Alvin Hansen
Encyclopedia
Alvin Harvey Hansen often referred to as "the American Keynes," was a professor of economics at Harvard, a widely read author on current economic issues, and an influential advisor to the government who helped create the Council of Economic Advisors and the Social security system. He is best known for introducing Keynesian economics
in the United States in the 1930s. More effectively than anyone else he explicated, extended, domesticated, and popularized the controversial ideas embodied in Keynes' The General Theory. In 1967, Paul McCracken, chairman of the President's Council of Economic Advisers, saluted Hansen: "It is certainly a statement of fact that you have influenced the nation's thinking about economic policy more profoundly than any other economist in this century."
on the South Dakota frontier. After an English degree at Yankton College
, he took his PhD in economics at the University of Wisconsin-Madison in 1918. He worked with institutionalists John R. Commons
and Richard T. Ely
, but did not adopt their approach. After his doctorate, Hansen taught at Brown University
until his appointment at the University of Minnesota
in 1923, where he specialized in business cycles. He consulted frequently in Washington and helped Edwin E. Witte
to help draft the Social Security Act of 1935. In 1937 Hansen was appointed Lucius N. Littauer Professor of Political Economy
at Harvard University.
's The General Theory of Employment, Interest and Money was skeptical, but by December 1938, in his presidential address to the American Economic Association, he embraced Keynesian theories of the need for government intervention in periods of economic recession. Soon after his arrival at Harvard in 1937, Hansen's famous graduate seminar on fiscal policy began inspiring graduate students such as Paul Samuelson
and James Tobin
--both of whom would go on to win the Nobel Prize--to further develop and popularize Keynesian economics. Hansen's 1941 book, Fiscal Policy and Business Cycles, was the first major work in the United States to entirely support Keynes's analysis of the causes of the Great Depression. Hansen used that analysis to argue for Keynesian deficit spending.
Hansen’s best known contribution to economics was his and John Hicks
' development of the IS-LM model, also known as the Hicks-Hansen synthesis. The framework graphically represents investment-savings (IS) and the liquidity-money supply (LM), and can be used to illustrate how fiscal and monetary policies can be employed to alter national income.
Hansen's 1938 book Full Recovery or Stagnation was based on Keynesian ideas and was an extended argument that there would be long-term employment stagnation without government demand-side intervention. Ultimately, economic stagnation
theories became more associated with Hansen than with Keynes.
Paul Samuelson
was Hansen's most famous student. Samuelson credited Hansen's Full Recovery or Stagflation? (1938) as the main inspiration for his famous accelerator-multiplier business cycle model of 1948. Leeson (1997) shows that while Hansen and Sumner Slichter continued to be regarded as leading exponents of Keynesian economics, their gradual abandonment of a commitment to price stability contributed to the development of a Keynesianism which conflicted with positions of Keynes himself.
Hansen frequently testified before Congress. He advocated against using unemployment to control inflation. He thought that price inflation could be managed by timely changes in tax rates and money supply (Functional finance
), and by effective wage and price controls. He also advocated fiscal and other stimulus to ward off the stagnation that he thought was endemic to mature industrialized economies.
During the Roosevelt
and Truman
presidencies Hansen was influential in shaping policy. He served on government commissions and as consultant to the Federal Reserve Board, the United States Department of the Treasury
and the National Resources Planning Board. In 1935, he helped create the U.S. social security system and, in 1946, he assisted in the drafting of the Full Employment Act which, among other things, created the Council of Economic Advisors. Between 1939 and 1945 he served as co-rapporteur to the economic and financial group of the Council on Foreign Relations
' War and Peace Studies
project, along with Chicago economist Jacob Viner
.
Hansen's advocacy (with Luther Gulick
) during World War II
of Keynesian policies to promote post-war full employment helped persuade Keynes to help develop plans for the international economy that emphasized free trade.
Hansen's 1953 book, A Guide to Keynes, (like Paul Samuelson's textbook Economics) promoted Keynesian economics in America and in many other countries after World War II.
Hansen was elected Vice President of the American Statistical Association
and President of the American Economic Association
.
He died June 6, 1975 in Alexandria, Virginia
.
Keynesian economics
Keynesian 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...
in the United States in the 1930s. More effectively than anyone else he explicated, extended, domesticated, and popularized the controversial ideas embodied in Keynes' The General Theory. In 1967, Paul McCracken, chairman of the President's Council of Economic Advisers, saluted Hansen: "It is certainly a statement of fact that you have influenced the nation's thinking about economic policy more profoundly than any other economist in this century."
Early years, education, and professional career
Hansen was born to Danish immigrant parents at Viborg, South DakotaViborg, South Dakota
Viborg is a city in Turner County, South Dakota, United States. The population was 782 at the 2010 census.Founded by Danish-Americans, the city is most likely named after the Danish city of Viborg...
on the South Dakota frontier. After an English degree at Yankton College
Yankton College
Yankton College was a small liberal arts college in Yankton, South Dakota, affiliated with the Congregational Christian Churches .Founded in 1881, it was the first institution of higher learning in the Dakota Territory...
, he took his PhD in economics at the University of Wisconsin-Madison in 1918. He worked with institutionalists John R. Commons
John R. Commons
John Rogers Commons was an American institutional economist and labor historian at the University of Wisconsin–Madison.-Biography:Born in Hollansburg, Ohio, John R. Commons had a religious upbringing which led him to be an advocate for social justice early in life...
and Richard T. Ely
Richard T. Ely
Richard Theodore Ely was an American economist, author, and leader of the Progressive movement who called for more government intervention in order to reform what they perceived as the injustices of capitalism, especially regarding factory conditions, compulsory education, child labor, and labor...
, but did not adopt their approach. After his doctorate, Hansen taught at Brown University
Brown University
Brown University is a private, Ivy League university located in Providence, Rhode Island, United States. Founded in 1764 prior to American independence from the British Empire as the College in the English Colony of Rhode Island and Providence Plantations early in the reign of King George III ,...
until his appointment at the University of Minnesota
University of Minnesota
The University of Minnesota, Twin Cities is a public research university located in Minneapolis and St. Paul, Minnesota, United States. It is the oldest and largest part of the University of Minnesota system and has the fourth-largest main campus student body in the United States, with 52,557...
in 1923, where he specialized in business cycles. He consulted frequently in Washington and helped Edwin E. Witte
Edwin E. Witte
Edwin E. Witte was an economist who focused on social insurance issues for the state of Wisconsin and for the Committee on Economic Security. While the executive director of the President's Committee on Economic Security under United States President Franklin D...
to help draft the Social Security Act of 1935. In 1937 Hansen was appointed Lucius N. Littauer Professor of Political Economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
at Harvard University.
Keynesianism
Hansen's review of John Maynard KeynesJohn 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...
's The General Theory of Employment, Interest and Money was skeptical, but by December 1938, in his presidential address to the American Economic Association, he embraced Keynesian theories of the need for government intervention in periods of economic recession. Soon after his arrival at Harvard in 1937, Hansen's famous graduate seminar on fiscal policy began inspiring graduate students such as Paul Samuelson
Paul Samuelson
Paul Anthony Samuelson was an American economist, and the first American to win the Nobel Memorial Prize in Economic Sciences. The Swedish Royal Academies stated, when awarding the prize, that he "has done more than any other contemporary economist to raise the level of scientific analysis in...
and James Tobin
James Tobin
James Tobin was an American economist who, in his lifetime, served on the Council of Economic Advisors and the Board of Governors of the Federal Reserve System, and taught at Harvard and Yale Universities. He developed the ideas of Keynesian economics, and advocated government intervention to...
--both of whom would go on to win the Nobel Prize--to further develop and popularize Keynesian economics. Hansen's 1941 book, Fiscal Policy and Business Cycles, was the first major work in the United States to entirely support Keynes's analysis of the causes of the Great Depression. Hansen used that analysis to argue for Keynesian deficit spending.
John Hicks
Sir John Richard Hicks was a British economist and one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics were his statement of consumer demand theory in microeconomics, and the IS/LM model , which...
' development of the IS-LM model, also known as the Hicks-Hansen synthesis. The framework graphically represents investment-savings (IS) and the liquidity-money supply (LM), and can be used to illustrate how fiscal and monetary policies can be employed to alter national income.
Hansen's 1938 book Full Recovery or Stagnation was based on Keynesian ideas and was an extended argument that there would be long-term employment stagnation without government demand-side intervention. Ultimately, economic stagnation
Economic stagnation
Economic stagnation or economic immobilism, often called simply stagnation or immobilism, is a prolonged period of slow economic growth , usually accompanied by high unemployment. Under some definitions, "slow" means significantly slower than potential growth as estimated by experts in macroeconomics...
theories became more associated with Hansen than with Keynes.
Paul Samuelson
Paul Samuelson
Paul Anthony Samuelson was an American economist, and the first American to win the Nobel Memorial Prize in Economic Sciences. The Swedish Royal Academies stated, when awarding the prize, that he "has done more than any other contemporary economist to raise the level of scientific analysis in...
was Hansen's most famous student. Samuelson credited Hansen's Full Recovery or Stagflation? (1938) as the main inspiration for his famous accelerator-multiplier business cycle model of 1948. Leeson (1997) shows that while Hansen and Sumner Slichter continued to be regarded as leading exponents of Keynesian economics, their gradual abandonment of a commitment to price stability contributed to the development of a Keynesianism which conflicted with positions of Keynes himself.
Stagnation
In the late 1930s Hansen argued that "secular stagnation" had set in, so that the American economy would never grow rapidly again, because all the growth ingredients had played out, including technological innovation and population growth. The only solution, he argued, was constant, large-scale deficit spending by the federal government. The thesis was highly controversial, as critics, such as George Terborgh, attacked Hansen as a pessimist and defeatist. Hansen replied that secular stagnation was just another name for Keynes's underemployment equilibrium. However, the sustained economic growth beginning in 1940 undercut Hansen's predictions and his stagnation model was forgotten.Public policy
Hansen excelled at both scholarly works and popular expositions that helped people understand economic cycles and deficit spending. He trained and influenced hundreds of students, many of whom later held important government posts, and he served on numerous governmental committees dealing with economic issues. The American Economic Association awarded him its Walker Medal in 1967.Hansen frequently testified before Congress. He advocated against using unemployment to control inflation. He thought that price inflation could be managed by timely changes in tax rates and money supply (Functional finance
Functional finance
Functional 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.-...
), and by effective wage and price controls. He also advocated fiscal and other stimulus to ward off the stagnation that he thought was endemic to mature industrialized economies.
During the Roosevelt
Franklin D. Roosevelt
Franklin Delano Roosevelt , also known by his initials, FDR, was the 32nd President of the United States and a central figure in world events during the mid-20th century, leading the United States during a time of worldwide economic crisis and world war...
and Truman
Harry S. Truman
Harry S. Truman was the 33rd President of the United States . As President Franklin D. Roosevelt's third vice president and the 34th Vice President of the United States , he succeeded to the presidency on April 12, 1945, when President Roosevelt died less than three months after beginning his...
presidencies Hansen was influential in shaping policy. He served on government commissions and as consultant to the Federal Reserve Board, the United States Department of the Treasury
United States Department of the Treasury
The Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
and the National Resources Planning Board. In 1935, he helped create the U.S. social security system and, in 1946, he assisted in the drafting of the Full Employment Act which, among other things, created the Council of Economic Advisors. Between 1939 and 1945 he served as co-rapporteur to the economic and financial group of the Council on Foreign Relations
Council on Foreign Relations
The Council on Foreign Relations is an American nonprofit nonpartisan membership organization, publisher, and think tank specializing in U.S. foreign policy and international affairs...
' War and Peace Studies
War and Peace Studies
War and Peace Studies was a project carried out by the Council on Foreign Relations between 1939 and 1945 before and during American involvement in World War II. It was intended to advise the U.S. Government on conduct in the war and the subsequent peace....
project, along with Chicago economist Jacob Viner
Jacob Viner
Jacob Viner was a Canadian economist and is considered with Frank Knight and Henry Simons one of the "inspiring" mentors of the early Chicago School of Economics in the 1930s: he was one of the leading figures of the Chicago faculty.- Biography :Viner was born in 1892 in Montreal, Quebec to...
.
Hansen's advocacy (with Luther Gulick
Luther Gulick (social scientist)
-Life:Luther Halsey Gulick was born January 17, 1892 in Osaka, Japan.His father was congregationalist missionary Sidney Lewis Gulick and his mother was Clara May Gulick. He shared his name with his grandfather, missionary Luther Halsey Gulick Sr. , and uncle physician Luther Halsey Gulick Jr....
) during World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
of Keynesian policies to promote post-war full employment helped persuade Keynes to help develop plans for the international economy that emphasized free trade.
Hansen's 1953 book, A Guide to Keynes, (like Paul Samuelson's textbook Economics) promoted Keynesian economics in America and in many other countries after World War II.
Hansen was elected Vice President of the American Statistical Association
American Statistical Association
The American Statistical Association , is the main professional US organization for statisticians and related professions. It was founded in Boston, Massachusetts on November 27, 1839, and is the second oldest, continuously operating professional society in the United States...
and President of the American Economic Association
American Economic Association
The American Economic Association, or AEA, is a learned society in the field of economics, headquartered in Nashville, Tennessee. It publishes one of the most prestigious academic journals in economics: the American Economic Review...
.
He died June 6, 1975 in Alexandria, Virginia
Alexandria, Virginia
Alexandria is an independent city in the Commonwealth of Virginia. As of 2009, the city had a total population of 139,966. Located along the Western bank of the Potomac River, Alexandria is approximately six miles south of downtown Washington, D.C.Like the rest of northern Virginia, as well as...
.
Primary sources
- Alvin Hansen, "Economic Progress and Declining Population Growth," American Economic Review (29) March (1939). at JSTOR
- http://www.bookrags.com/biography/alvin-hansen/
- Alvin Hansen, Fiscal Policy and Business Cycles (1941)
Secondary sources
- Barber, William J. "The Career of Alvin H. Hansen in the 1920s and 1930s: a Study in Intellectual Transformation." History of Political Economy 1987 19(2): 191-205. Issn: 0018-2702
- Leeson, Robert. "The Eclipse of the Goal of Zero Inflation." History of Political Economy 1997 29(3): 445-496. Issn: 0018-2702 Fulltext: in Ebsco. deals with Hansen and Sumner Slichter
- Donald MarkwellDonald MarkwellFor the Montgomery, Alabama, talk radio personality, Don Markwell, see Don Markwell Professor Donald John 'Don' Markwell is an Australian social scientist and college president...
, John Maynard KeynesJohn Maynard KeynesJohn 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...
and International Relations: Economic Paths to War and Peace, Oxford University Press (2006). - Miller, John E. "From South Dakota Farm to Harvard Seminar: Alvin H. Hansen, America's Prophet of Keynesianism" Historian (2002) 64(3-4): 603-622. Issn: 0018-2370
- Rosenof, Theodore. Economics in the Long Run: New Deal Theorists and Their Legacies, 1933-1993 (1997)
- Seligman, Ben B., Main Currents in Modern Economics, 1962.
Special issues of journals
- Quarterly Journal of Economics vol 90 # 1 (1976) pp 1–37, online at JSTOR and/or in most college libraries.
- "Alvin Hansen on Economic Progress and Declining Population Growth" in Population and Development Review, Vol. 30, 2004