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Clark A. Warburton (1896-1979) John B Marquette University e-Publications@Marquette Economics Faculty Research and Publications Economics, Department of 1-1-1990 Clark A. Warburton (1896-1979) John B. Davis Marquette University, [email protected] Published version. "Clark A. Warburton (1896-1979)," in Banking and Finance 1913-1989. Ed. Larry Schweikart. New York: Facts on File (Infobase Learning Imprint), 1990: 451-453. Publisher Link. © 1990 Facts on File (Infobase Learning Imprint). Used with permission. Business History and Biography Clark A. Warburton Edward Rosenbaum and Ari Sherman, M. M. Warburg & Archives: Company 1798-1938 (New York: Holmes & Meier, The papers of Paul M. Warburg are at Yale Univer­ 1979); sity Library. James P. Warburg, The Long Road Home (Garden City, N.Y.: Doubleday, 1964). Clark A. Warburton (January 27, 1896 - September 18, 1979) by John B. Davis Marquette University CAREER: U.S. Army (1917-1919); lecturer, Univer­ 1918 to 1919, Warburton returned to the United sity of Allahabad, India (1921-1924); instructor, States to attend Cornell University in Ithaca, New Rice Institute [later Rice University) (1925-1928); as­ York, where he received his B.A. in 1921. sociate professor, Emory University (1929-1932); Warburton took his first academic position as member, Brookings Institution (1932-1934); re­ a lecturer in economics at the University of Allaha­ searcher, chief administrator, Banking and Business bad in Allahabad, India, where he taught until Section, Division of Research and Statistics, Federal 1924. In his final two years in India he served as Deposit Insurance Corporation (1934-1966). the managing editor of the Indian Journal of Eco­ nomics and thus obtained an acquaintance with the Clark Abram Warburton, economist, educa­ standards and practices of scholarly publishing. He tor, and public administrator, was the author of returned to the United States in 1925 to take a posi­ more than 50 scholarly articles concerning the na­ tion as an instructor in economics at Rice Institute­ ture of fiscal and monetary policy in the United (later known as Rice University) in Houston, Texas, States. His practical experience came from working and he remained at Rice until 1928, when he re­ for more than three decades in the Federal Deposit ceived an M.A. from Cornell. He married Amber Insurance Corporation, where he developed his life­ Arthun on July 5, 1929, and accepted a position as long interest in the relationship of banking and mon­ associate professor of economics at Emory Univer­ etary policy to business fluctuations. Beginning in sity in Atlanta, Georgia. In 1932 Warburton re­ the Great Depression of the 1930s, Warburton en­ ceived his Ph.D. from Columbia University. His tered into a study of the role of the money supply dissertation, The Economic Results of Prohibition, in episodes of depression and inflation. That ulti­ was published by Columbia University Press that mately led him to conclude that monetary authori­ same year. ties in the United States had consistently failed to Warburton did not return to academia but in­ provide sufficient stability, at an appropriate rate of stead elected to devote his time and efforts to eco­ growth, in the supply of money available to the na­ nomic and financial research. He took a position in tion's people and its business enterprises. In those 1932 as a member of the research staff at the non­ conclusions, Warburton was later credited for pio­ profit Brookings Institution in Washington, D.C. neering the Quantity Theory of Money and cited as There he was among the first economists to work a forerunner of the economist Milton Friedman. on the newly conceived national income ~ccounts, Warburton was born in Shady Cove in upstate which summed total annual economic activity. In New York on January 27, 1896, the son of Mel­ 1934 Warburton left the Brookings Institution to vin Eugene Warburton, a clergyman, and Florence join the recently established Federal Deposit Insur­ Vough Warburton. He originally enrolled at ance Corporation (FDIC). As a result of the bank fail­ Houghton College in Houghton, New York, in ures and national financial panic of the early 1915, but with the U.S. entry into World War I he 1930s, the FDIC had been created by a provision of left school in 1917 to join the American Expedition­ the Glass-Steagall Act of June 1933 to guarantee ary Forces. After serving two years in France from small deposits in the banking system. Banks paid 451 Clark A. Warburton The Encyclopedia of American the cost of the insurance in the form of a fee based detailed analysis of the regional distribution of on the size of their deposits. Thus, first as a re­ bank failures and deposit contractions over the pe­ searcher and then later as chief of the Banking and riod from 1930 to 1935. He also needed to carry Business Sect;Jn of the Division of Research and Sta­ out a thorough evaluation of Federal Reserve opera­ tistics, Warburton acquired firsthand knowledge of tions during the same period. The results of those commercial banking operations in a fashion never be­ studies transformed Warburton's views. Despite his fore enjoyed by students of the American financial earlier adherence to a real theory of the business system. He remained at the FDIC until he retired cycle, whereby investment and production decisions from government service in 1966. accounted for economic fluctuations, Warburton Upon retirement Warburton briefly was made came to believe that money and monetary policy a visiting professor of economics at the University played the fundamental role in determining the of California at Davis through the efforts of Profes­ level of economic activity. sor Thomas Mayer. In poor health, which pre­ Warburton accordingly went on to challenge vented him from assuming a full teaching load, he Keynesianism, which was dominant at the time not conducted small weekly seminars for a few students so much in terms of its logical consistency as in investigating economic history (notably Thomas F. terms of its empirical relevance. By the early 1940s, Cargill). Though he had often encountered frustra­ after having comprehensively examined the annual tion from an economics profession less concerned tabulations of bank deposits from 1920 to 1935 with monetary phenomena than with Keynesian ex­ from country to country, he had concluded that penditure concepts, Warburton lived to see his ideas money quantity was indisputably the central factor gain broad acceptance among an emerging in the Great Depression downturn. By the late monetarist school of economics. He died at eighty­ 1940s and early 1950s he felt confident in blaming three on September 18, 1979, in Fairfax, Virginia. the Federal Reserve and "an erratic money supply Along with Carl Snyder, Lionel Edie, Lauchlin as the chief originating factor in business recessions Currie, James Angell, and Arthur Marget, War­ and not merely an intensifying force in the case of se­ burton was recognized by 1989 as one of the pioneer­ vere depressions." Indeed, his 1951 paper, "The ing voices of monetarism-the doctrine stating that Misplaced Emphasis in Contemporary Business Fluc­ changes in the quantity of money are the dominant tuations Theory"-perhaps his best known and independent determinant of cyclical changes in eco­ often considered his single most important contribu­ nomic activity. His special talent involved empirical tion to economic thought-argued against the view investigation into the relationship between money of Keynes and his followers that an imbalance in and economic activity, and it was on that basis that the savings-investment relationship alone provided he anticipated many of the conclusions of later mone­ a sufficient explanation of business fluctuations, pre­ tarists. However, despite his painstakingly careful ex­ cisely because of a conviction that the historical amination of economic data, and because he did his record placed the chief blame for business fluctua­ most extensive publishing during the height of the tions on the discretionary monetary policy of the Fed­ Keynesian- revolution in the 1940s and 1950s, his eral Reserve. work went largely unappreciated until the 1960s, Warburton's work has influenced present-day when, through the leadership of Friedman, monetarists in many respects. Mo~t important, in monetarism received attention from large numbers the course of his writings he developed an empiri­ of economists. Warburton's professional recognition cally useful version of the Quantity Theory of was thus belated, and the full nature of his contribu­ Money, distinguishing between the long-run or equi­ tion to an understanding of monetary phenomena librium version of the theory and the short-run or has accordingly only begun to gain the notice it disequilibrium version. Adapting Irving Fisher's will likely receive in future years. Equation of Exchange, which related an economy's Warburton first developed his understanding volume of money and velocity to output and prices, of the relationship between the quantity of money Warburton tested the relationship between money in the economy and economic activity as a ~esult of and prices across key periods in American eco­ research carried out at the FDIC in the 1930s- to de­ nomic history. In addition, he also provided evi­ termine the required insurance premium for bank de­ dence that the lag in the effect of monetary policy posits. He initially had to develop a reasonably was both long and variable, which led him to con- 452 Business History and Biography Clark A. Warburton clude that a discretionary monetary policy was unde­ That Warburton failed to have a significant im­ pendable and that the most appropriate strategy for pact upon his colleagues during his most active the monetary authority to pursue was that of a years as an economist can best be explained by his in­ steady growth in the money supply. Finally, War­ tellectual isolation in the immediate postwar pe­ burton also argued that because the Keynesians had riod.
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