At age 17,Burns enrolled in Columbia University on a scholarship offered by the university secretary. He worked in jobs ranging from postal clerk to shoe salesman during his time at Columbia as a student before earning his B.A. and M.A. in 1925,graduating Phi Beta Kappa.[4]
Academic career
Rutgers University
After college,he began teaching economics at Rutgers University in 1927,a role that he continued until 1944. Burns through his lectures became one of two professors,the other being Homer Jones,credited by Milton Friedman as a key influence for his decision to become an economist. Burns had convinced Friedman,Rutgers class of 1932,that modern economics could help end the Great Depression.[1][5]
Burns pursued graduate studies at Columbia while continuing his lectures at Rutgers. As a doctoral student,he became a protege of Wesley Clair Mitchell,a founder and the chief economics researcher of the National Bureau of Economic Research. In 1933,Burns joined the NBER under Mitchell's guidance and began a lifelong study of business cycles.[1] He received his Ph.D. in economics from Columbia a year later.[6]
In 1943 he was elected as a Fellow of the American Statistical Association.[7] In 1944,he left Rutgers and assumed the role of director of research at the NBER in 1945 following Mitchell's retirement.
Columbia University
In 1945,Burns became a professor at Columbia University. In 1959,he received the John Bates Clark endowed chair. At Columbia,he blocked the acceptance of Murray Rothbard's thesis on the Panic of 1819,despite having known Rothbard since the latter was a child.[8]
National Bureau of Economic Research
Beginning in 1933,the academic part of Burns's career focused on the measurement of business cycles,including questions such as the duration of economic expansions,and what economic variables rise during expansions and fall during recessions. In 1934,Burns wrote Production Trends in the United States Since 1870 his first major publication in the field.
Often,he collaborated with Wesley Clair Mitchell,whose research directorate role he assumed from 1945 to 1953. In 1946,Burns and Mitchell published Measuring Business Cycles,which presented the characteristic NBER methods of analyzing business cycles. During his tenure,Burns began the academic tradition of determining recessions,a role continued by the NBER's business cycle dating committee. Today,the NBER is still considered authoritative in dating recessions.
In the late 1940s,Burns asked Milton Friedman,then a professor at the University of Chicago,to join the NBER as a researcher of the role of money in the business cycle. Burns's detailed macroeconomic analysis influenced Milton Friedman and Anna Schwartz's classic work A Monetary History of the United States,1867–1960.
Public service
Counselor to the President
Burns was appointed as Counselor to the President when Richard Nixon took office in 1969. The newly created position held cabinet rank and was meant as a placeholder until Burns could be appointed as Chair of the Federal Reserve. Burns advised Nixon on economic policy during his brief time in the White House.[9]
As expected,Burns was appointed to replace the outgoing William McChesney Martin as Fed Chair in November 1969 and resigned his post in the Nixon administration.
Federal Reserve Chairman
Burns served as Fed Chairman from February 1970 until the end of January 1978. He has a reputation of having been overly influenced by political pressure in his monetary policy decisions during his time as Chairman[10] and for supporting the policy,widely accepted in political and economic circles at the time,that Fed action should try to maintain an unemployment rate of around 4 percent.[11][12]
Later,when Burns resisted,negative press about him was planted in newspapers and,under the threat of legislation to dilute the Fed's influence,Burns and other Governors succumbed.[13][14] Burns' relationship with Nixon was often rocky. Reflecting in his diary about a 1971 meeting attended by himself,Nixon,Treasury SecretaryJohn Connally,the Chairman of the Council of Economic Advisors,and the Director of the Bureau of the Budget,Burns wrote:
The President looked wild; talked like a desperate man; fulminated with hatred against the press; took some of us to task – apparently meaning me or [chairman of the Council of Economic Advisors, Paul] McCraken or both – for not putting a gay and optimistic face on every piece of economic news, however discouraging; propounded the theory that confidence can be best generated by appearing confident and coloring, if need be, the news.[8]
There was significant inflation during this period, which Nixon attempted to manage through wage and price controls while the Fed under Burns maintained an expansive[further explanation needed]monetary policy. Although Burns opposed Nixon's decision to close the "gold window," he "'assured the President that I would support his new program fully,' notwithstanding his reservations about the gold suspension."[8] After the 1972 election, due in part to oil shocks from the 1973 oil crisis, price controls began to fail and by 1974, the inflation rate was 12.3 percent.[10]
Burns thought the country was not willing to accept rates of unemployment in the range of six percent as a means of quelling inflation. From the Board of Governors meeting minutes of November 1970, Burns believed that:
...prospects were dim for any easing of the cost-push inflation generated by union demands. However, the Federal Reserve could not do anything about those influences except to impose monetary restraint, and he did not believe the country was willing to accept for any long period an unemployment rate in the area of 6 percent. Therefore, he believed that the Federal Reserve should not take on the responsibility for attempting to accomplish by itself, under its existing powers, a reduction in the rate of inflation to, say, 2 percent... he did not believe that the Federal Reserve should be expected to cope with inflation single-handedly. The only effective answer, in his opinion, lay in some form of incomes policy.[11]
During Burns' tenure, the rate of change of the consumer price index rose from 6%/year in early 1970 to over 12%/year in late 1974 after the Arab Oil embargo, and eventually falling to under 7%/year from 1976 to the end of his tenure in January, 1978, with an annual average rate of consumer price inflation of approximately 9% during his term. Negative economic events included multiple oil shocks (1973 and 1979) and heavy government deficits arising in part from the Vietnam War and Great Society government programs.
At the Watergate break-in of 1972, the burglars were found carrying $6300 of sequentially numbered $100 bills. The Fed lied to reporter Bob Woodward as to the source of the bills. Burns stonewalled Congressional investigations about them and issued a directive to all Fed offices prohibiting any discussion of the subject.[15]
In 1976, Burns received the U.S. Senator John Heinz Award for Greatest Public Service by an Elected or Appointed Official, an award given out annually by Jefferson Awards.[16]
American Enterprise Institute
William Baroody, then president of the American Enterprise Institute, brought Burns to the economics think tank in 1978 after Burns left his position at the Federal Reserve. From the AEI, Burns continued to influence public policy.[1]
Conservative economist Bruce Bartlett gives Burns poor marks for his tenure as Fed chairman because the inflationary forces that began in 1970 took more than a decade to resolve.
The only disagreement among economists is whether Burns fully understood the mistakes he was making, or was so wedded to incorrect Keynesian theories that he didn't realize what he was doing. The only alternative is that he was under irresistible political pressure from Nixon and had no choice. Neither explanation is very favorable to Burns. Economists now recognize the Nixon era as Exhibit A in how the adoption of bad economic policies in pursuit of short-term political gain eventually turns out to be bad politics as well.[18]
In more recent years, the famous quote, "The ultimate purpose of an economy is to produce more consumer goods," has erroneously been attributed to Burns in popular culture.[19] However, there is absolutely no evidence that Burns ever uttered this statement; to the contrary, he advocated–both in his speeches and his policies–for thrift and fiscal responsibility.[9]
Burns, Arthur F. Reflections of an Economic Policy Maker: Speeches and Congressional Statements: 1969–1978 (AEI Studies no. 217; Washington: American Enterprise Inst., 1978); reviewed by Paul W. McCracken, "Reflections of an Economic Policy Maker: a Review Article" in Journal of Economic Literature 1980 18(2): 579–585. ISSN 0022-0515 Fulltext online at Jstor and Ebsco.
Burns, Arthur F. "Progress Towards Economic Stability." American Economic Review 1960 50(1): 1–19. ISSN0002-8282 Fulltext in Jstor and Ebsco. Abstract: Views economic growth, 1929–59; discusses corporate growth, government subsidies, increased consumer expenditures, rise in personal income, industrialization, and overall improvement in economic organization.
Engelbourg, Saul. "The Council of Economic Advisers and the Recession of 1953–1954." Business History Review 1980 54(2): 192–214. ISSN0007-6805 Fulltext in Jstor. Abstract: The 1953–54 recession was the first in which a Council of Economic Advisers (CEA) appointed by a Republican President, Dwight D. Eisenhower, recommended policy actions. Despite traditional Republican Party rhetoric, the CEA supported an activist contracyclical approach that helped to establish Keynesianism as a bipartisan economic policy for the nation. Especially important in formulating the CEA response to the recession – accelerating public works programs, easing credit, and reducing taxes – were Arthur F. Burns and Neil H. Jacoby.
Hetzel, Robert L. (Winter 1998). "Arthur Burns and Inflation". Economic Quarterly. Federal Reserve Bank of Richmond. 84 (1): 21–44.
Throckmorton, H. Bruce. "The Moral Suasion of Arthur F. Burns: 1970–1977." Essays in Economic and Business History 1991 9: 111–121. ISSN0896-226X. Abstract: Reviews key words in Arthur F. Burns's testimony on various occasions before the Joint Economic Committee of Congress while he served as chairman of the Board of Governors of the Federal Reserve System, 1970–78. Correlates the key words with rates of inflation and interest rates to determine if there is a relationship between key words of testimony and selected economic variables.
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending. This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale anthropogenic or natural disaster. In the United States, it is defined as "a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales". In the United Kingdom, it is defined as a negative economic growth for two consecutive quarters.
In economics, stagflation or recession-inflation is a situation in which the inflation rate is high, the economic growth rate slows, and unemployment remains steadily high. It presents a dilemma for economic policy, since actions intended to lower inflation may exacerbate unemployment.
Business cycles are intervals of expansion followed by recession in economic activity. They have implications for the welfare of the broad population as well as for private institutions. Typically business cycles are measured by applying a band pass filter to a broad economic indicator such as Real Gross Domestic Production. Here important problems may arise with a commonly used filter called the "ideal filter". For instance if a series is a purely random process without any cycle, an "ideal" filter, better called a block filter, a spurious cycle is produced as output. Fortunately methods such as [Harvey and Trimbur, 2003, Review of Economics and Statistics] have been designed so that the band pass filter may be adapted to the time series at hand.
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William McChesney Martin Jr. was the ninth and longest-serving Chairman of the United States Federal Reserve Bank, serving from April 2, 1951, to January 31, 1970, under five presidents. Martin, who once considered becoming a Presbyterian minister, was described by a Washington journalist as "the happy Puritan".
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Wesley Clair Mitchell was an American economist known for his empirical work on business cycles and for guiding the National Bureau of Economic Research in its first decades.
Anna Jacobson Schwartz was an American economist who worked at the National Bureau of Economic Research in New York City and a writer for The New York Times. Paul Krugman has said that Schwartz is "one of the world's greatest monetary scholars."[1]
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A Monetary History of the United States, 1867–1960 is a book written in 1963 by Nobel Prize–winning economist Milton Friedman and Anna J. Schwartz. It uses historical time series and economic analysis to argue the then-novel proposition that changes in the money supply profoundly influenced the U.S. economy, especially the behavior of economic fluctuations. The implication they draw is that changes in the money supply had unintended adverse effects, and that sound monetary policy is necessary for economic stability. Economic historians see it as one of the most influential economics books of the century. The chapter dealing with the causes of the Great Depression was published as a stand-alone book titled The Great Contraction, 1929–1933.
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The Depression of 1920–1921 was a sharp deflationary recession in the United States, United Kingdom and other countries, beginning 14 months after the end of World War I. It lasted from January 1920 to July 1921. The extent of the deflation was not only large, but large relative to the accompanying decline in real product.
The 1973–1975 recession or 1970s recession was a period of economic stagnation in much of the Western world during the 1970s, putting an end to the overall post–World War II economic expansion. It differed from many previous recessions by being a stagflation, where high unemployment and high inflation existed simultaneously.
The Recession of 1969–1970 was a relatively mild recession in the United States. According to the National Bureau of Economic Research the recession lasted for 11 months, beginning in December 1969 and ending in November 1970, following an economic slump which began in 1968 and by the end of 1969 had become serious, thus ending the third longest economic expansion in U.S. history which had begun in February 1961.
The Recession of 1960–1961 was a recession in the United States. According to the National Bureau of Economic Research the recession lasted for 10 months, beginning in April 1960 and ending in February 1961. The recession preceded the third-longest economic expansion in U.S. history, from February 1961 until the beginning of the Recession of 1969–1970 in December 1969—to date only the 1990s and post-financial crisis (2009-2020) have seen a longer period of growth.
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