National Bureau Of Economic Research

The National Bureau of Economic Research (NBER) is a rather significant entity, masquerading as a private nonprofit research organization. Its stated mission, delivered with all the enthusiasm of a tax audit, is to engage in and disseminate unbiased economic research for the benefit of policymakers, business professionals, and academics. In essence, they’re the ones who unofficially, but quite effectively, declare when the United States has decided to take a nap, otherwise known as a recession .

The Nitty-Gritty Details

The NBER building itself, nestled in Cambridge, Massachusetts , is a testament to their enduring presence. Founded in 1920 by the rather prescient Wesley Clair Mitchell , it’s been around for over a century, which, in the fast-paced world of economics, is practically geological time. It operates as a Nonprofit organization , bearing the Tax ID no. 13-1641075. As of 2023, they were pulling in a respectable $41.7 million in revenue and spending $38.5 million, which seems like a lot of money to spend on not making policy recommendations. Their website, nber.org, is likely a treasure trove of data, if you have the stomach for it.

A Look Back: The Genesis and Growth

The NBER’s origins trace back to 1920, a time when income distribution was apparently a hot topic, sparking debates during the Progressive era . Founded by Malcolm Rorty and Nachum Stone, the NBER emerged from a perceived void in economic data. Their core principle, rigidly adhered to, is to present findings without venturing into the messy business of policy advice.

Early Years and Foundational Support: In its nascent stages, the NBER benefited from the financial backing of institutions like the Carnegie Foundation , the Laura Spelman Rockefeller Foundation, and various corporate entities. Columbia University professor Wesley Clair Mitchell served as the inaugural director of research, a role he held for a quarter of a century, shaping the organization’s initial research trajectory. Their early endeavors focused on measuring the proportion of national income attributable to labor and delving into the complexities of unemployment and the ebb and flow of business cycles.

The Kuznets Contribution: A significant figure who entered the NBER’s orbit in 1927 was Simon Kuznets . His subsequent work was instrumental in the development of the U.S. national income accounts, a monumental achievement that eventually earned him the Nobel Memorial Prize in Economic Sciences in 1971. The original text notes a “clarification needed ” regarding his role, which is a rather polite way of saying the specifics might be a bit fuzzy, but his impact is undeniable.

Post-War Evolution and Expansion: The period following World War II marked a significant expansion for the NBER, both in terms of its research scope and its influence. Arthur Burns took over as research director from Mitchell, guiding the organization through a transformative phase. The 1950s and 1960s were particularly fruitful, witnessing seminal research by luminaries such as Milton Friedman and Anna Schwartz on the intricate relationship between monetary policy and business cycles. Labor economics also saw considerable advancements during this era.

Leadership Transitions and Strategic Shifts: Arthur Burns transitioned to the role of NBER president in 1956, handing over the research director reins to John R. Meyer in 1967. Meyer was an innovator, introducing two NBER journals and establishing satellite offices in various cities, broadening the organization’s reach.

The Feldstein Era and Modernization: The presidency of Martin S. Feldstein , beginning in 1977, is often cited as a period of significant transformation. He adeptly expanded the NBER’s network of university-affiliated researchers, orchestrated the move of its headquarters to Cambridge, Massachusetts , and launched the NBER Working Paper Series, a crucial conduit for disseminating cutting-edge research. Feldstein also formalized research programs focused on specific economic domains and initiated the NBER Summer Institute, a major annual gathering.

The Poterba Succession and Continued Growth: James Poterba assumed the presidency from Feldstein in 2008, continuing the trajectory of expansion. Under his leadership, the number of affiliated researchers has surged, and new programs and working groups have been established. The NBER now circulates over 1,200 research papers annually and hosts approximately 125 meetings each year, covering a vast array of economic topics.

The Great Recession and Public Perception: In September 2010, the NBER’s Business Cycle Dating Committee, with a decision reached after a conference call, declared the Great Recession officially over, pinpointing its duration from December 2007 to June 2009. This pronouncement, however, met with a considerable disconnect from the public. Numerous newspapers reported that the majority of Americans remained unconvinced, still grappling with the lingering effects of the downturn and persistently high unemployment rates. The sentiment was clear: the official end date didn’t align with everyday economic realities for many.

The Engine Room: Research and Dissemination

The NBER’s research apparatus is structured around 20 distinct research programs, each dedicated to a specific area of economic inquiry, complemented by 14 working groups that delve into more niche subjects.

Research Programs: The breadth of their research is evident in the listed programs:

• Asset Pricing
• Children
• Corporate Finance
• Development Economics
• Development of the American Economy
• Economic Fluctuations and Growth
• Economics of Aging
• Economics of Education
• Environment and Energy Economics
• Health Care
• Health Economics
• Industrial Organization
• International Finance and Macroeconomics
• International Trade and Investment
• Labor Studies
• Law and Economics
• Monetary Economics
• Political Economy
• Productivity, Innovation, and Entrepreneurship
• Public Economics

Working Groups: The working groups offer a glimpse into specialized areas of focus:

• Behavioral Finance
• Chinese Economy
• Cohort Studies
• Economics of Crime
• Entrepreneurship
• Risks of Financial Institutions
• Household Finance
• Innovation Policy
• Insurance
• Market Design
• Organizational Economics
• Personnel Economics
• Race and Stratification in the Economy
• Urban Economics

The Exchange of Ideas: Conferences and Meetings

The NBER is a hub for economic discourse, hosting over 120 meetings annually. These gatherings serve as crucial platforms for researchers to present and debate their latest findings, and to spark new lines of inquiry. The NBER Summer Institute, a concentrated series of nearly 50 smaller meetings, takes place every July, drawing economists from around the globe.

Pillars of the Profession: Notable Affiliates

The NBER boasts an impressive roster of affiliated scholars, many of whom have achieved the highest accolades in their field.

Nobel Laureates: A significant number of Nobel Memorial Prize in Economic Sciences winners have been associated with the NBER. This list, extending to future anticipated recipients like Peter Howitt in 2025, Daron Acemoglu , Simon Johnson , and James A. Robinson in 2024, and Claudia Goldin in 2023, underscores the NBER’s deep connection to groundbreaking economic thought. The list includes past recipients such as Ben Bernanke (2022), Joshua Angrist , David Card , and Guido Imbens (2021), down to foundational figures like Simon Kuznets (1971) and Milton Friedman (1976).

Council of Economic Advisers (CEA) Chairs: The NBER has also served as a launching pad for individuals who have led the Council of Economic Advisers . Prominent figures like Cecilia Rouse (2021–2023), Alan Krueger (2011–2013), Austan Goolsbee (2010–2011), Christina Romer (2009–2010), and Janet Yellen (1997–1999) have all been associated with the NBER. Even former Federal Reserve Chair Ben Bernanke served in this capacity.

Other Distinguished Scholars: Beyond these specific categories, a wide array of other influential economists are affiliated with the NBER, including Alberto Alesina , Susan Athey , Robert Barro , Olivier Blanchard , John H. Cochrane , Aaron Edlin , John Lipsky , Francis Longstaff , Alan Marcus , Richard N. Rosett , Anna Schwartz , Eduardo Schwartz , Andrei Shleifer , and Richard Zeckhauser .

The Financial Lifeline: Funding Sources

The NBER’s operational capacity is sustained through a diversified funding model. This includes grants from government agencies, support from private foundations, contributions from corporations and individuals, and returns from its investment portfolio. Key governmental benefactors include the National Institutes of Health , the National Science Foundation , and the Social Security Administration . The Alfred P. Sloan Foundation is also a significant contributor.

Influence and the Art of Recession Dating

The NBER holds a unique position in the economic landscape, particularly concerning the designation of recessions. A 2010 report by the University of Pennsylvania ranked the NBER as the second most influential domestic economic policy think tank, trailing only the Brookings Institution .

The Arbiter of Downturns (Sort Of): The NBER is perhaps most widely recognized for its role in establishing the official start and end dates of U.S. recessions. While some view them as the definitive arbiter of economic downturns, it’s crucial to understand their methodology. The NBER doesn’t function as a real-time predictor or declarer of recessions. Instead, their Business Cycle Dating Committee operates retrospectively, analyzing data after the fact to pinpoint these significant economic shifts. This practice dates back to the 1960s when the Commerce Department began incorporating the NBER’s business cycle analysis into its publications.

The Committee and Its Process: The Business Cycle Dating Committee, comprising eight distinguished economists selected by the NBER president, is responsible for these designations. Their meetings are not publicly announced and do not follow a fixed schedule. While disagreements within the committee are not uncommon, they typically revolve around the precise start and end points of a recession rather than its existence.

A Broader Definition of Recession: Crucially, the NBER employs a more comprehensive definition of a recession than the commonly cited media standard of two consecutive quarters of declining gross domestic product (GDP). The NBER defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.” This multifaceted approach allows for a more nuanced assessment of economic health.

Why the Broader Approach? The NBER favors this methodology for several reasons:

1. Holistic Assessment: By examining a wider array of economic indicators, including both product-side (like GDP) and income-side (like gross domestic income - GDI) estimates, they aim for a more accurate picture of the economy’s overall condition.
2. Monthly Granularity: The NBER emphasizes monthly indicators to capture economic fluctuations with greater precision, rather than relying solely on quarterly data.
3. Depth of Decline: Their definition allows them to account for the severity of an economic contraction, differentiating between a minor dip and a significant downturn, and potentially identifying periods of economic stagnation .

The Subjectivity Factor: However, the NBER’s definition of “significant decline” is not quantitatively defined. Determinations are made on a case-by-case basis, leading to accusations that committee members might “play politics” in their decisions, as there’s no defined grading scale or weighting for the factors considered. This inherent subjectivity, while allowing for flexibility, also opens the door to criticism. The NBER’s approach also accommodates scenarios where a prolonged economic contraction might not neatly fit the two-quarter negative growth pattern, as observed following the bursting of the dot-com bubble .

Further Exploration

For those seeking to delve deeper into related economic concepts, the Economic Cycle Research Institute is another relevant organization.