National Economic Research Bureau website：www.nber.org

National Economic Research Bureau website

National Economic Research Bureau website：www.nber.org

The National Bureau of Economic Research (NBER) was founded in 1920, largely in response to heated Progressive-era controversies over income distribution. The two leading figures in its launch — Malcolm Rorty, an executive at the American Telephone and Telegraph Company, and Nachum Stone, a socialist labor organizer with a PhD in economics from Columbia University — had widely different views on many economic policy issues. They agreed, however, that there was little data on which to base discussions of these issues. With the support of a group of business and labor leaders, as well as university-based economists who were committed to uncovering and disseminating important facts about the economy of the United States, they created the NBER to address this information gap. To this day, NBER research is bound by a restriction that the founders imposed: studies may present data and research findings, but may not make policy recommendations or make normative statements about policy. 

Portrait of Wesley Clair Mitchell
Wesley Clair Mitchell
At the outset, the NBER received essential support from the Carnegie Foundation and the Laura Spellman Rockefeller Foundation, and funding from several corporations. The founders recruited Columbia Professor Wesley Clair Mitchell, a leading expert on economic fluctuations, to serve as the inaugural director of research. He oversaw the organization’s research program for 25 years.

Business Cycles and National Income Accounting
Mitchell assembled a small group of researchers who were dedicated to improving economic measurement. Their research project measured labor’s share of national income. The team developed two distinct methods of estimating the labor share, and only when the estimates agreed reasonably well did they publish their findings. The careful attention to data quality and statistical methods in the study of the income distribution were widely recognized and the findings were well received. The inaugural project was followed by research on unemployment and, later in the 1920s, on business-cycle fluctuations. The NBER research staff published 23 books during the organization’s first decade. Years later, Solomon Fabricant, a former NBER vice president for research, summarized this formative period for the NBER in a short essay.

In 1927, the same year in which he published his classic book Business Cycles: The Problem and Its Setting, Mitchell recruited one of his recently graduated doctoral students, Simon Kuznets, to join the NBER staff.  Kuznets quickly became an expert on economic measurement. In the early 1930s, in response to a request from the US Department of Commerce for support in developing measures of aggregate economic activity, he led an NBER research project that became the foundation of the US national income accounts. This was one of the contributions for which Kuznets would be awarded the Nobel Prize in Economic Sciences in 1971.

In 1936, Kuznets launched the Conference on Research on Income and Wealth, a group of researchers and economic statisticians devoted to improving measurement. The rapporteur for the first meeting was Milton Friedman, one of Kuznets’ students and a research assistant at the NBER. Friedman, who was honored with a Nobel prize in 1976 for his work on consumption and monetary theory, was an active contributor to the NBER’s research program for several decades.