Alvin Hansen

Alvin Harvey Hansen (1887-1975) was professor of Economics at Harvard University, and is best known in the History of modern economic thought 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, and promoted it to his many graduate students at Harvard. 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."

Career

Hansen was born to Danish immigrant parents on the South Dakota frontier. After an English degree at Yankton College, he took his PhD in economics at the University of Wisconsin, where he worked with institutionalists John R. Commons and Richard T. Ely. He then taught at the University of Minnesota, specializing in business cycles. He consulted frequently in Washington, and helped Edwin E. Witte, to help draft the Social Security Act of 1935.

Keynesian

His review of the Keynes book was skeptical when it first appeared, but by December 1938, in his presidential address to the American Economic Association, he embraced John Maynard Keynes's theories of the need for government intervention in periods of economic recession soon after arriving at Harvard in 1937.

Hansen's major theoretical contribution was an elaboration of the analytical approach created by British economist J. R. Hicks. Hansen elaborated the "IS-LM" framework, which became standard fare in economics textbooks to describe the interrelationships among interest rates, savings, investment, demand for money, and income.

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.

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 deficit spending by the federal government. Critics, such as George Terborgh, attacked Hansen as a pessimist and defeatist for advancing his secular stagnation thesis. 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.

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.

Bibliography

Primary sources

• Alvin Hansen, "Economic Progress and Declining Population Growth," American Economic Review (29) March (1939). online at JSTOR.
• 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
• Brazelton, W. Robert. "Alvin Harvey Hansen: Economic Growth and a More Perfect Society: the Economist's Role in Defining the Stagnation Thesis and in Popularizing Keynesianism." American Journal of Economics and Sociology 1989 48(4): 427-440. ISSN: 0002-9246 fulltext in Jstor and Ebsco
• 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
• 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, online at EBSCO
• Rosenof, Theodore. Economics in the Long Run: New Deal Theorists and Their Legacies, 1933-1993 (1997)

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

See also

• History of modern economic thought