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Alvin Hansen

(1887-1975)

Alvin Hansen, often referred to as "the American Keynes", helped to formalize many of Keynes’ ideas and was an active supporter of fiscal policy. Born in South Dakota, Hansen studied economics at Yankton College and earned his Ph.D. from the University of Wisconsin. He held teaching positions at Brown University, the University of Minnesota, and Harvard. Hansen frequently testified before Congress on economics, known by the trademark green visor he would wear. Hansen’s greatest contribution to economics was his work on the IS-LM model, also known as the Hicks-Hansen synthesis. This model typically is taught in the Intermediate Macroeconomics course within the economics major.

Alvin Hansen recognized the possibility of crowding-out before it became a formal criticism of fiscal policy.

As Hansen acknowledged,

In appraising the probable expansion of employment and income from a given increment of investment, it is necessary to consider not only the magnitude of the multiplier but also possible offsetting factors which may nullify (or intensify) the original impetus. Thus a net increase in outlays on public works (i.e. fiscal policy) may be nullified by decreased private investment. For example, the method of financing the public works may raise the rate of interest and so retard private investment.

Milton Friedman, a critic of Keynesianism, popularized the idea, arguing that crowding-out was substantial, perhaps dollar for dollar. In such a case, the multiplier would be zero. Most mainstream economists reject Friedman’s extreme view.

Major works of Alvin H. Hansen

- Shifting the War Burden, with L.H. Haney, 1921, AER
- Cycles of Strikes, 1921, AER
- Business Cycle Theory, 1927
- A Fundamental Error in Keynes's Treatise, 1932, AER
- Economic Stabilisation in an Unbalanced World, 1932
- Mr. Keynes on Underemployment Equilibrium, 1936, JPE
- Full Recovery or Stagnation, 1938
- Economic Progress and Declining Population Growth, 1939, AER
- Fiscal Policy and Business Cycles, 1941
- Economic Policy and Full Employment, 1946
- Some Notes on Terborgh's 'The Bogey of Economic Maturity', 1946, REStat
- Dr. Burns on Keynesian Economics, 1947, RES
- The General Theory, 1947, in Harris, editor, New Economics
- Keynes on Economic Policy, 1947, in Harris, editor, New Economics
- Monetary Theory and Fiscal Policy, 1949
- The Pigouvian Effect, 1951, JPE
- A Guide to Keynes, 1953
- The Dollar and the International Monetary System, 1965

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