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LATEST NEWS UPDATES | The foremost academic economist of the 20th century by Michael M Weinstein

The foremost academic economist of the 20th century by Michael M Weinstein

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published Published on Dec 15, 2009   modified Modified on Dec 15, 2009

Paul A. Samuelson, the first American Nobel laureate in economics and the foremost academic economist of the 20th century, died Sunday at his home in Belmont, Mass. He was 94.

His death was announced by the Massachusetts Institute of Technology, which Samuelson helped build into one of the world’s great centres of graduate education in economics.

In receiving the Nobel Prize in 1970, Samuelson was credited with transforming his discipline from one that ruminates about economic issues to one that solves problems, answering questions about cause and effect with mathematical rigor and clarity.

When economists “sit down with a piece of paper to calculate or analyze something, you would have to say that no one was more important in providing the tools they use and the ideas that they employ than Paul Samuelson,” said Robert M. Solow, a fellow Nobel laureate and colleague of Samuelson’s at MIT.

Samuelson attracted a brilliant roster of economists to teach or study at the university, among them Solow as well as others who would go on to become Nobel laureates like George A. Akerlof, Robert F. Engle III, Lawrence R. Klein, Paul Krugman, Franco Modigliani, Robert C. Merton and Joseph E. Stiglitz.

Samuelson wrote one of the most widely used college textbooks in the history of American education. The book, Economics, first published in 1948, was the nation’s best-selling textbook for nearly 30 years. Translated into 20 languages, it was selling 50,000 copies a year a half century after it first appeared.

“I don’t care who writes a nation’s laws — or crafts its advanced treatises — if I can write its economics textbooks,” Samuelson said.

His textbook taught college students how to think about economics. His technical work — especially his discipline-shattering Ph.D. thesis, immodestly titled “The Foundations of Economic Analysis” — taught professional economists how to ply their trade. Between the two books, Samuelson redefined modern economics.

The textbook introduced generations of students to the revolutionary ideas of John Maynard Keynes, the British economist who in the 1930s developed the theory that modern market economies could become trapped in depression and would then need a strong push from government spending or tax cuts, in addition to lenient monetary policy, to restore them. Many economics students would never again rest comfortably with the 19th-century view that private markets would cure unemployment without need of government intervention.

That lesson was reinforced in 2008, when the international economy slipped into the steepest downturn since the Great Depression, when Keynesian economics was born. When the Depression began, governments stood pat or made matters worse by trying to balance fiscal budgets and erecting trade barriers. But 80 years later, having absorbed the Keynesian teaching of Samuelson and his followers, most industrialised countries took corrective action, raising government spending, cutting taxes, keeping exports and imports flowing and driving short-term interest rates to near zero.

Samuelson explained Keynesian economics to American presidents, world leaders, members of Congress and the Federal Reserve Board, not to mention other economists. He was a consultant to the U.S. Treasury, the Bureau of the Budget and the President’s Council of Economic Advisers.

His most influential student was John F. Kennedy, whose first 40-minute class with Samuelson, after the 1960 election, was conducted on a rock by the beach at the family compound at Hyannis Port, Mass. Before class, there was lunch with politicians and Cambridge intellectuals aboard a yacht offshore. “I had expected a scrumptious meal,” Samuelson said. “We had franks and beans.”


After the 1960 election, he told the young president-elect that the nation was heading into a recession and that Kennedy should push through a tax cut to head it off. Kennedy was shocked.

“I’ve just campaigned on a platform of fiscal responsibility and balanced budgets and here you are telling me that the first thing I should do in office is to cut taxes?” Samuelson recalled, quoting the president.

Kennedy eventually accepted the professor’s advice and signalled his willingness to cut taxes, but he was assassinated before he could take action. His successor, Lyndon B. Johnson, carried out the plan, however, and the economy bounced back.


Samuelson provided a mathematical structure to study the effect of trade on different groups of consumers and workers. In a famous theorem, known as Stolper-Samuelson, he and a co-author showed that competition from imports of clothes and similar goods from underdeveloped countries, where producers rely on unskilled workers, could drive down the wages of low-paid workers in industrialised countries.

The theorem provided the intellectual scaffold for opponents of free trade. And late in his career, Samuelson set off an intellectual commotion by pointing out that the economy of a country like the United States could be hurt if productivity rose among the economies with which it traded.

Advocate of open trade


Yet Samuelson, like most academic economists, remained an advocate of open trade. Trade, he taught, raises average living standards enough to allow the workers and consumers who benefit to compensate those who suffer, and still have some extra income left over. Protectionism would not help, but higher productivity would.

Paul Anthony Samuelson was born May 15, 1915 in Gary, Ind., the son of Frank Samuelson, a pharmacist, and the former Ella Lipton. His family, he 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.”

But after his father lost much of his money in the years after the war, the family moved to Chicago. Young Paul attended Hyde Park High School, where as a freshman he began studying the stock market. At one point, he helped his algebra teacher select stocks to buy in the boom of the 1920s.

“Hupp Motors and other losers,” he remembered in an interview in 1996. “Proof of the fallibility of systems,” he said.

He left high school at age 16 to enter the University of Chicago. “I was born as an economist on Jan. 2, 1932,” he said. That was the day he heard his first college lecture, on Thomas Malthus, the 18th-century British economist who studied the relation between poverty and population growth. Hooked, he began taking economics courses.

After receiving his bachelor’s degree from Chicago in 1935, he went to Harvard, where he was attracted to the ideas of the Harvard professor Alvin Hansen, the leading exponent of Keynesian theory in America.


Among Samuelson’s fellow students at Harvard was Marion Crawford. They married in 1938. Samuelson earned his master’s degree from Harvard in 1936 and a Ph.D. in 1941. He wrote his thesis from 1937 to 1940 as a member of the prestigious Harvard Society of Junior Fellows. In 1940, Harvard offered him an instructorship, which he accepted, but a month later MIT invited him to become an assistant professor.

Harvard made no attempt to keep him, even though he had by then developed an international following. Solow said of the Harvard economics department at the time: “You could be disqualified for a job if you were either smart or Jewish or Keynesian. So what chance did this smart, Jewish, Keynesian have?”

During World War II, Samuelson worked in MIT’s Radiation Laboratory, developing computers for tracking aircraft, and was a consultant for the War Production Board. After the war, having resumed teaching, he and his wife started a family. When she became pregnant the fourth time, she gave birth to triplets, all boys.

Marion Samuelson died in 1978. Samuelson is survived by his second wife, Risha Clay Samuelson; six children from his first marriage: Jane Raybould, Margaret Crawford-Samuelson, William and the triplet sons, Robert, John and Paul; and 15 grandchildren. Samuelson is also survived by a brother, Robert Summers, a professor emeritus of economics at the University of Pennsylvania and father of Lawrence H. Summers, director of President Barack Obama’s National Economic Council and former secretary of the Treasury under President Bill Clinton and former president of Harvard.

— © 2009 The New York Times News Service


The Hindu, 15 December, 2009, http://www.hindu.com/2009/12/15/stories/2009121555440900.htm
 

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