Burns, Arthur Frank

Born in 1904 in what is now Ukraine, the son of poor immigrants, speaking no English as a child, Arthur Frank Burns graduated from Columbia University with both Bachelor and Master degrees in 1925. He taught at Rutgers University from 1927 to 1944, earned his PhD (Columbia University) in 1933, and became an internationally respected scholar, a director of the US National Bureau of Economic Research (NBER), Chairman of the Council of Economic Advisers (CEA) of the US President, Chairman of the Board of Governors of the US Federal Reserve (Fed), and US Ambassador to West Germany. He died in 1987 from complications following heart surgery.

Through his own Production Trends in the United States since 1870 (Burns, 1934) and then in his collaboration with Wesley Mitchell on measuring business cycles (Burns and Mitchell, 1946) Burns achieved renown as an expert on economic fluctuations as well as providing the initial motivation for the debate over "measurement without theory" initiated by Koopmans (1947). In response Burns could say, as in effect he did in Burns (1946), that Keynesian theory lacked an adequate empirical basis. He later succeeded Mitchell as Director of Research at the NBER and continued in that role until appointed Chairman of the CEA in 1953. He returned as NBER President in 1957, serving until his resignation in 1965 as reported by Rutherford (2008), after a critical report into the Bureau's research strategy and leadership.

He was appointed Chairman of the CEA by Eisenhower, succeeding the expansionist Keyserling, and served in the period 1953-56. At that time, the continued existence of the CEA was in question but it regained Congressional support during Burns's tenure, while Burns gained wider public recognition as a trustworthy expert. After the event, his general support for the controversially counter-inflationary stance of Eisenhower in these years was apparent in Prosperity Without Inflation (Burns, 1957).

In "Progress towards economic stability" (Burns, 1960) - his Presidential address to the American Economic Association - he noted changes in the structure of industry, the nature of employment and household behaviour amongst other things which, he felt, had brought a permanent reduction in the severity of business cycles. In picking up another theme from Production Trends in the United States since 1870, he also noted the impor- tance of product innovation in sustaining economic growth and thereby resolving the problems that had been seen by post-war Keynesian-stagnation theorists.

Burns went to Washington as a policy maker a second time, initially as counsellor to President Nixon, and then in 1970 as Chairman of the Federal Reserve Board. His tenure at the Federal Reserve covered the worst of the "stagflation" period, including the first oil shock, and was marked by great controversy not only over monetary policy but also the relations of the Federal Reserve to the Presidency, and in 1978 President Carter replaced him.

Burns's close association with Nixon made it difficult to escape suspicion that policy was serving political interests, although the specific allegation first made by Rose (1974), that monetary policy was loosened prior to the 1972 election, was the most damaging. Evidence appearing later has continued to suggest that Burns either bowed to Presidential wishes or to threats of legislative reform to compromise the US Federal System's inde- pendence. The pressure from the President, at least, is evident in Burns (2010).

The rational defence of the Fed's actions at that time would be that the unemployment of the time called for a monetary stimulus, while the inflation should be treated as "cost-push" and dealt with by incomes policy and related measures - and the price freeze of August 1971 was clearly such a measure. Even in Prosperity Without Inflation, Burns was sympathetic to the existence of cost-push inflation, although he initially opposed the specification of a numerical standard for wage increases (see Burns, 1965). In the stag- flation era, however, he was an outspoken proponent of the need for "incomes policy". The statement of the position that attracted most attention was that of the "Pepperdine College Lecture" (Burns, 1970 [1978]) of December 1970, when he said that the inflation problem was no longer one of excess demand but was caused by cost and particularly wage increases. Even when it became conventional to regard incomes policy as ineffective, he continued to emphasize the limitations - both economic and political - on the capabil- ity of central banks to control inflation, as he did in the Per Jacobsson Lecture, entitled "The anguish of central banking" (Burns, 1979).

Regarded by some as a Republican lackey, or otherwise as an economic conservative, Burns should be remembered as an outstanding scholar of the American business cycle and a careful and broad thinker on political economy, whose reputation was done no favours by holding office in what was then the most difficult period of post-war history, during a time of the most difficult of the US Presidents.

See also:

Federal Reserve System; Inflation.