Paul Samuelson

Paul Anthony Samuelson (May 15, 1915 – December 13, 2009) was an American economist. He was the first American to win the Nobel Prize in Economics.

Quotes

1940s

Foundations of Economic Analysis (1947; 1983)

• Science is not art. Yet, despite the lack of complete identity between art and science, there is much in common among different creative processes.
  • Introduction to the Enlarged Edition

• Just as Hegel is said to have understood his philosophy for the first time when he read its French translation, Vilfredo Pareto could have learned what it was he meant exactly to say when he read Bergson's 1938 classic.
  • Introduction to the Enlarged Edition

• I was lucky to enter economics in 1932. Analytical economics was poised for its take-off. I faced a lovely vacuum that young economists today can hardly imagine. So much remained to be done. Everything was still in an imperfect state. It was like fishing in a virgin lake: a whopper at every cast, but so many lovely new specimens that the palate never cloyed.
  • Introduction to the Enlarged Edition

• The existence of analogies between central features of various theories implies the existence of a general theory which underlies the particular theories and unifies them with respect to those central features. This fundamental principle of generalization by abstraction was enunicated by the eminent American mathematician E. H. Moore more than thirty years ago. It is the purpose of the pages that follow to work out its implication for theoretical and applied economics.
  • Ch. 1 : Introduction

• The general method involved may be very simply stated. In cases where the equilibrium values of our variables can be regarded as the solutions of an extremum (maximum or minimum) problem, it is often possible regardless of the number of variables involved to determine unambiguously the qualitative behavior of our solution values in respect to changes of parameters.
  • Ch. 2 : The Theory of Maximizing Behavior

• In the preface to the reissue of Risk, Uncertainty and Profit, Frank Knight makes the penetrating observation that under the conditions envisaged above the velocity of circulation would become infinite and so would the price level. This is perhaps an over-dramatic way of saying that nobody would hold money, and it would become a free good to go into the category of shell and other things which once served as money. We should expect too that it would not only pass out of circulation, but it would cease to be used as a conventional numeraire in terms of which prices are expressed. Interest bearing money would emerge. Of course, the above does not happen in real life, precisely because uncertainty, contingency needs, non-synchronization of revenues and outlay, transaction frictions, etc., etc., all are with us. But the abstract special case analyzed above should warn us against the facile assumption that the average levels of the structure of interest rates are determined solely or primarily by these differential factors. At times they are primary, and at other times, such as the twenties in this country, they may not be. As a generalization I should hazard the hypothesis that they are likely to be of great importance in an economy in which there is a “quasi-zero" rate of interest. I think by this hypothesis one can explain many of the anomalies of the United States money market in the thirties.
  • Ch. 5 : Theory of Consumer’s Behavior

Economics (1948-)

The competitive price system adapted from Samuelson, 1961

• Figure 12-6 pulls together in a simplified way the main elements of income determination. Without saving and investment, there would be a circular flow of income between business and the public: above, business pays out wages, interest, rents, and profits to the public in return for the services of labor and property; and below, the public pays consumption dollars to business in return for goods and services.
  Realistically, we must recognize that the public will wish to save some of its income, as shown at the spigot Z. Hence, businesses cannot expect their consumption sales to be as large as the total of wages, interest, rents, and profits.
  • 8th ed., 1970, p. 218

Quotes about Paul Samuelson

• Paul Samuelson is omnipresent in American and even world economics; like Joyce's Humphrey Chimpeden Earwicker or Melville's Confidence Man,. he appears at every turn of history and in every disguise.
  • Kenneth J. Arrow, "Samuelson Collected", Journal of Political Economy Vol. 75, No. 5 (Oct., 1967), pp. 730-737

• Paul’s work combined breadth and intensity. On the one hand, his structures were grounded in a very wide knowledge of the nature of mathematical systems used to describe natural phenomena. On the other, he studied individual questions in economics, sometimes at a very detailed level.
  • Kenneth J. Arrow, Foreword in Samuelsonian economics and the twenty-first century edited by Michael Szenberg, ‎Lall Ramrattan, ‎Aron A.. Gottesman (2006)

• As an intellectual and economist, there were two Samuelsons. There was the mathematical savant who had learned his trade at the feet of Viner, Leontief, Schumpeter and, above all, Wilson. This work had raised him above most of his contemporaries, enabling him to speak with the authority of one of the leading economists of his generation. However, his more popular work was not just a distillation of his abstract theories; it rested not on complex mathematical arguments but involved careful data analysis and familiarity with the way that economic institutions worked. This was the Samuelson, mentored by Hansen during the Second World War, who wrote Economics and whose views were sought by the press and government.
  • Roger Backhouse, "The people’s economist" (10 February, 2020)

• I got to know Paul Samuelson well during 2001-02 when I was a visiting professor at MIT. I would pause every now and then at his office to chit-chat about things. He was into his grey years by then and seemed a bit lonely. His interests were voracious — from the intricacies of science to the lives of people and he liked to chat.
  My last proper conversation with him was on May 15, 2002. I was photocopying something at MIT, when he stopped and said that it was his birthday that day. The Harvard Club would open a special champagne for him and he asked me if my wife and I would come to the Harvard Club. For an economist, that’s the equivalent of Einstein asking a physicist to dinner. I, of course, said yes, expecting lots of people there. It turned out to be a dinner with Samuelson, his charming wife Richa and the two of us. It was one of the most memorable evenings of my life. We — truth be told, mainly he —talked about art, history and, of course, economics.
  • Kaushik Basu, "He left his imprint on every field of economics" (Dec 14, 2009)

• The readers of this space know Paul Samuelson as a witty, informed and often acerbic commentator on current affairs, as a “liberal” supporter of the economic policies of the Kennedy and Johnson years, and as a critic of current Nixon economic policy.
  Millions of college graduates know Paul Samuelson for his economics textbook, which has been the leading elementary text in the United States for two decades, has sold nearly 3 million copies, and is almost surely the best-selling book on economics ever published in the Western world.
  Professional economists know Paul Samuelson as a mathematical economist who has ranged widely and deeply, who has helped to reshape and improve the theoretical foundations of our subject. This is the work for which this remarkably versatile man won the Nobel Prize. In the words of the announcement, the prize was awarded “for the scientific work through which he has developed static and dynamic economic theory and actively contributed to raising the level of analysis in economic science.”
  • Milton Friedman, "Paul Samuelson", Newsweek (9 November 1970)

• Another big influence was Samuelson's Foundations, which I read when I stated here at Chicago. It's a "how-to-do-it" book. a great book for first-year graduate students. It says, "Here's the way you do it." It lets you in on the secret of how you play the game, as opposed to cutting you off with big words. I think the combination of Samuelson's book plays Friedman's class was what got me going.
  • Robert E. Lucas, in Conversations with Economists (1983) by Arjo Klamer

• The only way I feel I understand something is if I can write it down in a model and make it work. I felt that from the beginning. That's why I liked Samuelson's book. He'll take these incomprehensible verbal debates that go on and on and never end and just end them; formulate the issue in such a way that the question is answerable, and then get the answer.
  • Robert E. Lucas, in Conversations with Economists (1983) by Arjo Klamer

• Samuelson says I was wrong and he was right, and he froths at the mouth when people talk about the lighthouse example. He says Coase is wrong; he doesn't overcome the free rider problem. Who are the free riders? The foreign ships going past the British coast which do not call at a British port. Using Samuelson's approach, what do you do? Do you ask the foreign governments to give you a subsidy? Do you tax people in Britain because the foreign ships are getting help without paying for it? What do you do?
  My approach is to compare the alternatives. People like Samuelson like to set up a perfect world and say that the market does not bring us to this point and imply that the government should do something. They stop their analysis at that point.
  • Ronald Coase, in "Looking For Results" (1997)

• Between meals I arranged a light, informal trivia competition. Had answers been counted, he would have won hands down. He even knew the third president—of Finland—a question I threw in as a joke.
  • Bengt Holmstrom, quoted in Michael Szenberg, Lall Ramrattan and Aron Gottesman, "Ten Ways to Know Paul A. Samuelson" (2006)

• Generally speaking, Samuelson's contribution has been that, more than any other contemporary economist, he has contributed to raising the general analytical and methodological level in economic science. He has in fact 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.
  • Award Ceremony Speech 1970 at nobelprize.org, by Professor Assar Lindbeck, Stockholm School of Economics.

• Of course, one can go back to high school or, in my case, junior college and find roots; there are some indeed, but my professional beginnings were in the Berkeley that existed just before World War II and the scholarship I won to MIT. There I met the dazzling wunderkind Paul Samuelson. When I was browsing in the Berkeley library and came across early issues of Econometrica, Samuelson’s contributions caught my eye. When I got an opportunity to go to MIT, it was the possibility of working with Samuelson that confirmed all my choices. I was attached to him as a graduate assistant from the outset, and I tried to maximize my contact with him, picking up insights that he scattered on every encounter.
  Working with Samuelson, who was at the forefront of interpreting Keynesian theory for teaching and policy application, I was put immediately in the midst of two challenging contests—one to gain acceptance for a way of thinking about macroeconomics and another to gain acceptance for a methodology in economics, namely, the mathematical method. Later, both challenges were to be overcome, but for ten or twenty years opposition was fierce.
  Once Samuelson’s Economics became a widely used text in first courses in the subject, Keynesian economics was firmly embedded. There was no turning back from that achievement. The successive student generations turned more toward the mathematical approach in graduate school, and they taught or did research in this vein. That eventually established the mathematical method, first in the United States, then in Europe, Japan, India, and other centers. Much of the foundation was built in Europe, and many of the American masters at mathematical economics were immigrants, but Samuelson, Friedman, and others gave it a native-born American flavor, and the approach truly caught on in this country.
  • Lawrence R. Klein, Lecture at Trinity University in October 1984, published in Lives of the Laureates (5th ed., 2009), edited by William Breit and Barry T. Hirsh,

• He knows history. If he had a Hungarian sitting at his side at the dinner table, he would quote easily names of politicians or novelists of the Austrian–Hungarian empire of the late 19th century. He also understands the significance of the history of a country. This is a rare quality at a time when the education of economists has become excessively technical.
  • János Kornai, quoted in Michael Szenberg, Lall Ramrattan and Aron Gottesman, "Ten Ways to Know Paul A. Samuelson" (2006)

• [Paul] mentioned that he had heard about a piece I had written on Irving Fisher. I have no idea how he heard about it, but I offered to send him a copy and within a few days I got back a letter. [Paul] read the paper and wanted to set down his own interpretation, but then he closes the letter with a remarkable line that I treasure: ‘Do disregard my heresies and follow your own star.’
  • Perry Mehrling, quoted in Michael Szenberg, Lall Ramrattan and Aron Gottesman, "Ten Ways to Know Paul A. Samuelson" (2006)

• Samuelson is an artist; he brought undergraduates pretty well up to the level of the state of knowledge in the profession.
  • Edward C. Prescott, interview in Brian Snowdon and Howard R. Vane. Modern macroeconomics: its origins, development and current state. (2005)

• There have been hedgehogs; there have been foxes; and then there was Paul Samuelson. (...) I’m referring, of course, to Isaiah Berlin’s famous distinction among thinkers – foxes who know many things, and hedgehogs who know one big thing. What distinguished Paul Samuelson as an economic thinker, making him like nobody else, past or present, was the fact that he knew – and taught us – many big things. No economist has ever had so many seminal ideas.
  • Paul Krugman, "Paul Samuelson: The incomparable economist" (2009)

• One recent history of economic thought (Jürg Niehans’s A History of Economic Theory) devotes twenty-four pages to Samuelson’s ideas. Adam Smith only gets thirteen. Samuelson’s work on stock markets and the random walk takes up less than two of those twenty-four pages. He was “the last generalist in economics,” as he liked to say, and for him financial market studies were just a side project that he at times seemed deeply ambivalent about. His intervention was, however, crucial to the triumph of the random walk. Here was one of the most important economists of all time, and he didn’t think the relationship between coin flips and the stock market was a dinner-speech triviality.
  • Justin Fox, Myth of Rational Market (2009), Ch. 4 : A Random Walk from Paul Samuelson to Paul Samuelson

• A few years ago, I had the good fortune of running across a first edition of Paul's textbook (not the recent reprint of the original text, but an actual 1948 edition). It was a real find. I bought the volume in an online auction for, if my recollection is correct, $35. Talk about consumer surplus! I would have gladly paid many times that.
  At the next Boston Fed meeting, I took the book along to get Paul to sign it. Below is the book's title page, along with Paul's gracious inscription.
  • Greg Mankiw, "Memories of Paul" (December 15, 2009)

• John Maynard Keynes may have had more influence on policy makers, Milton Friedman on citizens, Kenneth Arrow on economic theory, but Samuelson had more influence on the way economics is done today, and the purposes to which it is put, than any other economist of the twentieth century.
  • David Warsh, "The Enormous Black Box" (2009)

• He was influential. He influenced students through his textbook, and he influenced the entire economics profession through his dissertation, published as "Foundations of Economic Analysis." Readers of this blog will tend to disapprove of his influence, in that it promoted Keynes and the use of mathematical modeling. Perhaps Milton Friedman was more influential on policy. But Samuelson was more influential on the internal dynamics of the economics profession. On that score, I would say that he was without peer in this century. […] Compared with later generations of economists, he was more nuanced in his thinking and not as capable a mathematician.
  • Arnold Kling, Thoughts on the Late Paul Samuelson (2009)

• Many principles of economics were hidden in obscure verbiage of previous generations; he reformulated and extended them with crystal clarity in the language of mathematics.
  • Avinash Dixit, "Paul Samuelson's Legacy" (2012)

External links

• "Paul A. Samuelson (Ideological Profiles of the Economics Laureates)," by Daniel B. Klein, and Ryan Daza. Econ Journal Watch 10.3 (2013): 561-569.