Abba Lerner
The economics of control
Market rules for a planned welfare economy.
Heterodox Market SocialistOne of 729 ideologies · enter the Market Socialist hall →- Role
- Economist
- Era
- 1903–1982
- Region
- UK / US
- Social band
- Heterodox
- Placement
- −68 · −4 · +35
§ Where Abba Lerner stands
3 axesLerner wanted collective control over the economy's outcomes without abolishing markets. The Economics of Control (1944) gave managers a single rule, price equal to marginal cost, to mimic perfect competition whether firms were publicly or privately owned, while 'Functional Finance and the Federal Debt' (1943) made full employment the duty of government spending and taxation. Treating ownership as secondary keeps him short of full collectivism.
His vision was technocratic but liberal. Lerner trusted economists and public agencies to manage demand and steer prices, yet he defended consumer sovereignty and free choice of occupation as goals any controlled economy must respect. His 1980 Market Anti-Inflation Plan, written with David Colander, even proposed tradeable permits for price increases rather than direct wage and price controls.
Lerner's progressivism showed in his aims rather than in cultural campaigns. He treated mass unemployment as a preventable social evil and argued in The Economics of Control that, because no one can know whose capacity for satisfaction is greatest, an equal distribution of income maximises probable total welfare, a strongly egalitarian conclusion.
How close are you to Abba Lerner?
Three statements, one per axis. Answer them and we’ll drop you on the compass next to them.
§ The story
HistoricalAbba Lerner (1903–1982) was an economist born in Bessarabia, then part of the Russian Empire, and raised in London's East End. He worked as a tailor and in other trades before entering the London School of Economics in 1929, where he helped found the Review of Economic Studies in 1933 and spent time in Cambridge absorbing Keynes's new ideas. He moved to the United States in the late 1930s and taught at a long list of institutions, including the New School, Roosevelt University, Michigan State and the University of California, Berkeley.
Lerner's place in the market-socialist tradition rests on The Economics of Control (1944), which argued that a socialist or mixed economy could reach efficiency by instructing managers to set price equal to marginal cost, extending the case he and Oskar Lange had made against Ludwig von Mises in the calculation debate of the 1930s. His doctrine of functional finance, which judged budgets by their effects on employment and inflation rather than by whether they balanced, made him one of the boldest interpreters of Keynes, and Modern Monetary Theory later claimed him as a founding influence.
Notable for
- 01'The Economics of Control'
- 02Marginal-cost pricing rules
- 03Functional finance
Key works & moments
- 1933Helps found the Review of Economic Studies with fellow young economists at the LSE.
- 1934Proposes the Lerner index, measuring monopoly power by the gap between price and marginal cost.
- 1934–37Argues with Oskar Lange that a socialist economy can calculate prices, answering Ludwig von Mises.
- 1943Publishes 'Functional Finance and the Federal Debt', judging budgets by results rather than balance.
- 1944The Economics of Control sets out marginal-cost pricing rules for a planned welfare economy.
- 1980Co-authors MAP: A Market Anti-Inflation Plan with David Colander.
§ Minds closest to Abba Lerner
All minds →
§ Also in the Market Socialist hall
Enter the hall →§ Common questions
4 answersWhat was Abba Lerner's political ideology?
Abba Lerner was a socialist-leaning economist who believed markets could be harnessed for collective goals: on the 99ideologies three-axis compass, a Heterodox Market Socialist. Economically he sat well left of centre (−68), backing marginal-cost pricing rules for public and private firms alike and an active fiscal policy aimed at full employment. On governance he was near the centre (−4), favouring expert economic management bounded by consumer choice, and socially he was progressive (+35), with a strong preference for equality.
Was Abba Lerner left-wing or right-wing?
Left-wing, of an unusually pragmatic kind. Lerner began as a socialist and always favoured equality, full employment and public responsibility for economic outcomes. But he cared more about how an economy is run than about who owns it, insisting that prices, competition and consumer sovereignty are tools socialists should use rather than fear. That made him a heretic to both laissez-faire conservatives and orthodox Marxists, and a bridge between socialist economics and Keynesian liberalism.
Is Abba Lerner the father of Modern Monetary Theory?
He is its most important forerunner. Lerner's 1943 theory of functional finance held that a government issuing its own currency should judge spending, taxes and borrowing only by their effects on employment and prices, not by whether the budget balances. Modern Monetary Theory economists from the 1990s onward adopted that principle explicitly, alongside the state theory of money of Georg Friedrich Knapp. Lerner himself, however, worried about inflation near full employment and designed anti-inflation plans to deal with it.
Which minds are closest to Abba Lerner?
On the 99ideologies three-axis compass, the minds closest to Abba Lerner are Alec Nove (98% alike), Oskar Lange (97% alike) and Jaroslav Vanek (97% alike). The furthest is Adam Sutler (11% alike).