Background
Alvin Hansen was born on August 23, 1887 in Viborg, South Dakota, United States. He was the son of Niels Hansen, a farmer, and Marie Bergitta Nielsen.
Alvin Harvey Hansen (August 23, 1887 – June 6, 1975, age 87)
Pic.1 complete IS/LM model, at point E, the goods market, the labor market, and the asset market are all simultaneously in equilibrium
Pic.2 An increase in the nominal money supply causes a downward shift of the LM curve
Pic.3 An increase in government spending shifts the IS curve up to the right, AD > Y*, so the price level rises. The LM curve shifts up to the left to restore equilibrium.
Alvin Hansen was born on August 23, 1887 in Viborg, South Dakota, United States. He was the son of Niels Hansen, a farmer, and Marie Bergitta Nielsen.
Alvin Hansen graduated from Yankton College in South Dakota in 1910 and worked several years as a high school teacher, then principal, then county school superintendent, before returning to school for graduate studies, which he completed at the University of Wisconsin in 1918.
Alvin Hansen taught at Brown University until his appointment at the University of Minnesota in 1923. His major works in this period on business cycles and economic stabilization were in the neoclassical economics tradition.
In 1937 he accepted a prestigious appointment as Lucius N. Littauer Professor of Political Economy at Harvard University. Hansen's seminar on fiscal policy created a generation of graduate students, such as Paul Samuelson and James Tobin, who supported Keynesian economics. His 1938 book Full Recovery or Stagnation? was based on but a few paragraphs of Keynes's The General Theory of Employment, but it was an extended argument that employment stagnation would continue for decades to come. Ultimately, stagnation theories became more associated with Hansen, rather than Keynes. His 1941 book on 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, and he used that analysis to support Keynes's mainstay of deficit spending.
Hansen was much more than just a disciple of Keynes. He found serious mistakes in Keynes's presentation; he implemented Keynes, for example, by developing tax and spending models which clarified tax and spending policies as weapons in Keynes's arsenal, and he criticized Keynes for putting too much faith in interest rates and monetary policy. Still, one of his most influential teaching devices was his book, A Guide to Keynes, which took students through Keynes's General Theory chapter by chapter and, at times, paragraph by paragraph.
He was said to be "a sparkling teacher. " He wrote fifteen books, including an account of the Bretton Woods Conference that helped to establish the World Bank. His books were widely translated and read world-wide.
During the Roosevelt and Truman years, Hansen was of considerable influence in shaping fiscal policies as a member of numerous government commissions and as consultant to the Federal Reserve Board, the Treasury Department and the National Resources Planning Board. In 1935, he helped create the Social Security System and in 1946, he helped in the drafting of the Full Employment Act which among other things created the Council of Economic Advisors.
After retiring from Harvard University in 1957, Hansen taught at the University of Bombay and at numerous American universities almost to his death in 1975.
Alvin Hansen introduced Keynesian economics in the United States in the 1930s, IS-LM model, was the author of "investment" theory of the business cycle. Hansen pioneered accelerator-multiplier models, and helped to create the Council of Economic Advisors and the Social security system. Hansen made significant contributions as an economic analyst.
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Alvin Hansen argued that the American economy during the Great Depression was not going through a particularly severe business cycle 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, 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.
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 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. 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, for example, argued that Hansen's policies were de facto fascism, sharing alarming similarities with the economic policy of Benito Mussolini, the dictator of Italy.
During the Roosevelt and Truman presidencies, Hansen served on government commissions and as consultant to the Federal Reserve Board, the United States Department of the Treasury and the National Security Resources Board. 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.
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 assist in the development of plans for the international economy.
Alvin Hansen was influenced by John Maynard Keynes, John Hicks, Paul Samuelson, James Tobin, Robert Solow. Hansen's teaching, in essence, was that government should not put the main burden of inflation control on unemployment by its inaction. He thought inflation control should be exercised by timely changes in tax rates, by appropriate changes in the money supply, and by effective wage-price controls.
Alvin Hansen married Mabel Lewis. They had two children.
