Who is Paul Samuelson?
Paul Samuelson was a noted academic economist who left a lasting imprint on the field. In 1970, Samuelson was the first American to be awarded the Nobel Memorial Prize in Economics for his outstanding contributions. Upon receiving the award, Samuelson was praised for raising "the level of scientific analysis in economic theory." His legacy includes a college textbook called Economics: An Introductory Analysis, first published in 1948, currently in its 19th edition, and available in 40 languages.
- Paul Samuelson was one of the most influential economists of the 20th century and was awarded the Nobel Prize in 1970.
- Samuelson was the author of a major body of theoretical economics in many areas and of one of the most popular economics textbooks in the U.S.
- Samuelson developed the neoclassical synthesis, which combines neoclassical microeconomics and neo-Keynesian macroeconomics.
Understanding Paul Samuelson
Samuelson attended the University of Chicago and later Harvard University, where he was awarded a PhD in economics, and his 1941 doctoral dissertation was the basis for Foundations of Economic Analysis, published by Harvard Press in 1947. At 25, Samuelson began to teach at the Massachusetts Institute of Technology, where he remained for the rest of his career, becoming a full professor at 32. While at MIT, Samuelson taught generations of students on the principles of economics, and continued research into many aspects of economic theory.
Samuelson also served the U.S. government as an advisor to two presidents, Kennedy and Johnson, and later worked as a consultant to the United States Treasury, the Bureau of the Budget, and the president's Council of Economic Advisers. In 1996, President Clinton lauded Samuelson’s contribution to economics when he presented him with the National Medal of Science, commending him for his “fundamental contributions to economic science” across a 60-year career.
Samuelson was both a serious technical wonk and a populist about the field of economics, digging into such dense research topics as consumer theory, modern welfare economics, linear programming, Keynesian economics, economic dynamics, international trade theory, and logical choice and maximization, while also co-authoring (with Milton Friedman) a column on economic issues for Newsweek magazine.
Samuelson died in 2009 at the age of 94, following a brilliant career in which he made contributions as a teacher, researcher, speaker, and adviser to students and colleagues in the field of economics.
Samuelson’s seminal work, Foundations of Economic Analysis, set the stage for his remarkably productive career as an academic economist. Notably, this work explicitly set his economic analysis in the language of formal mathematical logic, which was to become the dominant paradigm for economic theory and research through to the present day. Foundations presented economic analysis as primarily focused on the formulation and exploration of various problems of constrained optimization and equilibration. His later book Economics first presented what would come to be known as the neoclassical synthesis, which combines neoclassical microeconomics with neo-Keynesian mathematical macroeconomics. Within the frameworks established in these two books, Samuelson would build the remainder of his research career.
Throughout his career, Samuelson would favor a balanced approach between free markets and technocratic regulation of the economy. He argued that individual markets usually tend toward efficiency in a microeconomic sense, but that the macroeconomy was not efficient in general. Samuelson presented his theories as functioning according to individual, rational choice, but did not believe that free markets would stabilize themselves. He strongly criticized free market economists of his era and repeatedly published overly-optimistic projections that the Soviet Union would economically outperform and overtake the U.S. economy by the 1980s or 1990s.
Samuelson developed the concept of revealed preference, which argues that a consumer's utility function can be deduced from their behavior. His application of the mathematics of constrained optimization to consumer behavior deals with consumers’ preferences as revealed by their choices, rather than an assumed utility function. He also made contributions to welfare theory, including the Lindahl–Bowen–Samuelson criteria for determining whether a change in the economy will improve welfare.
Financial Theory and Public Finance
Samuelson contributed to the development of the Efficient Market Hypothesis with a mathematical proof that says if markets are efficient, then asset prices will follow a random walk, though he also argued that observing a random walk in asset prices did not prove that financial markets are efficient (and he did believe that they are). In public finance theory, he developed the theory of public goods and optimal public financing of public goods in a market economy of private goods markets.
Samuelson helped develop and popularize neo-Keynesian mathematical macroeconomics, including the overlapping generations model and use of the multiplier and accelerator effects to explain business cycles and recessions. His most important contribution was his introduction of the neoclassical synthesis. This is the view that, under full employment and macroeconomic equilibrium, an economy based on neoclassical microeconomics of supply and demand could (for the most part) function efficiently. However, that neo-Keynesian theory better described the macroeconomy and supported the necessary government macroeconomic policies to achieve and maintain conditions of full employment, which microeconomic markets require to function efficiently. This general concept of economics is the still the dominant paradigm in economics and economic policy.