Paul Samuelson

Paul Samuelson
Samuelson in 1997
Born Paul Anthony Samuelson
(1915-05-15)May 15, 1915
Gary, Indiana, US
Died December 13, 2009(2009-12-13) (aged 94)
Belmont, Massachusetts, US
Nationality United States
Institution Massachusetts Institute of Technology
Field Macroeconomics
School or
tradition		 Neo-Keynesian economics
Alma mater University of Chicago, (B.A.)
Harvard University, (Ph.D.)
Doctoral
advisor		 Joseph Schumpeter
Wassily Leontief
Doctoral
students		 Lawrence Klein[1][2]
Robert C. Merton[3]
Influences Keynes • Schumpeter • Leontief • Haberler • Hansen • Wilson • Wicksell • Lindahl
Contributions Neoclassical synthesis
Mathematical economics
Economic methodology
Revealed preference
International trade
Economic growth
Public goods
Awards John Bates Clark Medal (1947)
Nobel Memorial Prize in Economic Sciences (1970)
National Medal of Science (1996)
Information at IDEAS / RePEc

Paul Anthony Samuelson (15 May 1915 – 13 December 2009) was an American economist and the first American to win the Nobel Memorial Prize in Economic Sciences. The Swedish Royal Academies stated, when awarding the prize in 1970, that he "has done more than any other contemporary economist to raise the level of scientific analysis in economic theory".[4] Economic historian Randall E. Parker has called him the "Father of Modern Economics",[5] and The New York Times considered him to be the "foremost academic economist of the 20th century".[6]

Samuelson was likely the most influential economist of the later 20th century.[7] In 1996, when he was awarded the National Medal of Science, considered to be America's top science-honor, President Bill Clinton commended Samuelson for his "fundamental contributions to economic science" for over 60 years.[4] Samuelson considered mathematics to be the "natural language" for economists and contributed significantly to the mathematical foundations of economics with his book Foundations of Economic Analysis.[8] He was author of the best-selling economics textbook of all time: Economics: An Introductory Analysis, first published in 1948.[9] It was the second American textbook that attempted to explain the principles of Keynesian economics. It is now in its 19th edition, having sold nearly 4 million copies in 40 languages, including Russian, French, Greek, Slovak, Chinese, Portuguese, German, Spanish, Polish, Japanese, Czech, Vietnamese, Hungarian, Indonesian, Swedish, Croatian, Dutch, Turkish, Hebrew, Italian, and Arabic.[10] James Poterba, former head of MIT's Department of Economics, noted that by his book, Samuelson "leaves an immense legacy, as a researcher and a teacher, as one of the giants on whose shoulders every contemporary economist stands".[4]

He entered the University of Chicago at age 16, during the depths of the Great Depression, and received his PhD in economics from Harvard. After graduating, he became an assistant professor of economics at Massachusetts Institute of Technology (MIT) when he was 25 years of age and a full professor at age 32. In 1966, he was named Institute Professor, MIT's highest faculty honor.[4] He spent his career at MIT where he was instrumental in turning its Department of Economics into a world-renowned institution by attracting other noted economists to join the faculty, including Robert M. Solow, Franco Modigliani, Robert C. Merton, Joseph E. Stiglitz, and Paul Krugman, all of whom went on to win Nobel Prizes.

He served as an advisor to Presidents John F. Kennedy and Lyndon B. Johnson, and was a consultant to the United States Treasury, the Bureau of the Budget and the President's Council of Economic Advisers. Samuelson wrote a weekly column for Newsweek magazine along with Chicago School economist Milton Friedman, where they represented opposing sides: Samuelson, as a self described "Cafeteria Keynesian",[7] claimed taking the Keynesian perspective but only accepting what he felt was good in it.[7] By contrast, Friedman represented the monetarist perspective.[11] Samuelson died on 13 December 2009, at the age of 94.

Biography

Samuelson was born in Gary, Indiana, on 15 May 1915, to Frank Samuelson, a pharmacist, and the Ella née Lipton. His family, he later said, was "made up of upwardly mobile Jewish immigrants from Poland who had prospered considerably in World War I, because Gary was a brand new steel-town when my family went there".[6] In 1923, Samuelson moved to Chicago where he graduated from Hyde Park High School (now Hyde Park Career Academy). He then studied at the University of Chicago and received his Bachelor of Arts degree there in 1935. He said he was born as an economist, at 8.00am on January 2, 1932, in the University of Chicago classroom.[7] The lecture mentioned the cause was on the British economist Thomas Malthus, who most famously studied population growth and its effects.[12] Samuelson felt there was a dissonance between neoclassical economics and the way the system seemed to behave; he said Henry Simons and Frank Knight were a big influence on him.[13] He next completed his Master of Arts degree in 1936, and his Doctor of Philosophy in 1941 at Harvard University. He won the David A. Wells prize in 1941 for writing the best doctoral dissertation at Harvard University in economics, for a thesis titled "Foundations of Analytical Economics", which later turned into Foundations of Economic Analysis. As a graduate student at Harvard, Samuelson studied economics under Joseph Schumpeter, Wassily Leontief, Gottfried Haberler, and the "American Keynes" Alvin Hansen. Samuelson moved to MIT as an assistant professor in 1940 and remained there until his death.[14]

Samuelson's family included many well-known economists, including brother Robert Summers, sister-in-law Anita Summers, brother-in-law Kenneth Arrow and nephew Larry Summers.

During his seven decades as an economist, Samuelson's professional positions included:

  • Assistant Professor of Economics at M.I.T, 1940, Associate Professor, 1944.
  • Member of the Radiation Laboratory 1944–45.
  • Professor of International Economic Relations (part-time) at the Fletcher School of Law and Diplomacy in 1945.
  • Guggenheim Fellowship from 1948–49
  • Professor of Economics at MIT beginning in 1947 and Institute Professor beginning in 1962.
  • Vernon F. Taylor Visiting Distinguished Professor at Trinity University (Texas) in spring 1989.

Death

Samuelson died after a brief illness on December 13, 2009, at the age of 94.[15] His death was announced by the Massachusetts Institute of Technology.[6] James M. Poterba, an economics professor at MIT and the president of the National Bureau of Economic Research, commented that Samuelson "leaves an immense legacy, as a researcher and a teacher, as one of the giants on whose shoulders every contemporary economist stands".[15] Susan Hockfield, the president of MIT, said that Samuelson "transformed everything he touched: the theoretical foundations of his field, the way economics was taught around the world, the ethos and stature of his department, the investment practices of MIT, and the lives of his colleagues and students".[16]

Fields of interest

As professor of economics at the Massachusetts Institute of Technology, Samuelson worked in many fields, including:

Impact

Samuelson is considered one of the founders of neo-Keynesian economics and a seminal figure in the development of neoclassical economics. In awarding him the Nobel Memorial Prize in Economic Sciences the committee stated:

More than any other contemporary economist, Samuelson has helped to raise the general analytical and methodological level in economic science. He has simply rewritten considerable parts of economic theory. He has also shown the fundamental unity of both the problems and analytical techniques in economics, partly by a systematic application of the methodology of maximization for a broad set of problems. This means that Samuelson's contributions range over a large number of different fields.

He was also essential in creating the neoclassical synthesis, which ostensibly incorporated Keynesian and neoclassical principles and still dominates current mainstream economics. In 2003, Samuelson was one of the ten Nobel Prize–winning economists signing the Economists' statement opposing the Bush tax cuts.[17]

Aphorisms and quotations

Stanislaw Ulam once challenged Samuelson to name one theory in all of the social sciences which is both true and nontrivial. Several years later, Samuelson responded with David Ricardo's theory of comparative advantage: "That it is logically true need not be argued before a mathematician; that is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them."[18]

For many years, Samuelson wrote a column for Newsweek. One article included Samuelson's most quoted remark and a favorite economics joke:

To prove that Wall Street is an early omen of movements still to come in GNP, commentators quote economic studies alleging that market downturns predicted four out of the last five recessions. That is an understatement. Wall Street indexes predicted nine out of the last five recessions! And its mistakes were beauties.[19]

Paul Davidson on Samuelson as a Keynesian

Samuelson consistently maintained he was a "Keynesian," albeit a "Cafeteria Keynesian",[7] and eventually, in later editions of his seminal textbook, even a "post-Keynesian."[20] However, Paul Davidson rejected Samuelson's claim,[21] pointing out discrepancies between John Maynard Keynes's system of analysis and Samuelson's:

  • Samuelson claimed that Keynes's analysis must be based on the rigidity of wages and prices in a Walrasian system. Specifically, Samuelson stated that, in his view, Keynes's analysis is a "very slow adjusting disequilibrium" system where the "full Walrasian equilibrium was not realized" in the short run because, according to Samuelson, prices and wages do not adjust rapidly enough to an exogenous shock.[22] Yet, Keynes, as a student of Alfred Marshall, had based The General Theory's microfoundations on Marshall's microeconomic analysis and not Walrasian analysis. Keynes had explicitly denounced Walras's approach as "wrong."[23]
  • Keynes argued that only in a money-using, entrepreneur economy, where the future is uncertain (and, therefore, cannot be reliably predicted) would money (and all other liquid assets) always be non-neutral - because these assets are used a store for savings.[21] Keynes, essentially, rejected the axiom of ergodicity in economics, since he viewed every economy as a system moving through calendar time from an irrevocable past to an uncertain and statistically impossible to predict future. Yet, Samuelson, in an article published in 1969, argued that the "ergodic hypothesis [axiom]" is a necessary foundation if Economics is to be "hard science."[24]
  • Samuelson was claiming as late as 1986 that "we [Keynesians] always assumed that the Keynesian underemployment equilibrium floated on a substructure of administered prices and imperfect competition," stating that there was no need to formalize this requirement of rigidity.[22] Yet, Keynes showed,[25][26] using Marshallian microfoundations, that a less-than-full employment equilibrium could exist in a purely competitive economy with freely flexible wages and prices.

Publications

The competitive price system adapted from Samuelson, 1961

Foundations of Economic Analysis

Samuelson's book Foundations of Economic Analysis (1946) is considered his magnum opus. It is derived from his doctoral dissertation, and was inspired by the classical thermodynamic methods.[27] The book proposes to:

  • examine underlying analogies between central features in theoretical and applied economics and
  • study how operationally meaningful theorems can be derived with a small number of analogous methods (p. 3),

in order to derive "a general theory of economic theories" (Samuelson, 1983, p. xxvi). The book showed how these goals could be parsimoniously and fruitfully achieved, using the language of the mathematics applied to diverse subfields of economics. The book proposes two general hypotheses as sufficient for its purposes:

  • maximizing behavior of agents (including consumers as to utility and business firms as to profit) and
  • economic systems (including a market and an economy) in stable equilibrium.

In the first tenet, his views presented the idea that all actors, whether firms or consumers, are striving to maximize something. They could be attempting to maximize profits, utility, or wealth, but it did not matter because their efforts to improve their well-being would provide a basic model for all actors in an economic system.[28] His second tenet was focused on providing insight on the workings of equilibrium in an economy. Generally in a market, supply would equal demand. However, he urged that this might not be the case and that the important thing to look at was a system's natural resting point. Foundations presents the question of how an equilibrium would react when it is moved from its optimal point.[28] Samuelson was also influential in providing explanations on how the changes in certain factors can affect an economic system. For example, he could explain the economic effect of changes in taxes or new technologies.

In the course of analysis, comparative statics, (the analysis of changes in equilibrium of the system that result from a parameter change of the system) is formalized and clearly stated.

The chapter on welfare economics "attempt(s) to give a brief but fairly complete survey of the whole field of welfare economics" (Samuelson, 1947, p. 252). It also exposits on and develops what became commonly called the Bergson–Samuelson social welfare function. It shows how to represent (in the maximization calculus) all real-valued economic measures of any belief system that is required to rank consistently different feasible social configurations in an ethical sense as "better than", "worse than", or "indifferent to" each other (p. 221).

Economics

Samuelson is also author (and since 1985 co-author) of an influential principles textbook, Economics, first published in 1948, now in its 19th edition. The book has been translated into forty-one languages and sold over four million copies; it is considered the best-selling economics textbook in history. Samuelson was once quoted as saying, "Let those who will write the nation's laws if I can write its textbooks."[29] Written in the shadow of the Great Depression and the Second World War, it helped to popularize the insights of John Maynard Keynes. A main focus was how to avoid, or at least mitigate, the recurring slumps in economic activity.

Samuelson wrote: "It is not too much to say that the widespread creation of dictatorships and the resulting World War II stemmed in no small measure from the world's failure to meet this basic economic problem [the Great Depression] adequately."[30] This reflected the concern of Keynes himself with the economic causes of war and the importance of economic policy in promoting peace.[31]

Samuelson's influential textbook has been criticized for including comparative growth rates between the United States and the Soviet Union that were inconsistent with historical GNP differences.[32] The 1967 edition extrapolates the possibility of Soviet/US real GNP parity between 1977 and 1995. Each subsequent edition extrapolated a date range further in the future until those graphs were dropped from the 1985 edition.[33]

In 1989, Samuelson commented on the economics of the Soviet Union and Marxism: "Contrary to what many skeptics had earlier believed, the Soviet economy is proof that [...] a socialist, command economy can function and even thrive."[34] The Revolutions of 1989 happened during the same year and the Soviet Union broke up two years later.

Samuelson's book was the second one that attempted to introduce to a wider audience Keynesian economics, yet by far the most successful one. Canadian economist Lorie Tarshis, who had been a student attending Keynes's lectures at Harvard in the 1930s, published in 1947 an introductory textbook that incorporated his Tarshis's lecture notes, titled The Elements of Economics.[35] It was attacked by trustees of, and donors, to American colleges and universities as preaching a "socialist heresy".[21] William F. Buckley Jr. attacked the Tarshis analysis as "communist inspired".[36]

Other publications

There are 388 papers in Samuelson's Collected Scientific Papers. Stanley Fischer (1987, p. 234) writes that taken together they are "unique in their verve, breadth of economic and general knowledge, mastery of setting, and generosity of allusions to predecessors."

Samuelson was co-editor, along with William A. Barnett, of Inside the Economist's Mind: Conversations with Eminent Economists (Blackwell Publishing, 2007), a collection of interviews with notable economists of the 20th century.

Memberships

List of publications

  • Samuelson, Paul A. (1947), Enlarged ed. 1983. Foundations of Economic Analysis, Harvard University Press.
  • Samuelson, Paul A. (1948), Economics: An Introductory Analysis, ISBN 0-07-074741-5; with William D. Nordhaus (since 1985), 2009, 19th ed., McGraw–Hill. ISBN 978-0-07-126383-2
  • Samuelson, Paul A. (1952), "Economic Theory and Mathematics – An Appraisal," American Economic Review, 42(2), pp. 56–66.
  • Samuelson, Paul A (1954). "The Pure Theory of Public Expenditure". Review of Economics and Statistics. 36 (4): 387–89. doi:10.2307/1925895.
  • Samuelson, Paul A. (1958), Linear Programming and Economic Analysis with Robert Dorfman and Robert M. Solow, McGraw–Hill. Chapter-preview links.
  • Samuelson, Paul A. (1960), "Efficient paths of capital accumulation in terms of the calculus of variations", in Arrow, Kenneth J.; Karlin, Samuel; Suppes, Patrick, Mathematical models in the social sciences, 1959: Proceedings of the first Stanford symposium, Stanford mathematical studies in the social sciences, IV, Stanford, California: Stanford University Press, pp. 77–88, ISBN 9780804700214
  • Samuelson, Paul A. (1982), "Quesnay's 'Tableau Economique' as a theorist would formulate it today", in Meek, Ronald (author); Bradley, Ian C. (editor); Howard, Michael C. (editor), Classical and Marxian political economy: essays in honour of Ronald L. Meek, London: Macmillan, pp. 45–78, ISBN 9780333321997.
  • The Collected Scientific Papers of Paul A. Samuelson, MIT Press. Preview links for vol. 1–3 below. Contents links for vol. 4–7.
Samuelson, Paul A. (1966), Vol. 1, 1937–mid-1964.
Samuelson, Paul A. (1966), Vol. 2, 1937–mid-1964.
Samuelson, Paul A. (1972), Vol. 3, mid-1964–1970.
Samuelson, Paul A. (1977), Vol. 4, 1971–76.
Samuelson, Paul A. (1986), Vol. 5, 1977–1985 Description
Samuelson, Paul A. (2011), Vol. 6, 1986–2009. Description.
Samuelson, Paul A. (2011), Vol. 7, 1986–2009.
  • Paul A. Samuelson Papers, 1930s–2010, Rubenstein Library, Duke University.
  • Samuelson, Paul A. (2007), Inside the Economist's Mind: Conversations with Eminent Economists with William A. Barnett, Blackwell Publishing, ISBN 1-4051-5917-0
  • Samuelson, Paul A. (2002), Paul Samuelson and the Foundations of Modern Economics, Transaction Publishers, ISBN 978-0-76-580114-2

See also

References

  1. ↑ Business Cycles and Depressions: An Encyclopedia, p. 361, at Google Books
  2. ↑ De Vroey, Michel; Malgrange, Pierre (2012). "From The Keynesian Revolution to the Klein–Goldberger model: Klein and the Dynamization of Keynesian Theory". History of Economic Ideas. 20 (2): 113–36.
  3. ↑ Merton, Robert C. (1970), Analytical optimal control theory as applied to stochastic and non-stochastic economics. Ph.D. dissertation, Massachusetts Institute of Technology.
  4. 1 2 3 4 Frost, Greg (Dec 13, 2009). "Nobel-winning economist Paul A. Samuelson dies at age 94". MIT News. "In a career that spanned seven decades, he transformed his field, influenced millions of students and turned MIT into an economics powerhouse"
  5. ↑ Parker, Randall E. (2002), Reflections on the Great Depression, Cheltenham: Edward Elgar, p. 25, ISBN 1-84376-335-4
  6. 1 2 3 Weinstein, Michael M. (December 13, 2009). "Paul A. Samuelson, Economist, Dies at 94". New York Times.
  7. 1 2 3 4 5 6 "Paul Samuelson: The last of the great general economists died on December 13th, aged 94", The Economist, 17 December 2009
  8. ↑ Solow, Robert (2010). "On Paul Samuelson". Challenge.
  9. ↑ Skousken, Mark, The Perseverance of Paul Samuelson's Economics
  10. ↑ "Year 107 – 1967: Economics: An Introductory Analysis by Paul A. Samuelson | 150 Years in the Stacks". libraries.mit.edu. Retrieved 2016-04-26.
  11. ↑ Szenberg, Michael; Gottesman, Aron A.; Ramrattan, lall (2005), Paul Samuelson: On Being an Economist, New York: Jorge Pinto Books, p. 18, ISBN 0-9742615-3-X
  12. ↑ Weinstein, Michael M. (14 December 2009). "Paul A. Samuelson, Economist, Dies at 94". The New York Times. ISSN 0362-4331. Retrieved 2016-04-26.
  13. ↑ Parker, Randall E. (2002). Reflections on the Great Depression. Cheltenham: Edward Elgar. pp. 27–28.
  14. ↑ Backhouse, R. E. (2014). "Paul A. Samuelson's Move to MIT". History of Political Economy. 46: 60. doi:10.1215/00182702-2716118.
  15. 1 2 "Nobel economics laureate Samuelson died at 94". Reuters. December 13, 2009.
  16. ↑ "Economics revolutionary Paul Samuelson dies aged 94", The Daily Telegraph, 14 December 2009
  17. ↑ "Economists' statement opposing the Bush tax cuts". 3 April 2003. Retrieved 31 October 2007.
  18. ↑ Samuelson, Paul (1969), "The Way of an Economist", in Samuelson, P. A., International Economic Relations: Proceedings of the Third Congress of the International Economic Association, London: Macmillan, pp. 1–11
  19. ↑ Samuelson, Paul (September 19, 1966), "Science and Stocks", Newsweek, p. 92
  20. ↑ "...In recent years 90 percent of American economists have stopped being 'Keynesian economists' or 'anti-Keynesian economists' . Modern economists are 'post-Keynesians', rendering obsolete any theories that cannot meet the test of experience." Samuelson, Economics, 2009
  21. 1 2 3 Davidson, Paul. "What was the primary factor encouraging mainstream economists to marginalize post-Keynesian theory?" Journal of Post-Keynesian Economics, vol.37, no.3, spring 2015, pp.369-383
  22. 1 2 Colander, D.C. & Landreth, H. The Coming of Keynesianism To America, Cheltenham: Elgar, 1996
  23. ↑ "...The analysis of the previous chapters made it plain that [the] account of the matter [in Walras] must be erroneous...this [the Walrasian system] is a nonsense theory." From Keynes General Theory (1936) pp. 177, 179
  24. ↑ Samuelson, Paul. "Classical and Neoclassical Theory", in R.W.Clower (ed.) Monetary Theory, London: Penguin, 1969, pp. 51-73
  25. ↑ Keynes, General Theory (1936) ch. 19
  26. ↑ Keynes, J.M. "Relative Movements of Real Wages; and Output", Economic Journal, 49, 1939
  27. ↑ Liossatos, Panagis, S. (2004). "Statistical Entropy in General Equilibrium Theory," (pg. 3). Department of Economics, Florida International University.
  28. 1 2 Solow, Robert (15 Jan 2010). "Paul A. Samuelson (1915–2009)". Science.
  29. ↑ "Paul Anthony Samuelson: The Concise Encyclopedia of Economics | Library of Economics and Liberty". www.econlib.org. Retrieved 2016-04-26.
  30. ↑ See Mankiw, Gregory (January 10, 2009), "Is government spending too easy an answer?", New York Times
  31. ↑ See Markwell, Donald (2006), John Maynard Keynes and International Relations: Economic Paths to War and Peace, New York: Oxford University Press, ISBN 0-19-829236-8
  32. ↑ Levy, David M.; Peart, Sandra J. (December 3, 2009), "Soviet Growth & American Textbooks", SSRN Working Paper, pp. 8–12, SSRN 1517983, the optimistic forecast of time before the Soviet overtaking is 23 years; the more pessimistic time to overtaking in the max-max world is 36 years. The non-overtaking trajectory is constructed on the specification that something reduces Soviet growth in out years below what simple extrapolation would have it.
  33. ↑ Bethell, Tom (October 1999). "The Soviet Experiment". The noblest triumph: property and prosperity through the ages. Palgrave MacMillan. p. 151. ISBN 978-0-312-22337-3.
  34. ↑ Samuelson, Paul (1989). Economics, 13th Ed. McGraw Hill. p. 837.
  35. ↑ Tarshis, Lorie. The Elements of Economics: An Introduction to the Theory of Price and Employment. Houghton-Mifflin, 1947, ASIN: B0006D85FI
  36. ↑ Buckley, William F. God and Man at Yale, 1951

Further reading

  • Dixit, Avinash (2012), "Paul Samuelson's Legacy", Annual Review of Economics, Annual Reviews, 4: 1–31, doi:10.1146/annurev-economics-080511-110957
  • Fischer, Stanley (1987), "Samuelson, Paul Anthony", The New Palgrave: A Dictionary of Economics, London: Macmillan, 4, pp. 234–41, ISBN 0-935859-10-1 .
  • Silk, Leonard (1976), The Economists, New York: Basic Books, ISBN 0-465-01810-6 .
  • Sobel, Robert (1980), The Worldly Economists, New York: Free Press, ISBN 0-02-929780-X .
  • Fusfeld, Daniel R. (2002), "The Neoclassical Synthesis", The Age of the Economist (9th ed.), Boston: Addison-Wesley, pp. 198–201, ISBN 0-321-08812-3 .
  • Paul Samuelson at the Mathematics Genealogy Project
  • Biography at the Nobel e-Museum
  • 1970 Press Release, Nobel Prize in Economics
  • Presentation Speech by Professor Assar Lindbeck, Stockholm School of Economics, Award Ceremony, The Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel, 1970
  • A History of Economic Thought biography, 2004
  • Paul Anthony Samuelson (1915–2009). The Concise Encyclopedia of Economics. Library of Economics and Liberty (2nd ed.). Liberty Fund. 2009.
  • Paul Samuelson, Yale Honorands biography, May 2005
  • "Nobel-winning economist Paul A. Samuelson dies at age 94", MIT News, 13 December 2009
  • Appearances on C-SPAN
  • Paul Samuelson publications indexed by Google Scholar
  • "Paul A. Samuelson". JSTOR.
Awards
Preceded by
Ragnar Frisch
Jan Tinbergen		 Laureate of the Nobel Memorial Prize in Economics
1970		 Succeeded by
Simon Kuznets
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