Arthur Melvin Okun (1929-1980) was an American economist, representative of post-keynesism. He was born in Jersey City, New Jersey. Little is known about his childhood and growing up. He studied and received his doctorate at Colombia University. Since 1952, he lectured at Yale University, where, in 1963 he received the title of Professor of Economics.
Starting from 1961 he was a member of the Committee of Economic Advisers to US President John Kennedy, later also for the President Lyndon Johnson. In 1968 he became Chairman of this Committee. In later years Arthur Okun was an employee of Brooking Institution, one of the oldest American academic and research institutions, specializing in social sciences: sociology, economics, globalisation, political (including foreign) government.
Basic views and achievements
Okun is the author of the concept of "potential GDP", meaning production that can be achieved in a given period by the full utilization of material and human resources. This concept became one of the guiding principles of economic policy in the United States.
Basing on studies of the US economy, Okun formulated the law named later as Okun's law. Under this law, for each 1% increase in the actual unemployment, gap in GNP will increase by an amount of 2.5%.
Okun also studied the costs associated with a reduction in inflation. His research showed that, in order to reduce the cost of inflation of 1% for a year, unemployment should be maintained at the level of about 2% higher than the natural rate of unemployment.
Okun's achievements also includes an explanation of the phenomena occurring in developed economies, saying that product and production factors markets adjust to changes in demand and supply through quantitative changes, and not, as was believed by price changes. It follows that unemployment leads to lower nominal wages, and the increase in generating capacity to lower prices.
Okun is the author of the saying something for something (big tradeoff of equality and efficiency) referring to the conflict between efficiency and equity. This states that, among others, redistributive measures to ensure equalization of income (e.g. progressive tax), lead to lower levels of well-being.
- Potential GNP: Its Measurement and Significance - 1962
- Equality and Efficiency, The Big Trade-off - 1975
- Efficient Disinflationary Policies - 1978
- Prices and Quantities: a Macroeconomic Analysis - 1981
- Okun, A. M. (1971). The mirage of steady inflation. Brookings Papers on Economic Activity, 1971(2), 485-498.
- Okun, A. M. (1970). The political economy of prosperity. Brookings Inst Pr.
- Okun, A. M., Fellner, W., & Wachter, M. (1975). Inflation: its mechanics and welfare costs. Brookings Papers on Economic Activity, 1975(2), 351-401.
- Okun, A. M. (2015). Equality and efficiency: The big tradeoff. Brookings Institution Press.
- Arthur Melvin Okun @ Wikipedia.