Man is only great when he acts from passion.

Benjamin Disraeli

Abba P. Lerner - Biography

Abba Ptachya Lerner (October 28, 1903 – October 27, 1982) was an American economist.

Lerner was born on October 28, 1903 in Bessarabia (Russian Empire). He grew up in a Jewish family, which emigrated to Great Britain when Lerner was three years old. Lerner grew up in the London East End. From the age of sixteen he worked as a machinist, a teacher in Hebrew schools, and as a businessman. He entered the London School of Economics in 1929 where he would study under Friedrich Hayek. A six-month stay at Cambridge in 1934–1935 brought him into contact with John Maynard Keynes. Lerner married Alice Sendak in 1930; they had twin children, Marion and Lionel, in 1932.

In 1937, Lerner emigrated to the United States. While in the US, Lerner befriended his intellectual opponents Milton Friedman and Barry Goldwater.

Accomplishments

  • The use of fiscal policy and monetary policy as the twin tools of Keynesian economics is credited to Lerner by historians such as David Colander.
  • The Lerner symmetry theorem states that an import tariff can have the same effects as an export tax.
  • The Lerner Index measures potential monopoly power as the negative inverse of demand elasticity.
  • Lerner improved a formula of Alfred Marshall, which is known since as the Marshall–Lerner condition.
  • Lerner developed a model of market socialism, which differed form the pure planned economy. It became known as the Third Way. By the 1960s Lerner began to distance himself from his early work on socialism.
  • Lerner improved the calculations made by Wilhelm Launhardt on the effect of terms of trade.
  • Lerner developed the concept of distributive efficiency, which shows that economic equality will produce the greatest total happiness with a given amount of wealth.
  • Lerner contributed to the Lange-Lerner-Taylor theorem.
  • Based on effective demand principle and chartalism, Lerner developed functional finance, a theory of purposeful financing (and funding) to meet explicit goals, including full employment, no taxation designed solely to fund expenditure or finance investment, and low inflation.
  • Lerner (1951, Ch. 14) developed the concept of the NAIRU (before Friedman and Phelps). He termed it "low full employment" and contrasted it the "high full employment," the maximum employment achievable by implementing functional finance.
  • The Lerner-Samuelson theorem goes back to Lerner.


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