Economist as policymaker

Arthur Okun (1929-1979) was one of the most aeatiYe American economic poIicymakers
of the postwar era. Educated at Columbia. he taught at Yale until he joined the staff of President Kennedy’s Council of Economic Advisers in 1961. He became a CEA rnemberjn 1964 and President Johnson’s chainnan in 1968. After he left the CEA. Okun stayed in Washington at the Brookings Institution. Okun .was concerned with developing tools that
would help the United States track and manage the business cycle. He created the concept of potential output and then showed the relation between output and unemployment that is now known as Okun’s law. Using these tools, he advised Presidents Kennedy and Johnson on the fiscal policies necessary to steer the economy between excessive unemployment and rising inflation. One of Okun’s central concerns was to find ways of containing inflation without throwing millions of people out of work. espoused a novel approach to anti-inflation policies called tax-based incomes policies (TIP), which we will discuss in Chapter 32.

In addition, Okun was renowned for his use of simple homilies to illustrate economic points. He compared arguments against a tax increase to his 7-year-old’s arguments against taking medicine: “He is perfectly well; he is so sick that nothing can possibly help him; he will take it later in the day if his throat doesn’t get better; it isn’t fair unless his brothers take it too:’ Okun proved time and again that a well-told tale is often worth more than 1000 equations.

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