I thought many on this list would be interested in this entry in the American National Biography Online. Humberto Barreto Special Announcement: OUP is pleased to announce that ANB Online is now available by individual subscription for $14.95 a month. For more information or to subscribe, please visit http://www.anb.org. American National Biography Online Lerner, Abba (28 Oct. 1903-27 Oct. 1982), economist and democratic socialist, was born Abba Ptachya Lerner in Bessarabia, Russia, the son of Eastern European socialists who moved to the Jewish quarter of London's East End in 1912. His earliest influences included a diverse collection of leftist intellectuals and movements, from Maurice Dobb to Thorstein Veblen, from Marxists and Social Democrats to Labor Zionists. After a series of false starts--he was for brief periods a capmaker, rabbinical student, Hebrew school teacher, and (failed) businessman--he accepted the London School of Economics's offer in 1930 of its famous Tooke Scholarship. He received a B.Sc. in economics in 1932, winning both the Gonner and Gladstone Memorial Prizes, and his Ph.D., also from LSE, in 1943, some time after he had moved to the United States. Lerner's first contribution to the academic literature, "A Diagrammatical Representation of the Cost Conditions in International Trade," was published in Economica (12 [Aug. 1932]: 346-56) even before he had assumed his residential fellowship (1932-1934) at LSE, but it foreshadowed, in form if not in substance, much of the six decades of research that followed. The paper demonstrated Lerner's soon renowned methods and analytical powers: he became one of the few modern economic theorists whose reputation for precision and sophistication did not rely on the use of abstract mathematics. As the restatement of an "established" economic principle, the work was also the first manifestation of Lerner's durable commitment, unusual in an economist of his stature, to the clarification and dissemination of the work of others, including that of Gottfried Haberler. To the extent that his often became, and sometimes remained, the "textbook" versions of fundamental economic principles, his influence on the evolution of the discipline is sometimes difficult to demarcate. Furthermore, the paper revealed an intellectual commitment to the methods, if not the politics, of mainstream economics, an obvious tribute to his conservative mentors at LSE, Lionel Robbins and Friedrich von Hayek. In 1933 Lerner became one of the founders and editors of the Review of Economic Studies, which soon established a reputation as an influential forum for concise theoretical research. He also contributed an important article to the inaugural volume, "The Concept of Monopoly and the Measurement of Monopoly Power" (1 [June 1934]: 157-75), which opened one of the several lines of research that later culminated in his dissertation and magnum opus, The Economics of Control (1944). The paper's principal contribution was its clear account of the formal requirements for allocative efficiency, familiar to most economists as the "Pareto conditions." Lerner's second contribution to the Review of Economic Studies, "Economic Theory and Socialist Economy" (2 [Oct. 1934]: 51-61), was the first of several influential papers he published on the theoretical foundations of "market socialism" between 1934 and 1938. With Oskar Lange, his LSE classmate and, later, vice president of Poland, and American economist Fred M. Taylor, Lerner soon acquired a reputation as one of the most prominent and formidable advocates of the proposition that socialist economies could exploit the "market mechanism" to realize desirable and efficient allocations. (Although this is often called the Lange-Lerner Theorem, it was Taylor's "The Guidance of Production in a Socialist State" [American Economic Review (Mar. 1929)] that breathed new life into Enrico Barone's vision of "rational" socialist planning.) The simple but elegant rules outlined in these papers were then modified and extended in Lerner's Economics of Control. Lerner will also be remembered for his contributions to the establishment of a "Keynesian tradition" in the United States, and his "conversion" might be traced to the publication of Joan Robinson's "The Theory of Money and the Analysis of Output" in the remarkable first volume of the Review of Economic Studies (Oct. 1933). In 1934-1935 a Leon Fellowship allowed Lerner to spend six months in Cambridge, England, where he became one of the first and few Cambridge outsiders to participate in the deliberations of the "Political Economy Club," the "circus" of economists that, including Robinson and John Maynard Keynes himself, devoted much of its time to the discussion of the principles and policies that would later become the foundation of Keynes's The General Theory of Employment, Interest and Money (1936). Lerner's review of Keynes's landmark treatise, published a few months later in the International Labor Review (34 [Oct. 1936]: 435-54), was both enthusiastic and, in the judgment of most historians of economic thought, faithful. After a brief period (1935-1937) as an assistant lecturer at LSE, Lerner then traveled on a Rockefeller Fellowship (1937) to the United States, where, with the exception of several brief interludes in Switzerland (1950-1951) and Israel (1953-1956), he remained until his death. Soon after his arrival, he published a number of articles on the "new macroeconomics," which became so closely identified with Keynesian principles that David Colander, who would collaborate with Lerner on a "market anti-inflation plan" in the late 1970s, could wonder "Was Keynes a Keynesian or a Lernerian?" (Journal of Economic Literature [Dec. 1984]). One of Lerner's best-known contributions to this tradition was the "doctrine of functional finance." In his often-reprinted Social Research (10 [Feb. 1943]: 38-51) paper, "Functional Finance and the Federal Debt," he offered this definition: The central idea is that government fiscal policy, its spending and taxing, its borrowing and its repayment of loans, its issue of new money and its withdrawal of money, shall all be taken with an eye only to the results of these actions on the economy and not to any established traditional doctrine about what is sound or unsound. In practice, Lerner believed, this called for the state to (a) ensure that the level of effective demand that was "appropriate" in each period, which required increases in net (of taxation) public expenditure in recessions and decreases in booms, and (b) support the interest rate(s) consistent with the optimal level of investment in new plant and equipment, which required the state to lend funds when interest rates were excessive and to borrow when interest rates were too low. In this context Lerner also introduced his famous "steering wheel" metaphor for the role of fiscal and monetary policies and also articulated his still relevant critique of economists' "conventional wisdom" concerning the burdens of an internal public debt. Well before this paper was published, however, Lerner had moved from the University of Kansas City (assistant professor, 1940-1942), his first permanent U.S. academic appointment, to the New School for Social Research (associate professor, 1942-1946; professor, 1946-1947). In a remarkable but peripatetic career, he would also hold positions as professor at Roosevelt University (1947-1959), Michigan State University (1959-1965), and the University of California at Berkeley (1965-1971) and, as distinguished professor, at Queen's College (1971-1978) and Florida State University (1978-1980). "The Essential Properties of Interest and Money" (Quarterly Journal of Economics [May 1952]) was another important, if less influential, contribution to the literature on Keynesian economics. It explored some of the most difficult and problematic sections of Keynes's The General Theory, namely, those concerned with the failure, either in principle or in practice, of the so-called self correction mechanism, the centerpiece of classical macroeconomics. In the still standard characterization of the mechanism, the downward wage and price adjustments that should be associated with depressed product and labor markets stimulate, through a number of indirect channels, the demands for both. When economies failed to self-correct, however, or when the self-correction mechanism proved slow or unreliable, macroeconomists were forced to consider whether this was a consequence of "wage and price stickiness," or the absence of an "invisible hand." Keynes himself seemed to endorse both positions--that is, wages were inflexible downward but even if this were not the case, no self-correction mechanism existed--but his rationale for the second position was both opaque and controversial. In Lerner's careful restatement, it is the expectation of further deflation, in a world where, as an institutional matter, wages' and prices' deflation is never smooth, that "short circuits" the self-correction mechanism. Lerner was also the first of Keynes's disciples to be concerned about the possible "inflation bias" of active stabilization policies. In particular, he became convinced, even if he failed to convince Keynes himself, that upward pressure(s) on wages and prices would materialize, even in the absence of "labor force bottlenecks," before economies achieved "full employment" in the conventional sense of the word. In his Economics of Employment (1951), Lerner drew the distinction between "low full employment" and "high full employment" and warned that, without policies to complement the standard tools of demand management, wage and price inflation would materialize at the former, not the latter. The distinction is perhaps not as contrived as it first seems: almost two decades later, Milton Friedman's influential "The Role of Monetary Policy" (American Economic Review [Mar. 1968]) would introduce the notion of the "natural rate of unemployment," a version of Lerner's "low full employment." From the 1950s onward, inflation became the principal focus of Lerner's research, a reflection of his intellectual commitment to discover the particular combination of policies that would maintain both "high full employment" and stable prices. In the process, he contributed much to the modern understanding of the phenomenon, including its now familiar classification into "overspending inflation," "administered inflation," and "expectational inflation," all of which were reviewed in his Flation (1972). He was one of the first to understand that the classification of inflation mattered inasmuch as the cure for the first type was the obvious (demand reduction) one, while remedies for the second and third would prove more elusive. He expressed the view that, because administered, or cost-push, inflation arises from the inconsistent claims of workers and capitalists on national income and expectational inflation tends to be self-fulfilling, both can (and sometimes do) manifest themselves well below full employment, in which case reductions in public and private expenditure would reduce inflation, but at the cost of increased joblessness. Lerner's own solution, the product of joint research with David Colander, is described in its most complete form in their MAP: A Market Anti-Inflation Plan (1980), the last of Lerner's major contributions to economics. Lerner and Colander proposed the use of "tradeable permits"--an approach often associated with environmental economists who deal with "externalities" of another kind--that would in effect establish a market for permits to increase prices faster than some predetermined rate. Whatever the practical merits of their proposal, it exhibited Lerner's lifelong commitment to the reliance on market-based ends to achieve constructive social ends. He died in Tallahassee, Florida. He was survived by his second wife and by two children from his first marriage, which ended in divorce. Bibliography A fraction of Lerner's archives are available at the University of California at Berkeley. The standard introduction to Lerner's work is Selected Economic Writings of Abba P. Lerner, ed. David C. Colander (1983), a collection that includes his most influential articles, brief selections from the books mentioned here as well as Everybody's Business (1961) and, with Haim Ben-Shahar, The Economics of Efficiency and Growth (1975), and a number of unpublished papers. The most comprehensive evaluations of Lerner's place within the discipline are Tibor Scitovsky, "Lerner's Contribution to Economics," Journal of Economic Literature 22 (1984): 1547-71, and Irwin Sobel, "Abba Ptachya Lerner, 1903-1982: Six Decades of Achievement," Journal of Post-Keynesian Economics 6 (1983): 3-19. For Lerner's own assessment of his role in the Keynesian revolution, see David Colander and Harry Landreth, eds., The Coming of Keynesianism to America (1996). For a critical review of the Lange-Lerner literature on "market socialism," see Joseph E. Stiglitz, Whither Socialism? (1994). An obituary is Martin Bronfenbrenner, "Abba, 1903-1982," Atlantic Economic Journal 11 (Mar. 1983): 1-5. Peter Hans Matthews Citation: Peter Hans Matthews. "Lerner, Abba"; http://www.anb.org/articles/14/14-01013.html; American National Biography Online Feb. 2000. Access Date: Copyright (c) 2000 American Council of Learned Societies. Published by Oxford University Press. All rights reserved. Note: This email has been sent in plain text format so that it may be read with the standard ASCII character set. Special characters and formatting have been normalized. Copyright Notice Permission is granted to make and distribute verbatim copies of the American National Biography of the Day and Sample Biographies provided that the following statement is preserved on all copies: From American National Biography, published by Oxford University Press, Inc., copyright 2000 American Council of Learned Societies. Further information is available at http://www.anb.org. 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