What’s at stake: Paul A. Samuelson, the first American Nobel laureate in economics whose analytical work laid the foundation for modern economics, died Sunday 13 December at his home in Belmont, Mass. He was 94.
Lawrence Summers, nephew of Mr. Samuelson, says that he used to proudly remark that he had never spent a full week in Washington. But through his research, teaching, and writing he had more impact on the economic life of this country and the world than any government economic official and many presidents.
Avinash Dixit has the best description of Samuelson’s contribution to economic research (it’s a bit technical though, so non academic should favour the New-York Times’ obituary). Dixit notes that Samuelson took numerous principles of economics that were hidden in obscure verbiage by previous generations, and reformulated them with crystal clarity in the language of mathematics. In the process he always found new results, many of which launched new fields, or revolutions in stagnant fields. More than anyone else in the latter half of the twentieth century, Samuelson changed the way economists think and write.
Robert Lucas says that Samuelson was the Julia Child of economics, somehow teaching you the basics and giving you the feeling of becoming an insider in a complex culture all at the same time. Like so many others in his cohort, Lucas says that he internalized Samuelson’s view that if he couldn’t formulate a problem in economic theory mathematically, he didn’t know what he was doing. He came to the position that mathematical analysis is not one of many ways of doing economic theory: It is the only way. Economic theory is mathematical analysis. Everything else is just pictures and talk.
Paul Krugman says Samuelson’s realism – his understanding that markets are great things but need to be supported by government activism — has never seemed more relevant than it does now. Samuelson was, intellectually, a Depression baby – he came of intellectual age in an environment of mass unemployment. His textbook brought Keynesian thinking to a broad audience. And he never forgot that markets can malfunction terribly. How, then, could economic theory on the virtues of markets be of any real-world use? Samuelson’s answer was that good macro policies come first. Monetary and fiscal policy had to be employed to assure more or less full employment. Exchange rates had to be adjusted to assure competitiveness. Only then could the virtues of markets come into play. It was a lesson that too many economists forgot, as they immersed themselves in the lovely math of perfect markets.
The Atlantic has a very interesting interview with Samuelson from June 2009. The first part of the conversation is mostly economic history – the rise and fall (and rise) of Keynes, the influence of Milton Friedman, and the era of Alan Greenspan. Part two covers current events – the need for a more stimulus spending and how his nephew is doing running the economy. At the end of the interview, he speculates on where the big developments in macro are going to be and says that, contrary to what he would have said when he was younger, he recommends to have a very healthy respect for the study of economic history, because that's the raw material out of which any of your conjectures or testings will come. But history doesn't tell its own story. You've got to bring to it all the statistical testings that are possible. And we have a lot more information now than we used to.
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