ptachya Lerner was an American
economist.
Lerner was born on October 28, 1903 in Bessarabia
(Russian Empire
). He grew up in a Jewish family, which emigrated to Great Britain
when Lerner was three years old. Lerner grew up in the London
East End. From the age of sixteen he worked as a machinist, a teacher in Hebrew
schools, and as a businessman. He entered the London School of Economics
in 1929 where he would study under Friedrich Hayek
. A six-month stay at Cambridge
in 1934–1935 brought him into contact with John Maynard Keynes
. Lerner married Alice Sendak in 1930; they had twin children, Marion and Lionel, in 1932.
In 1937, Lerner emigrated to the United States
. While in the US, Lerner befriended his intellectual opponents Milton Friedman
and Barry Goldwater
.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
economist.
Lerner was born on October 28, 1903 in Bessarabia
Bessarabia
Bessarabia is a historical term for the geographic region in Eastern Europe bounded by the Dniester River on the east and the Prut River on the west....
(Russian Empire
Russian Empire
The Russian Empire was a state that existed from 1721 until the Russian Revolution of 1917. It was the successor to the Tsardom of Russia and the predecessor of the Soviet Union...
). He grew up in a Jewish family, which emigrated to Great Britain
Great Britain
Great Britain or Britain is an island situated to the northwest of Continental Europe. It is the ninth largest island in the world, and the largest European island, as well as the largest of the British Isles...
when Lerner was three years old. Lerner grew up in the London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
East End. From the age of sixteen he worked as a machinist, a teacher in Hebrew
Hebrew language
Hebrew is a Semitic language of the Afroasiatic language family. Culturally, is it considered by Jews and other religious groups as the language of the Jewish people, though other Jewish languages had originated among diaspora Jews, and the Hebrew language is also used by non-Jewish groups, such...
schools, and as a businessman. He entered the London School of Economics
London School of Economics
The London School of Economics and Political Science is a public research university specialised in the social sciences located in London, United Kingdom, and a constituent college of the federal University of London...
in 1929 where he would study under Friedrich Hayek
Friedrich Hayek
Friedrich August Hayek CH , born in Austria-Hungary as Friedrich August von Hayek, was an economist and philosopher best known for his defense of classical liberalism and free-market capitalism against socialist and collectivist thought...
. A six-month stay at Cambridge
Cambridge
The city of Cambridge is a university town and the administrative centre of the county of Cambridgeshire, England. It lies in East Anglia about north of London. Cambridge is at the heart of the high-technology centre known as Silicon Fen – a play on Silicon Valley and the fens surrounding the...
in 1934–1935 brought him into contact with John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...
. Lerner married Alice Sendak in 1930; they had twin children, Marion and Lionel, in 1932.
In 1937, Lerner emigrated to the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. While in the US, Lerner befriended his intellectual opponents Milton Friedman
Milton Friedman
Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...
and Barry Goldwater
Barry Goldwater
Barry Morris Goldwater was a five-term United States Senator from Arizona and the Republican Party's nominee for President in the 1964 election. An articulate and charismatic figure during the first half of the 1960s, he was known as "Mr...
.
Accomplishments
- The use of fiscal policyFiscal policyIn economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....
and monetary policyMonetary policyMonetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relatively stable prices and low unemployment...
as the twin tools of Keynesian economicsKeynesian economicsKeynesian economics is a school of macroeconomic thought based on the ideas of 20th-century English economist John Maynard Keynes.Keynesian economics argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes and, therefore, advocates active policy responses by the...
is credited to Lerner by historians such as David ColanderDavid ColanderDavid C. Colander is the Christian A. Johnson Distinguished Professor of Economics at Middlebury College. He is known for his study of the economics profession itself, and the sociology of economics. His books The Making of an Economist and its later edition, The Making of an Economist, Redux, have...
.
- The Lerner symmetry theoremLerner symmetry theoremThe Lerner symmetry theorem is a result used in trade theory, which states that, based on an assumption of a zero balance of trade , an ad valorem import tariff will have the same effects as an export tax...
states that an import tariff can have the same effects as an export tax.
- The Lerner Index measures potential monopoly power as the negative inverse of demand elasticity.
- Lerner improved a formula of Alfred MarshallAlfred MarshallAlfred Marshall was an Englishman and one of the most influential economists of his time. His book, Principles of Economics , was the dominant economic textbook in England for many years...
, which is known since as the Marshall–Lerner condition.
- Lerner developed a model of market socialismMarket socialismMarket socialism refers to various economic systems where the means of production are either publicly owned or cooperatively owned and operated for a profit in a market economy. The profit generated by the firms system would be used to directly remunerate employees or would be the source of public...
, which differed form the pure planned economyPlanned economyA planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...
. It became known as the Third WayThird way (centrism)The Third Way refers to various political positions which try to reconcile right-wing and left-wing politics by advocating a varying synthesis of right-wing economic and left-wing social policies. Third Way approaches are commonly viewed from within the first- and second-way perspectives as...
. By the 1960s Lerner began to distance himself from his early work on socialism.
- Lerner improved the calculations made by Wilhelm LaunhardtWilhelm LaunhardtCarl Wilhelm Friedrich Launhardt was a German mathematician and economist.Launhardt was born in Hanover, the capital of the Kingdom of Hanover. He studied and taught at Hanover's technical school...
on the effect of terms of tradeTerms of tradeIn international economics and international trade, terms of trade or TOT is /. In layman's terms it means what quantity of imports can be purchased through the sale of a fixed quantity of exports...
.
- Lerner developed the concept of distributive efficiencyDistributive efficiencyIn welfare economics, distributive efficiency occurs when goods and services are received by those who have the greatest need for them. Abba Lerner first proposed the idea of distributive efficiency in his 1944 book The Economics of Control....
, which shows that economic equality will produce the greatest total happiness with a given amount of wealth.
- Lerner contributed to the Lange-Lerner-Taylor theoremLange-Lerner-Taylor theoremThe Lange Model is an economic model which combines public ownership and a trial and error approach to determine output and equilibrium. The state owns non-labor factors of production and consumer goods are allocated by market...
.
- Based on effective demandEffective demandIn economics, effective demand in a market is the demand for a product or service which occurs when purchasers are constrained in a different market. It contrasts with notional demand, which is the demand that occurs when purchasers are not constrained in any other market...
principle and chartalismChartalismChartalism is a descriptive economic theory that details the procedures and consequences of using government-issued tokens as the unit of money. The name derives from the Latin charta, in the sense of a token or ticket...
, Lerner developed functional financeFunctional financeFunctional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principle and chartalism. It states that government should finance itself to meet explicit goals, such as taming the business cycle, achieving full employment, ensuring growth and low inflation.-...
, a theory of purposeful financing (and funding) to meet explicit goals, including full employmentFull employmentIn macroeconomics, full employment is a condition of the national economy, where all or nearly all persons willing and able to work at the prevailing wages and working conditions are able to do so....
, no taxation designed solely to fund expenditure or finance investment, and low inflationInflationIn economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
.
- Lerner (1951, Ch. 14) developed the concept of the NAIRUNAIRUIn monetarist economics, particularly the work of Milton Friedman, on which also worked Lucas Papademos and Franco Modigliani in 1975,NAIRU is an acronym for Non-Accelerating Inflation Rate of Unemployment, and refers to a level of unemployment below which inflation rises.It is widely used in...
(before Friedman and Phelps). He termed it "low full employment" and contrasted it the "high full employment," the maximum employment achievable by implementing functional financeFunctional financeFunctional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principle and chartalism. It states that government should finance itself to meet explicit goals, such as taming the business cycle, achieving full employment, ensuring growth and low inflation.-...
.
- The Lerner-Samuelson theorem goes back to Lerner.
External links
- http://www.economyprofessor.com/theorists/abbalerner.php
- http://www.newschool.edu/nssr/het/profiles/lerner.htm
- http://www.econlib.org/library/Enc/bios/Lerner.html
- http://www.levy.org/pubs/wp272.pdf
- http://books.nap.edu/openbook.php?record_id=4547&page=208