Arthur F. Burns

"Arthur Burns" redirects here. For other uses, seeArthur Burns (disambiguation).

Arthur Burns
United States Ambassador to West Germany
In office June 30, 1981 – May 16, 1985
President	Ronald Reagan
Preceded by	Walter J. Stoessel Jr.
Succeeded by	Richard Burt
10thChairman of the Federal Reserve
In office February 1, 1970 – January 31, 1978
President	Richard Nixon Gerald Ford Jimmy Carter
Deputy	James Robertson George W. Mitchell Stephen Gardner
Preceded by	William McChesney Martin
Succeeded by	G. William Miller
Member of theFederal Reserve Board of Governors
In office January 31, 1970 – March 31, 1978
President	Richard Nixon Gerald Ford Jimmy Carter
Preceded by	William McChesney Martin
Succeeded by	Nancy Teeters
Counselor to the President
In office January 20, 1969 – November 5, 1969
President	Richard Nixon
Preceded by	Position established
Succeeded by	Bryce Harlow Daniel Patrick Moynihan
3rd Chairman of theCouncil of Economic Advisers
In office March 19, 1953 – December 1, 1956
President	Dwight D. Eisenhower
Preceded by	Leon Keyserling
Succeeded by	Raymond J. Saulnier
Personal details
Born	Arthur Frank Burns (1904-04-27)April 27, 1904 Stanislau,Austria-Hungary (now Ivano-Frankivsk,Ukraine)
Died	June 26, 1987(1987-06-26)(aged 83) Baltimore,Maryland,U.S.
Political party	Democrat Republican
Spouse	Helen Bernstein
Education	Columbia University(BA,MA,PhD)

Arthur Frank Burns(April 27, 1904 – June 26, 1987) was an American economist and diplomat who served as the 10thchairman of the Federal Reservefrom 1970 to 1978. He previously chaired theCouncil of Economic Advisersunder PresidentDwight D. Eisenhowerfrom 1953 to 1956, and served as the firstCounselor to the PresidentunderRichard Nixonfrom January to November 1969. He also taught and researched atRutgers University,Columbia University,and theNational Bureau of Economic Research.

President Nixonnominated him to succeedWilliam McChesney Martinas Chairman of the Federal Reserve and later renominated him for another term. Burns was succeeded byG. William Millerwhen his second term expired. After leaving the Fed, PresidentRonald Reaganchose him to serve asAmbassador to West Germanyin 1981, where he remained in office until 1985.

Early life

Burns was born in Stanislau (nowIvano-Frankivsk),Austrian Poland (Galicia),a province of theAustro-Hungarian Empire,in 1904 toPolish-Jewishparents, Sarah Juran and Nathan Burnseig, who worked as a house painter. He showed aptitude early in his childhood, when he translated theTalmudinto Polish and Russian by age six and debatedsocialismat age nine.In 1914, he immigrated toBayonne, New Jersey,with his parents.He graduated fromBayonne High School.

At age 17, Burns enrolled inColumbia Universityon 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 hisB.A.andM.A.in 1925, graduatingPhi Beta Kappa.

Academic career

Rutgers University

After college, he began teaching economics atRutgers Universityin 1927, a role that he continued until 1944. Burns through his lectures became one of two professors, the other beingHomer Jones,credited byMilton Friedmanas a key influence for his decision to become an economist. Burns had convinced Friedman, Rutgers class of 1932, that modern economics could help end theGreat Depression.

In 1930, he married Helen Bernstein, a teacher.

Burns pursued graduate studies at Columbia while continuing his lectures at Rutgers. As a doctoral student, he became a protege ofWesley Clair Mitchell,a founder and the chief economics researcher of theNational Bureau of Economic Research.In 1933, Burns joined the NBER under Mitchell's guidance and began a lifelong study of business cycles.He received his Ph.D. in economics from Columbia a year later.

In 1943 he was elected as aFellow of the American Statistical Association. 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 Clarkendowed chair.At Columbia, he blocked the acceptance ofMurray Rothbard'sthesison thePanic of 1819,despite having known Rothbard since the latter was a child.

During his time at Columbia, Burns was elected a member of both theAmerican Academy of Arts and Sciencesand theAmerican Philosophical Society.

National Bureau of Economic Research

Beginning in 1933, the academic part of Burns's career focused on the measurement ofbusiness cycles,including questions such as the duration ofeconomic expansions,and what economic variables rise during expansions and fall duringrecessions.In 1934, Burns wroteProduction Trends in the United States Since 1870his 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 publishedMeasuring 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 askedMilton Friedman,then a professor at theUniversity of Chicago,to join the NBER as a researcher of the role of money in the business cycle. Burns's detailedmacroeconomicanalysis influencedMilton FriedmanandAnna Schwartz's classic workA Monetary History of the United States, 1867–1960.

Public service

Counselor to the President

Burns was appointed asCounselor to the PresidentwhenRichard Nixontook office in 1969. The newly created position held cabinet rank and was meant as a placeholder until Burns could be appointed asChairman of the Federal Reserve.Burns advised Nixon on economic policy during his brief time in the White House.

As expected, Burns was appointed to replace the outgoingWilliam McChesney Martinas Fed Chairman 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 Chairmanand 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.

WhileVice PresidentRichard M. Nixonwas running forPresidentin 1959–1960, the Fed – underTruman-appointed chairmanWilliam McChesney Martin, Jr.– was undertakingmonetary tightening,increasing the cost of borrowing and reflected in a recession by April 1960. In his bookSix Crises,Nixon later blamed hisdefeat in 1960in part on Fed policy and the resulting tight credit conditions and slow growth. After finally winning thepresidential election of 1968,Nixon named Burns to the Fed Chair in 1970 with instructions to ensure easy access to credit when Nixon was running for reelection in 1972.

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.Burns's relationship with Nixon was often rocky. Reflecting in his diary about a 1971 meeting attended by himself, Nixon,Treasury SecretaryJohn Connally,the Chairman of theCouncil of Economic Advisors,and the Director of theBureau 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.

There was significantinflationduring this period, which Nixon attempted to manage throughwage and price controlswhile the Fed under Burns increased themoney supply.Although Burns opposedNixon'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."After the 1972 election, due in part to oil shocks from the1973 oil crisis,price controls began to fail and by 1974, the inflation rate was 12.3 percent.

Burns thought the country was not willing to accept rates ofunemploymentin 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.

During Burns's tenure, the rate of change of theconsumer price indexrose 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 (1973and1979) and heavy governmentdeficitsarising in part from theVietnam WarandGreat Societygovernment programs.

At theWatergate break-inof 1972, the burglars were found carrying $6300 of sequentially numbered $100 bills. The Fed lied to reporterBob Woodwardas 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.

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 byJefferson Awards.

American Enterprise Institute

William Baroody,then president of theAmerican 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.

Ambassador to West Germany

Arthur Burns was appointedUnited States Ambassador to West Germanyby President Ronald Reagan. He served in Bonn from June 1981 to May 1985.

Death

He died on June 26, 1987, atJohns Hopkins HospitalinBaltimore, Maryland.

Criticism

Conservative economistBruce Bartlettgives 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 incorrectKeynesian theoriesthat 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.

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.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.

Selected works

• Burns, Arthur Frank; Mitchell, Wesley C.,Measuring Business Cycles,National Bureau of Economic Research(Studies in Business Cycles), 1946
• Burns, Arthur Frank,Wesley Clair Mitchell: The Economic Scientist.New York: National Bureau of Economic Research, 1952
• Burns, Arthur Frank,The Frontiers of Economic Knowledge: Essays,Princeton University Press, 1954. Reprinted from a National Bureau of Economic Research publication.

• Burns, Arthur Frank,Prosperity Without Inflation,Buffalo, Smith, Keynes & Marshall; distributed by Doubleday, Garden City, N.Y., 1958
• Burns, Arthur Frank, et al.,The Anguish of Central Banking,Per Jacobsson Foundation,1979

See also

• Economic Cycle Research Institute

Sources

• Abrams, Burton A. (Fall 2006)."How Richard Nixon Pressured Arthur Burns: Evidence from the Nixon Tapes".Journal of Economic Perspectives.20(4). American Economic Association: 177–188.doi:10.1257/jep.20.4.177.
• Burns, Arthur F.Inside the Nixon Administration: The Secret Diary of Arthur Burns, 1969–1974(University Press of Kansas, 2010); reviewed by Doug French, "Burns Diary Exposes the Myth of Fed Independence,"Mises Institute.
• 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" inJournal of Economic Literature1980 18(2): 579–585. ISSN 0022-0515 Fulltext online at Jstor and Ebsco.
• Burns, Arthur F. "Progress Towards Economic Stability."American Economic Review1960 50(1): 1–19.ISSN0002-8282Fulltext 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 Review1980 54(2): 192–214.ISSN0007-6805Fulltext 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.84(1). Federal Reserve Bank of Richmond: 21–44.
• Meltzer, Allan H.(2009).A History of the Federal Reserve – Volume 2, Book 1: 1951–1969.Chicago:University of Chicago Press.pp. 486–682.ISBN978-0226520025.
• Meltzer, Allan H.(2009).A History of the Federal Reserve – Volume 2, Book 2: 1970–1986.Chicago:University of Chicago Press.pp. 683–1005.ISBN978-0226213514.
• Throckmorton, H. Bruce. "The Moral Suasion of Arthur F. Burns: 1970–1977."Essays in Economic and Business History1991 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 theFederal 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.
• Wells, Wyatt C. (1994).Economist in an Uncertain World: Arthur F. Burns and the Federal Reserve, 1970–1978.New York:Columbia University Press.ISBN978-0231084963.

External links

• Papers of Arthur F. Burns, Dwight D. Eisenhower Presidential Library
• Arthur F. Burns Papers, 1911–2005 and undated, bulk 1940–1987,Rubenstein Library Duke University
• Statements and Speeches of Arthur F. Burns
• Papers of Arthur Burns, Gerald R. Ford Presidential Library,selected documents cited in theAllan H. Meltzerbook A History of the Federal Reserve.
• "Arthur Frank Burns (1904–1987)".The Concise Encyclopedia of Economics.Library of Economics and Liberty(2nd ed.).Liberty Fund.2008.
• Collection of Arthur Burns's works.
• AppearancesonC-SPAN