Abraham "Abba" Ptachya Lerner (also Abba Psachia Lerner; 28 October 1903 – 27 October 1982) was a Russian-born American-British

economist An economist is a professional and practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this ...

Biography

Born in

Novoselytsia Novoselytsia ( ; ro, Noua Suliță ; yi, נאוואסעליץ, Novoselitz) is a city in Chernivtsi Raion, Chernivtsi Oblast (province) of Ukraine. It stands at the northern tip of Bessarabia region, on its border with Bukovina. It hosts the adm ...

Bessarabia Bessarabia (; Gagauz: ''Besarabiya''; Romanian: ''Basarabia''; Ukrainian: ''Бессара́бія'') is a historical region in Eastern Europe, bounded by the Dniester river on the east and the Prut river on the west. About two thirds of Be ...

Russian Empire The Russian Empire was an empire and the final period of the Russian monarchy from 1721 to 1917, ruling across large parts of Eurasia. It succeeded the Tsardom of Russia following the Treaty of Nystad, which ended the Great Northern War. ...

, Lerner grew up in a

Jewish Jews ( he, יְהוּדִים, , ) or Jewish people are an ethnoreligious group and nation originating from the Israelites Israelite origins and kingdom: "The first act in the long drama of Jewish history is the age of the Israelites""The ...

family, which emigrated to Great Britain when Lerner was three years old. Lerner grew up in London's

East End The East End of London, often referred to within the London area simply as the East End, is the historic core of wider East London, east of the Roman and medieval walls of the City of London and north of the River Thames. It does not have uni ...

and from age 16 worked as a machinist, a teacher in

Hebrew Hebrew (; ; ) is a Northwest Semitic language of the Afroasiatic language family. Historically, it is one of the spoken languages of the Israelites and their longest-surviving descendants, the Jews and Samaritans. It was largely preserved ...

schools, and as an entrepreneur. In 1929, Lerner entered the

London School of Economics , mottoeng = To understand the causes of things , established = , type = Public research university , endowment = £240.8 million (2021) , budget = £391.1 millio ...

, where he studied under

Friedrich Hayek Friedrich August von Hayek ( , ; 8 May 189923 March 1992), often referred to by his initials F. A. Hayek, was an Austrian–British economist, legal theorist and philosopher who is best known for his defense of classical liberalism. Haye ...

. A six-month stay at

Cambridge Cambridge ( ) is a university city and the county town in Cambridgeshire, England. It is located on the River Cam approximately north of London. As of the 2021 United Kingdom census, the population of Cambridge was 145,700. Cambridge bec ...

in 1934–1935 brought him into contact with

John Maynard Keynes John Maynard Keynes, 1st Baron Keynes, ( ; 5 June 1883 – 21 April 1946), was an English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in ...

. In 1937, Lerner emigrated to the United States. While in the US, he befriended intellectual opponents

Milton Friedman Milton Friedman (; July 31, 1912 – November 16, 2006) was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the ...

and

Barry Goldwater Barry Morris Goldwater (January 2, 1909 – May 29, 1998) was an American politician and United States Air Force officer who was a five-term U.S. Senator from Arizona (1953–1965, 1969–1987) and the Republican Party nominee for presiden ...

. Lerner never stayed at one institution long, serving on the faculties of nearly a dozen universities and accepting over 20 visiting appointments. Lerner was 62 when he was given a professorship at the

University of California, Berkeley The University of California, Berkeley (UC Berkeley, Berkeley, Cal, or California) is a public land-grant research university in Berkeley, California. Established in 1868 as the University of California, it is the state's first land-grant u ...

in 1965 and left after reaching mandatory retirement age six years later. During his time there, Lerner criticized the unrest caused by the student protests as a threat to

academic freedom Academic freedom is a moral and legal concept expressing the conviction that the freedom of inquiry by faculty members is essential to the mission of the academy as well as the principles of academia, and that scholars should have freedom to teac ...

. Abba Lerner taught in the Economics Department at Florida State University, for several years. He stopped teaching after he suffered a stroke while visiting Israel. Although Lerner never received the Sveriges Riksbank's

Nobel Memorial Prize in Economic Sciences The Nobel Memorial Prize in Economic Sciences, officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel ( sv, Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne), is an economics award administered ...

, he has been recognized as one of the greatest economists of his era.

Research

* Lerner developed a model of

market socialism Market socialism is a type of economic system involving the public, cooperative, or social ownership of the means of production in the framework of a market economy, or one that contains a mix of worker-owned, nationalized, and privately owned ...

which featured decentralised market pricing proportional to marginal social cost

Tibor Scitovsky Tibor de Scitovsky, also known as Tibor Scitovsky (November 3, 1910 – June 1, 2002), was a Hungarian born, American economist who was best known for his writing on the nature of people's happiness in relation to consumption. He was Associa ...

, ( 9872008). "Lerner, Abba Ptachya (1905–1982)," ''

The New Palgrave Dictionary of Economics ''The New Palgrave Dictionary of Economics'' (2018), 3rd ed., is a twenty-volume reference work on economics published by Palgrave Macmillan. It contains around 3,000 entries, including many classic essays from the original Inglis Palgrave Diction ...

'', 2nd Edition. Previe
link.
/ref> and in so doing contributed to the

Lange–Lerner–Taylor theorem The Lange model (or Lange–Lerner theorem) is a neoclassical economic model for a hypothetical socialist economy based on public ownership of the means of production and a trial-and-error approach to determining output targets and achieving econ ...

. * Lerner contributed to the idea of a

social dividend The social dividend is the return on the capital assets and natural resources Social ownership, owned by society in a socialist economy. The concept notably appears as a key characteristic of market socialism, where it takes the form of a dividen ...

by incorporating it into Oskar R. Lange's original model of socialism, where the social dividend would be distributed to each citizen as a lump-sum payment.''Who framed 'social dividend'?'', by Van Tier, Walter. March 2002. USBIG Conference, CUNY. * The use of

fiscal policy In economics and political science, fiscal policy is the use of government revenue collection (taxes or tax cuts) and expenditure to influence a country's economy. The use of government revenue expenditures to influence macroeconomic variables ...

and

monetary policy Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often a ...

as the twin tools of

Keynesian economics Keynesian economics ( ; sometimes Keynesianism, named after British economist John Maynard Keynes) are the various macroeconomic theories and models of how aggregate demand (total spending in the economy) strongly influences economic output an ...

is credited to Lerner by historians such as

David Colander David Charles Colander (born November 16, 1947) is an American economist, and the Christian A. Johnson Distinguished Professor of Economics at Middlebury College. He is known for his study of the economics profession itself and socioeconomics. H ...

. * The

Lerner symmetry theorem The Lerner symmetry theorem is a result used in international trade theory, which states that an ad valorem import tariff (a percentage of value or an amount per unit) will have the same effects as an export tax. The theorem is based on the observ ...

states that an import tariff can have the same effects as an export tax. * The

Lerner Index The Lerner index, formalized in 1934 by British economist of Russian origin Abba Lerner, is a measure of a firm's market power. Definition The Lerner index is defined by: L=\frac where P is the market price set by the firm and MC is the firm's ...

measures potential monopoly power as mark-up of price over

marginal cost In economics, the marginal cost is the change in the total cost that arises when the quantity produced is incremented, the cost of producing additional quantity. In some contexts, it refers to an increment of one unit of output, and in others it r ...

divided by price or equivalently the negative inverse of demand elasticity. * Lerner improved a formula of

Alfred Marshall Alfred Marshall (26 July 1842 – 13 July 1924) was an English economist, and was one of the most influential economists of his time. His book '' Principles of Economics'' (1890) was the dominant economic textbook in England for many years. I ...

, which is known since as the

Marshall–Lerner condition The Marshall–Lerner condition (after Alfred Marshall and Abba P. Lerner) is satisfied if the absolute sum of a country's export and import demand elasticities (demand responsiveness to price) is greater than one.. If it is satisfied, then if a c ...

. * Lerner improved the calculations made by

Wilhelm Launhardt Carl Wilhelm Friedrich Launhardt (7 April 1832 – 14 May 1918) was a German mathematician and economist. Launhardt was born in Hannover, the capital of the Kingdom of Hannover. He studied and taught at Hannover's technical school. Following H ...

on the effect of

terms of trade The terms of trade (TOT) is the relative price of exports in terms of imports and is defined as the ratio of export prices to import prices. It can be interpreted as the amount of import goods an economy can purchase per unit of export goods. An i ...

. * Lerner developed the concept of

distributive efficiency In 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 argued that economic equality will produce the greatest probable total

utility As a topic of economics, utility is used to model worth or value. Its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or happiness as part of the theory of utilitarianism by moral philosopher ...

with a given amount of wealth. * Based on

effective demand In economics, effective demand (ED) 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 ...

and

chartalism In macroeconomics, chartalism is a heterodox theory of money that argues that money originated historically with states' attempts to direct economic activity rather than as a spontaneous solution to the problems with barter or as a means with whi ...

, Lerner developed

functional finance Functional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principles and chartalism. It states that government should finance itself to meet explicit goals, such as taming the business cycle, achieving full emplo ...

, a theory of purposeful financing (and funding) to meet explicit goals, including

full employment Full employment is a situation in which there is no cyclical or unemployment#Cyclical unemployment, deficient-demand unemployment. Full employment does not entail the disappearance of all unemployment, as other kinds of unemployment, namely Structu ...

. This is in contrast to “sound finance” principles where taxation is designed solely to fund expenditure or finance investment and low inflation. * The

Lerner–Samuelson theorem Factor price equalization is an economics, economic theory, by Paul A. Samuelson (1948), which states that the prices of identical factors of production, such as the wage rate or the rent of capital, will be equalized across countries as a result of ...

goes back to Lerner.Murray C. Kemp, 2008. ''International Trade Theory: A Critical Review'', Routledge, pp
xiv–xvii.Description.
/ref>

References

External links

"Abba Lerner"

* * Mathew Forstater (July 1999)
"Functional Finance and Full Employment: Lessons from Lerner for Today?"
''Working Paper''. No. 272. The Jerome

Levy Economics Institute Founded in 1986 as the Jerome Levy Economics Institute, the Levy Economics Institute of Bard College is a nonprofit, nonpartisan public policy think tank. The purpose of its research and other activities is to enable scholars and leaders in busi ...

. * {{DEFAULTSORT:Lerner, Abba P. 1903 births 1982 deaths Bessarabian Jews Emigrants from the Russian Empire to the United Kingdom British emigrants to the United States Alumni of the London School of Economics Post-Keynesian economists Welfare economists 20th-century British economists Fellows of the Econometric Society Distinguished Fellows of the American Economic Association Academics of the London School of Economics