Faculty Profile

"This kind of thing is silly," said Professor Alvin H. Hansen, referring to biographies in general, "but you can't blame the students for wanting to put something in their newspaper." Hansen has a good reason to object; for 20 years as the nation's leading Keynesian economist, he has received plenty of attention.

"Whenever new ideas appear," said Hansen, looking out from under his ever-present eyeshade, "they are first branded nonsense, then dangerous, and finally old stuff." He believes that Keynesian economics has gone through all three stages, that there has been a real revolution in thinking. Businessmen have the idea that Hansen, who looks like a businessman himself, was the ogre who led FDR down the "rosy path of deficit financing." Actually Roosevelt spent mostly for relief, not on Hansen's program of public investment. The revolution in economic thinking engulfed only a portion of the professional thinkers.

When the depression deflated prices, it deflated Classical theories as well. Hansen, with degrees from two colleges and a plethora of answers, stepped into the vacuum. He also stepped into several government jobs.

As a member of the advisory committee on Social Security, Hansen prevented the government from sitting on all the money that would come in from Social Security payments. If the government had kept all this money in a special fund "it would have drained off savings at a time when more spending was needed."

Policies like this might have stirred up a battle or two, but most of Hansen's "wars" have been on paper. There haven't been many of those, for Hansen never budged from his position and didn't see much point in answering his critics. "They went on criticizing and I just went on stating my views." By 1940 Hansen's views were old stuff and most of the lurid criticism had died down.

Hansen's first love has always been teaching; most of his work in the government was advisory and he had little direct influence. In 1940, he attended a London conference of economists. Before he appeared, everyone was discussing free trade as the panacea for all world problems. Hansen introduced the idea of international cooperation to promote stability and full employment. This idea was taken up by others and ultimately led to the European Payments Union.

During the years when many placed Hansen's ideas in the bolshevik class, he was constantly misrepresented. As an example of how easy this was to do, a friend sent Hansen a letter containing a dialogue on economics made up of quotes from Hansen's work and from a critic's. These excerpts all seemed in order at first, but actually the writer had put Hansen's name on his critic's arguments and vice versa.

"Some people have gotten the idea that we are just spenders, expansionists," Hansen said. "Keynesian economics stress control of inflation just as much as deflation..."

However, he still stresses fiscal policy as more important that monetary policy. As far as he is concerned, the present battle between the Federal Reserve and the Treasury is relatively unimportant. "This is certainly no time for easy credit, but more effective control could be had through allocating resources, which would restrict unnecessary capital outlays, and selective controls over consumer and real estate credit." If the Federal Reserve used its power drastically, it could stop inflation, but it would get its fingers burnt."

"The country is caught in a situation where you have to give incentives. Patriotic appeals are very weak now... We'll find it very hard to control this inflation."