Paul Anthony Samuelson (May 15, 1915 – December 13, 2009) was an American economist who was the first American to win the Nobel Memorial Prize in Economic Sciences. When awarding the prize in 1970, the Swedish Royal Academies stated that he "has done more than any other contemporary economist to raise the level of scientific analysis in economic theory".[6]
Samuelson was one of the most influential economists of the latter half of the 20th century.[7][8] In 1996, when he was awarded the National Medal of Science.[6] 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.[9] He was author of the best-selling economics textbook of all time: Economics: An Introductory Analysis, first published in 1948.[10] It was the second American textbook that attempted to explain the principles of Keynesian economics.
Samuelson was born in Gary, Indiana, on May 15, 1915, to Frank Samuelson, a pharmacist, and 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".[13] In 1923, Samuelson moved to Chicago where he graduated from Hyde Park High School (now Hyde Park Career Academy).
Samuelson attended the University of Chicago as an undergraduate, earning a Bachelor of Arts degree in 1935. He said he was born as an economist at 8:00 am on January 2, 1932, in the University of Chicago classroom.[7] The lecture mentioned as the cause was on the British economist Thomas Malthus, who most famously studied population growth and its effects.[13] 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.[14] 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.[15] Samuelson's biographer argues that a central reason for Samuelson's move from Harvard to MIT was the anti-Semitism that was famously widespread at Harvard at the time. In a 1989 letter to his friend Henry Rosovsky, Samuelson blamed anti-Semitism in Harvard economics above all on chair Harold Burbank, as well as on Edward Chamberlin, John H. Williams, John D. Black, and Leonard Crum.[16]
Samuelson died after a brief illness on December 13, 2009, at the age of 94.[17] His death was announced by the Massachusetts Institute of Technology.[13]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".[17]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".[18] His second wife died in 2019.
As professor of economics at the Massachusetts Institute of Technology, Samuelson worked in many fields, including:
Consumer theory, where he pioneered the revealed preference approach, which is a method by which one can discern a consumer's utility function, by observing their behavior. Rather than postulate a utility function or a preference ordering, Samuelson imposed conditions directly on the choices made by individuals – their preferences as revealed by their choices.
Welfare economics, in which he popularised the Lindahl–Bowen–Samuelson conditions (criteria for deciding whether an action will improve welfare) and demonstrated in 1950 the insufficiency of a national-income index to reveal which of two social options was uniformly outside the other's (feasible) possibility function (Collected Scientific Papers, v. 2, ch. 77; Fischer, 1987, p. 236).
Market economics: Samuelson believed unregulated markets have drawbacks, he stated, "free markets do not stabilise themselves. Zero regulating is vastly suboptimal to rational regulating. Libertarianism is its own worst enemy!" Samuelson strongly criticised Friedman and Friedrich Hayek, arguing their opposition to state intervention "tells us something about them rather than something about Genghis KhanorFranklin Roosevelt. It is paranoid to warn against inevitable slippery slopes ... once individual commercial freedoms are in any way infringed upon."[7]
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.
Stanislaw Ulam once challenged Samuelson to name one theory in all of the social sciences that 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."[20]
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.[21]
In the early editions of his famous, bestselling economics textbook Paul Samuelson joked that GDP falls when a man "marries his maid".[22]
Publications
[edit]The competitive price system adapted from Samuelson, 1961
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 behaviorofagents (including consumers as to utility and business firms as to profit) and
Economic systems (including a market and an economy) in stable equilibrium.
The first tenet suggests 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.[24] His second tenet focuses on providing insight on the workings of equilibrium in an economy. Generally in a market, supply would equal demand. However, he noted that this isn't always 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.[24] 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).
Samuelson is also author (and from 1985 co-author) of an influential principles textbook, Economics, first published in 1948 (19th ed. as of 2010; multiple reprints). The book sold more than 300,000 copies of each edition from 1961 through 1976 and was translated into forty-one languages. As of 2018, it had sold over four million copies. William Nordhaus joined as co-author on the 12th edition (1985). Sometime before 1988, it had become the best-selling economics textbook of all time.[25][26]
Samuelson was once quoted as saying, "Let those who will write the nation's laws if I can write its textbooks."[27] 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."[28] This reflected the concern of Keynes himself with the economic causes of war and the importance of economic policy in promoting peace.[29][30][31]
Samuelson's book was the second to introduce Keynesian economics to a wide audience, and was by far the most successful. 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 lecture notes, titled Elements of Economics.[32][33][34]
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.
Samuelson's textbook was a watershed in introducing the serious study of business cycles to the economics curriculum. It was particularly timely because it followed the Great Depression. The study of business cycles along with the introduction of the Keynesian approach of aggregate demand set the stage for the macroeconomic revolution in America, which then diffused throughout the world through translations into every major language. Generations of students, who then became teachers, learned their first and most influential lessons from Samuelson's Economics. It attracted many imitators, who became successful in different niches of the college market.
The text was not without criticism. While it praised the "mixed economy" of market and government, some found that too radical and attacked it as socialist. As a precursor to criticisms of Samuelson's Economics textbook, Lorie Tarshis's textbook was attacked by trustees of, and donors to, American colleges and universities as preaching a "socialistheresy".[35] Piling on, William F. Buckley, Jr., in his 1951 book, God and Man at Yale, devoted an entire chapter, attacking both Samuelson's and Tarshis' textbooks. For Samuelson's book, Buckley drew from the Educational Examiner and credited it as an "excellent review of Samuelson's text." ("Note to Chapter Two." p. 234)[36][a] For Tarshis' book, Buckley drew from Merwin K. Hart's organization to wit: "I am also grateful to the National Economic Council for its telling analysis of the Tarshis." ("Note to Chapter Two." p. 234)[36] Buckley essentially characterized both as – in the words of Paul Davidson – "communist inspired".[36][34] Buckley, for the rest of his life, defended the criticisms set forth in his book.
One criticism – of a concept that Samuelson added to his Economics textbook – was the comparison of USAgrowth rates with those of the USSR, which, according to the criticism, was inconsistent with historical GNP differences.[37] The textbook's 1967 edition (7th ed.) extrapolates (projects) the possibility of USSR/US realGNP parity between 1977 and 1995. Each subsequent edition extrapolates a date range further in the future until those graphs were dropped from the 1985 edition (12th ed.).[38]
Samuelson, together with Robert Solow, helped develop and popularize the mathematics of the Phillips Curve. The curve suggested that unemployment and inflation were inversely related; with the advent of stagflation in the 1970s some economists including Milton Friedman and Friedrich Hayek attacked the economics based on the Phillips Curve as questionable or mistaken.
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 (eds.). 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. ISBN9780804700214.
Samuelson, Paul A. (1982). "Quesnay's 'Tableau Economique' as a theorist would formulate it today". In Meek, Ronald (author); Bradley, Ian C.; Howard, Michael C. (eds.). Classical and Marxian political economy: essays in honour of Ronald L. Meek. London: Macmillan. pp. 45–78. ISBN9780333321997. {{cite book}}: |editor-first1= has generic name (help)
The Collected Scientific Papers of Paul A. Samuelson, MIT Press. Preview links for vol. 1–3 below. Contents links for vol. 4–7. OCLC1079936608 (all editions).
Samuelson, Paul A. (1966), Vol. 1 → via Google Books, 1937–mid-1964.
Samuelson, Paul A. (1966), Vol. 2 → via Google Books, 1937–mid-1964.
Samuelson, Paul A. (1972), Vol. 3 → via Google Books, mid-1964–1970.
Samuelson, Paul A. (1977), Vol. 4 → via Internet Archive(registration required), 1971–76.
Samuelson, Paul A. (1983). "My Life Philosophy", The American Economist, 27(2), pp. 5–12.
Samuelson, Paul A. (2007), Inside the Economist's Mind: Conversations with Eminent Economists with William A. Barnett, Blackwell Publishing, ISBN1-4051-5917-0
Samuelson, Paul A. (2002), Paul Samuelson and the Foundations of Modern Economics, Transaction Publishers, ISBN978-0-76-580114-2
^The Educational Reviewer was founded in 1949 by Lucille Cardin Crain (née Marie Lucille Gabrielle Cardin; 1901–1983), a conservative activist whose primary interest was in – as she stated in 1951 – "rooting out radical influences in American education." In each issue, arch-conservative academicians and writers offered their views of high school and college textbooks as evidence of collectivist content and the like. The publication, for the first three years, was chiefly financed by William F. Buckley, Jr. Crain's husband, Kenneth Cardwell Crain (1883–1969), was a brother of Gustavus Demetrious Crain, Jr. (1885–1973), founder of Crain Communications.
^ abFrost, Greg (December 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"
^Szenberg, Michael; Gottesman, Aron A.; Ramrattan, lall (2005). Paul Samuelson: On Being an Economist. New York: Jorge Pinto Books. p. 18. ISBN978-0-9742615-3-9.
^Parker, Randall E. (2002). Reflections on the Great Depression. Cheltenham: Edward Elgar. p. 25. ISBN978-1-84376-335-2.
^Backhouse, R. E. (2014). "Paul A. Samuelson's Move to MIT". History of Political Economy. 46: 60. doi:10.1215/00182702-2716118.
^Backhouse, Roger (2017). Founder of Modern Economics: Paul Samuelson, vol. 1: Becoming Samuelson, 1915–1948. Oxford: Oxford University Press. pp. 300–307. ISBN9780190664091.
^Samuelson, Paul (1969). "The Way of an Economist". In Samuelson, P. A. (ed.). International Economic Relations: Proceedings of the Third Congress of the International Economic Association. London: Macmillan. pp. 1–11.
^Samuelson, Paul (September 19, 1966). "Science and Stocks". Newsweek. p. 92.
^See Markwell, Donald (2006). John Maynard Keynes and International Relations: Economic Paths to War and Peace. New York: Oxford University Press. ISBN978-0-19-829236-4.
^Levy, David M.; Peart, Sandra J. (December 3, 2009). "Soviet Growth & American Textbooks". SSRN Working Paper: 8–12. SSRN1517983. 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.
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
