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Alvin Harvey Hansen (August 23, 1887 – June 6, 1975) was an American economist who taught at the
University of Minnesota The University of Minnesota, formally the University of Minnesota, Twin Cities, (UMN Twin Cities, the U of M, or Minnesota) is a public university, public Land-grant university, land-grant research university in the Minneapolis–Saint Paul, Tw ...
and was later a chair professor of economics at
Harvard University Harvard University is a private Ivy League research university in Cambridge, Massachusetts. Founded in 1636 as Harvard College and named for its first benefactor, the Puritan clergyman John Harvard, it is the oldest institution of higher le ...
. Often referred to as "the American
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 m ...
", he was a widely read popular author on economic issues, and an influential advisor to the government on
economic policy The economy of governments covers the systems for setting levels of taxation, government budgets, the money supply and interest rates as well as the labour market, national ownership, and many other areas of government interventions into the e ...
. Hansen helped create the
Council of Economic Advisors The Council of Economic Advisers (CEA) is a United States agency within the Executive Office of the President established in 1946, which advises the President of the United States on economic policy. The CEA provides much of the empirical resea ...
and the
Social Security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specificall ...
system. He is best remembered today for introducing
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 ...
in the United States in the 1930s and 40s. More effectively than anyone else, he explicated, extended, domesticated, and popularized the ideas embodied in Keynes's ''
The General Theory ''The General Theory of Employment, Interest and Money'' is a book by English economist John Maynard Keynes published in February 1936. It caused a profound shift in economic thought, giving macroeconomics a central place in economic theory and ...
.'' He helped develop with
John Hicks Sir John Richards Hicks (8 April 1904 – 20 May 1989) was a British economist. He is considered one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economic ...
the
IS–LM model IS–LM model, or Hicks–Hansen model, is a two-dimensional macroeconomic tool that shows the relationship between interest rates and assets market (also known as real output in goods and services market plus money market). The intersection of ...
(or Hicks–Hansen model), a mathematical representation of Keynesian macroeconomic theory. In 1967, Paul McCracken, chairman of the President's Council of Economic Advisers, saluted Hansen stating: "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 life and education

Hansen was born in Viborg,
South Dakota South Dakota (; Sioux language, Sioux: , ) is a U.S. state in the West North Central states, North Central region of the United States. It is also part of the Great Plains. South Dakota is named after the Lakota people, Lakota and Dakota peo ...
on August 23, 1887, the son of Niels Hansen, a farmer, and Marie Bergitta Nielsen. Graduating from the nearby
Yankton College Yankton College is a former private liberal arts college in Yankton, South Dakota, United States, affiliated with the Congregational Christian Churches (later the United Church of Christ). Yankton College produced nine Rhodes Scholars, more than a ...
(closed in 1984) in 1910 with a major in English, he enrolled in the
University of Wisconsin-Madison A university () is an institution of higher (or tertiary) education and research which awards academic degrees in several academic disciplines. Universities typically offer both undergraduate and postgraduate programs. In the United States, the ...
in 1913 to study economics under Richard Ely and
John R. Commons John Rogers Commons (October 13, 1862 – May 11, 1945) was an American institutional economist, Georgist, progressive and labor historian at the University of Wisconsin–Madison. Early years John R. Commons was born in Hollansburg, Ohio on ...
, from whom he learned to use economics to address pressing social problems. Upon completion of the coursework for the PhD in 1916. Hansen married Mabel Lewis: they had two children.


Academic career

He taught at
Brown University Brown University is a private research university in Providence, Rhode Island. Brown is the seventh-oldest institution of higher education in the United States, founded in 1764 as the College in the English Colony of Rhode Island and Providenc ...
while writing his doctoral dissertation, "Cycles of Prosperity and Depression". Upon completion of the dissertation in 1918 (published in 1921), he moved back west to the
University of Minnesota The University of Minnesota, formally the University of Minnesota, Twin Cities, (UMN Twin Cities, the U of M, or Minnesota) is a public university, public Land-grant university, land-grant research university in the Minneapolis–Saint Paul, Tw ...
in 1919, where he rose quickly through the ranks of a full teacher in 1923. Subsequently, his ''Business Cycle Theory'' (1927) and his introductory text ''Principles of Economics'' (1928, with Frederic Garver) brought him to the attention of the wider economics profession. His ''Economic Stabilization in an Unbalanced World'' (1932), written with the help of a Guggenheim grant that funded travel in Europe during 1928-1929, established Hansen in the broader circle of public affairs. He was elected as a
Fellow of the American Statistical Association Like many other academic professional societies, the American Statistical Association (ASA) uses the title of Fellow of the American Statistical Association as its highest honorary grade of membership. The number of new fellows per year is limited ...
in 1932. In 1937 he received an invitation to occupy the new Lucius N. Littauer Chair of political Economy at
Harvard University Harvard University is a private Ivy League research university in Cambridge, Massachusetts. Founded in 1636 as Harvard College and named for its first benefactor, the Puritan clergyman John Harvard, it is the oldest institution of higher le ...
. His first book at Harvard posed the question ''Full Recovery or Stagnation?'' (1938) sketched the outlines of what came to be called the " secular stagnation thesis". Later, his ''America's Role in the World Economy'' (1945) and ''Economic Policy and Full Employment'' (1947) made this case to a wider public. Hansen was appointment as special economic adviser to Marriner Eccles at the Federal Reserve Board in 1940 and he was in charge until 1945. After retiring from active teaching in 1956, he wrote ''The American Economy'' (1957), ''Economic Issues of the 1960s and Problems'' (1964), and ''The Dollar and the International Monetary System'' (1965). He died in Alexandria, Virginia on June 6 of 1975 at the age of 87 years.


Theories

His most outstanding contribution to economic theory was the joint development, with
John Hicks Sir John Richards Hicks (8 April 1904 – 20 May 1989) was a British economist. He is considered one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economic ...
, of the so-called
IS–LM model IS–LM model, or Hicks–Hansen model, is a two-dimensional macroeconomic tool that shows the relationship between interest rates and assets market (also known as real output in goods and services market plus money market). The intersection of ...
, also known as the "Hicks–Hansen synthesis." The IS–LM diagram claims to show the relationship between the
investment Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing i ...
-
saving Saving is income not spent, or deferred consumption. Methods of saving include putting money aside in, for example, a deposit account, a pension account, an investment fund, or as cash. Saving also involves reducing expenditures, such as recur ...
(IS) curve and the
liquidity preference __NOTOC__ In macroeconomic theory, liquidity preference is the demand for money, considered as liquidity. The concept was first developed by John Maynard Keynes in his book ''The General Theory of Employment, Interest and Money'' (1936) to expl ...
-
money supply In macroeconomics, the money supply (or money stock) refers to the total volume of currency held by the public at a particular point in time. There are several ways to define "money", but standard measures usually include Circulation (curren ...
(LM) curve. It is used in
mainstream economics Mainstream economics is the body of knowledge, theories, and models of economics, as taught by universities worldwide, that are generally accepted by economists as a basis for discussion. Also known as orthodox economics, it can be contrasted to h ...
literature and textbooks to illustrate how monetary and fiscal policy can influence GDP. Hansen's book of 1938, ''Full Recovery or Stagnation''. based in Keynes's ''General Theory'', presents his thesis for both growth and employment being stagnant if there is no economic state intervention to stimulate
demand In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given time. The relationship between price and quantity demand is also called the demand curve. Demand for a specific item ...
. Hansen presented evidence on several occasions before the
U.S. Congress The United States Congress is the legislature of the federal government of the United States. It is Bicameralism, bicameral, composed of a lower body, the United States House of Representatives, House of Representatives, and an upper body, ...
to oppose the use of
unemployment Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for Work (human activity), w ...
as the main means of fighting
inflation In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
. He advocated instead that inflation could be controlled by changes in interest- and tax-rates as well as controls on prices and wages. Lately, theories of economic stagnation have become more associated with Hansen's ideas than with those of Keynes.


Keynesianism

Hansen, in his review of ''
The General Theory of Employment, Interest and Money ''The General Theory of Employment, Interest and Money'' is a book by English economist John Maynard Keynes published in February 1936. It caused a profound shift in economic thought, giving macroeconomics a central place in economic theory and ...
'', was skeptical of
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 ...
's propositions, but by December 1938, in his presidential address to the
American Economic Association The American Economic Association (AEA) is a learned society in the field of economics. It publishes several peer-reviewed journals acknowledged in business and academia. There are some 23,000 members. History and Constitution The AEA was esta ...
, 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 Anthony Samuelson (May 15, 1915 – December 13, 2009) was an American economist who was the first American to win the Nobel Memorial Prize in Economic Sciences. When awarding the prize in 1970, the Swedish Royal Academies stated that he "h ...
and
James Tobin James Tobin (March 5, 1918 – March 11, 2002) was an American economist who served on the Council of Economic Advisers and consulted with the Board of Governors of the Federal Reserve System, and taught at Harvard and Yale Universities. He devel ...
(both of whom would go on to win the Economics Nobel) 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 The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
. Hansen used that analysis to argue for Keynesian
deficit spending Within the budgetary process, deficit spending is the amount by which spending exceeds revenue over a particular period of time, also called simply deficit, or budget deficit; the opposite of budget surplus. The term may be applied to the budget ...
. Hansen's best known contribution to economics was his and
John Hicks Sir John Richards Hicks (8 April 1904 – 20 May 1989) was a British economist. He is considered one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economic ...
's development of the
IS–LM model IS–LM model, or Hicks–Hansen model, is a two-dimensional macroeconomic tool that shows the relationship between interest rates and assets market (also known as real output in goods and services market plus money market). The intersection of ...
, also known as the "Hicks–Hansen synthesis." The framework claims to graphically represent the investment-savings (IS) curve and the liquidity-money supply (LM) curve as an illustration of 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.
Paul Samuelson Paul Anthony Samuelson (May 15, 1915 – December 13, 2009) was an American economist who was the first American to win the Nobel Memorial Prize in Economic Sciences. When awarding the prize in 1970, the Swedish Royal Academies stated that he "h ...
was Hansen's most famous student. Samuelson credited Hansen's ''Full Recovery or Stagnation?'' (1938) as the main inspiration for his famous multiplier-accelerator model of 1939. Leeson (1997) shows that while Hansen and
Sumner Slichter Sumner Huber Slichter (January 8, 1892 – September 27, 1959) was an American economist and the first Lamont University Professor at Harvard University. Slichter was considered by many to be the pre-eminent labor economist of the 1940s and 195 ...
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 that conflicted with positions of Keynes himself.


Stagnation

In the late 1930s, Hansen argued that "secular stagnation" had set in so 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 a "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.


Economic cycles

One of the most important contribution to the economic theory by Alvin Hansen are the economic cycles. In his book ''Business Cycles and National Income'', he defines the cycle as a fluctuation in: employment, output, and prices. The cycle is divided in two phases: expansion, extending from trough to peak; and contraction, extending from peak to trough. For Hansen, there exist stable and unstable economic cycles. The instability is caused by displacement due to external shocks. Hansen claims that the business-cycle analysis must take into consideration technical progress, the money market, and expectations.


Public policy

Hansen argued that the American economy during the
Great Depression The Great Depression (19291939) was an economic shock that impacted most countries across the world. It was a period of economic depression that became evident after a major fall in stock prices in the United States. The economic contagio ...
was not going through a particularly severe
business cycle Business cycles are intervals of Economic expansion, expansion followed by recession in economic activity. These changes have implications for the welfare of the broad population as well as for private institutions. Typically business cycles are ...
but through the exhaustion of a longer-term progressive dynamic. What Hansen had in mind was not just counter-cyclical public spending to stabilize employment but rather major projects such as rural electrification,
slum clearance Slum clearance, slum eviction or slum removal is an urban renewal strategy used to transform low income settlements with poor reputation into another type of development or housing. This has long been a strategy for redeveloping urban communities; ...
, and natural resource development conservation, all with a view of opening up new investment opportunities for the private sector and so, restoring the economic dynamism needed to the system as a whole.''American National Biography'', New York: Oxford UP, 1999 Hansen trained and arguably influenced numerous students, many of whom later held government posts, and he served on numerous governmental committees dealing with economic issues. The
American Economic Association The American Economic Association (AEA) is a learned society in the field of economics. It publishes several peer-reviewed journals acknowledged in business and academia. There are some 23,000 members. History and Constitution The AEA was esta ...
awarded him its Walker Medal in 1967. Hansen frequently testified before Congress. He advocated against using unemployment to control inflation. He argued that inflation could be managed by timely changes in tax rates and the money supply, and by effective
wage and price controls Incomes policies in economics are economy-wide wage and price controls, most commonly instituted as a response to inflation, and usually seeking to establish wages and prices below free market level. Incomes policies have often been resorted to ...
. He also advocated fiscal and other stimuli to ward off the stagnation that he thought was endemic to mature, industrialized economies. Hansen was not without his critics, however; journalist
John T. Flynn John Thomas Flynn (October 25, 1882 – April 13, 1964) was an American journalist best known for his opposition to President Franklin D. Roosevelt and to American entry into World War II. In September 1940, Flynn helped establish the America Fi ...
, for example, argued that Hansen's policies were ''de facto'' fascism, sharing alarming similarities with the economic policy of
Benito Mussolini Benito Amilcare Andrea Mussolini (; 29 July 188328 April 1945) was an Italian politician and journalist who founded and led the National Fascist Party. He was Prime Minister of Italy from the March on Rome in 1922 until his deposition in 194 ...
, the dictator of Italy. During the
Roosevelt Roosevelt may refer to: *Theodore Roosevelt (1858–1919), 26th U.S. president * Franklin D. Roosevelt (1882–1945), 32nd U.S. president Businesses and organisations * Roosevelt Hotel (disambiguation) * Roosevelt & Son, a merchant bank * Rooseve ...
and Truman presidencies, Hansen served on government commissions and as consultant to the
Federal Reserve Board The Board of Governors of the Federal Reserve System, commonly known as the Federal Reserve Board, is the main governing body of the Federal Reserve System. It is charged with overseeing the Federal Reserve Banks and with helping implement the mon ...
, the
United States Department of the Treasury The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and t ...
and the
National Security Resources Board The National Security Resources Board was a United States government agency created by the National Security Act of 1947 whose purpose was to advise the President, in times of war, on how to mobilize natural resources, manpower, and the scientific e ...
. In 1935, he helped create the US 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 The Council of Economic Advisers (CEA) is a United States agency within the Executive Office of the President established in 1946, which advises the President of the United States on economic policy. The CEA provides much of the empirical resea ...
. Between 1939 and 1945, he served as co-rapporteur to the economic and financial group of the
Council on Foreign Relations The Council on Foreign Relations (CFR) is an American think tank A think tank, or policy institute, is a research institute that performs research and advocacy concerning topics such as social policy, political strategy, economics, mi ...
's ''
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 ...
'' project, along with Chicago economist
Jacob Viner Jacob Viner (3 May 1892 – 12 September 1970) was a Canadian economist and is considered with Frank Knight and Henry Simons to be one of the "inspiring" mentors of the early Chicago school of economics in the 1930s: he was one of the leading fig ...
. Hansen's advocacy (with Luther Gulick) during
World War II World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
of Keynesian policies to promote post-war full employment helped persuade Keynes to assist in the development of plans for the international economy.
Donald Markwell Donald John Markwell (born 19 April 1959) is an Australian social scientist, who has been described as a "renowned Australian educational reformer". He was appointed Head of St Mark's College, Adelaide, from November 2019. He was Senior Adviser ...
, ''John Maynard Keynes and International Relations: Economic Paths to War and Peace'', Oxford University Press, 2006.


References


Primary sources

* Hansen, Alvin H. (1939). "Economic Progress and Declining Population Growth," ''American Economic Review'' (29) March
at JSTOR
* Hansen, Alvin H. (1941). ''Fiscal Policy and Business Cycles'' * Hansen, Alvin H. (1949). ''Monetary Theory and Fiscal Policy''. New York: McGraw-Hill. * Hansen, Alvin H. (1953). ''
A Guide To Keynes ''A Guide to Keynes'' is a non-fiction work by Alvin Hansen, about John Maynard Keynes' work The General Theory. It was first published in 1953. Hansen's guide, 237 pages long.Hansen, Alvin H. (1953). ''A Guide To Keynes'', including thPreface New ...
'', including th
Preface
New York: McGraw-Hill. * Hansen, Alvin H. (1964). ''Business Cycles and National Income''. London: AllenUnin.


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. * Leeson, Robert. "The Eclipse of the Goal of Zero Inflation." ''History of Political Economy'' 1997 29(3): 445–496. Fulltext: in Ebsco. deals with Hansen and Sumner Slichter *
Donald Markwell Donald John Markwell (born 19 April 1959) is an Australian social scientist, who has been described as a "renowned Australian educational reformer". He was appointed Head of St Mark's College, Adelaide, from November 2019. He was Senior Adviser ...
, ''
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 ...
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. * 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. * ''American National Biography''. New York: Oxford UP, 1999. Print.


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


External links

* {{DEFAULTSORT:Hansen, Alvin 1887 births 1975 deaths University of Wisconsin–Madison College of Letters and Science alumni Brown University faculty University of Minnesota faculty Harvard University faculty 20th-century American economists Fellows of the Econometric Society American people of Danish descent Neo-Keynesian economists Yankton College alumni People from Viborg, South Dakota Fellows of the American Statistical Association Presidents of the American Economic Association Mathematicians from South Dakota Distinguished Fellows of the American Economic Association Economists from South Dakota