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Arthur M. Okunwas an American economist who served as chairman of the U.S. Council of Economic Advisers (1968â69).
After obtaining a B.S. (1949) and a Ph.D. (1956) in economics from Columbia University, Okun taught at Yale University (1961â69). He was, however, on leave from Yale for most of his tenure there, serving in the Council of Economic Advisers (CEA), an agency within the Executive Office of the President. Okun worked at the CEA as a staff economist (1961â62) and council member (1964â68) before presiding over the council as its chairman (1968â69) under President Lyndon B. Johnson.
A firm advocate of Keynesian economic theories, Okun believed that fiscal policy (the raising and spending of revenue) was a better means of influencing the economy than federal monetary policy (controlling the supply of money). Thus, when the country faced recession in the mid-1960s, the CEA advised the president to lower taxes to stimulate consumer spending. During Okunâs tenure as chairman of the CEA, the federal government created a huge budget deficit by borrowing money to finance the war in Vietnam. On the CEAâs recommendation, Congress passed a 10 percent tax surcharge in June 1968. After leaving the CEA, Okun became (1969) a senior fellow at the Brookings Institution, where he forecast and analyzed trends in the economy.
Inflation drives up the cost of everyday goods, affecting what you pay for items both large and small.
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Okun was the discoverer of the widely cited âOkunâs Law,â which stipulated that for every 3 percent rise in the rate of economic growth above the economyâs long-term potential growth rate, unemployment would decrease by 1 percent. But during the turbulent 1970s, when stagflation (a stagnating economy with inflation) afflicted the country, the rule no longer held true. For the remainder of his life Okun attempted to find ways to stifle inflation while avoiding recession. He also formulated the universal definition for recession: two consecutive quarters of negative gross national product growth.
Okunâs many books include Equality and Efficiency: The Big Tradeoff (1975). At the time of his death he was working on a volume dealing with stagflation, tentatively titled Prices and Quantities in Cyclical Fluctuations.
