Alvin Harvey Hansen (August 23, 1887 – June 6, 1975), once referred to as "the American Keynes", brought the 1930s Keynesian economics revolution to the United States. A professor of economics at Harvard, he was a prolific writer who helped create the Council of Economic Advisors and the Social security system.
Early years and education
Hansen was born in Viborg, South Dakotato Danish immigrant parents. He graduated from Yankton College in South Dakota in 1910, and worked several years as an educator before returning to school for his doctorate at the University of Wisconsin–Madison in economics in 1918.
In 1937 Hansen was appointed Lucius N. Littauer Professor of Political Economy at Harvard University. He was the first of a generation of economists there attracted to Keynes's economic theory. Hansen's seminar on fiscal policy inspired graduate students such as Paul Samuelson and James Tobin who would 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 a small portion of John Maynard Keynes's The General Theory of Employment, Interest and Money, 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.
Hansen frequently testified before Congress. He advocated against using unemployment to controll 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 Economics) promoted Keynesian economics in the United States and in many other countries after World War II.
- Michael Wala (1994). The Council on Foreign Relations and American Foreign Policy in the Early Cold War. Berghahn Books, 38. ISBN 157181003X. “The rapporteurs of the Economic and Financial Group”
- Donald Markwell, John Maynard Keynes and International Relations: Economic Paths to War and Peace, Oxford University Press, 2006.
- Whitman, Alden (June 7, 1975). "Alvin Hansen, Keynesian, Dead at 87", New York Times.
- 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)
- 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
- Donald Markwell, John Maynard Keynes 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.