Reflections on Paul Samuelson and MIT Economics

I have finished my first path through the Weintraub volume. Here are my thoughts now:

1. There truly was a dramatic break between pre-war and postwar economics. Before the second World War, you could still see economics as a branch of social and political philosophy. And as philosophers, economists were worried about what they could and could not know. After the war, the discipline became dominated by modeling. Some of that was a long-term trend, and some of it came from the fact that modeling was applied to some aspects of the war effort itself.

2. Samuelson and Solow were part of a transitional generation. They were exponents of the newer modeling culture, but they still had plenty of doubts about the assumptions embedded in models.

3. The next generation of MIT economists, I would argue, was never trained to question assumptions. Once a particular equation had become customary, because a lot of papers used that equation, you just treated the equation as true. Think of the Cobb-Douglas production function, or the expectations-augmented Phillips Curve.

4. Samuelson’s self-image was that of an ideologically neutral technocrat. In the Weintraub volume, Harro Maas writes,

Technicality implied impartiality and detachment. Samuelson thus exemplifies for economics the general move of science in the postwar era to define itself as technical, a move that fit well with the teaching and research profile that MIT developed in the postwar era.

And later,

Samuelson did not consider it his task to be partisan for one particular line of economic policy, or to compromise between opposite policy positions, but to step back, or better “step aside,” and offer an analytical perspective from which to choose.

5. Of course, I would view Samuelson’s very framework as ideologically loaded. Samuelson took a “seeing like a state” approach to economics. Whether it was a social welfare function, a Keynesian multiplier, the doctrine of revealed preference, the Phillips Curve, or the production function, he focused on tools for helping policy makers control an economy. With such tools, the policy maker could know enough to direct economic activity. Samuelson was not troubled by Hayekian concerns about local knowledge.

3 thoughts on “Reflections on Paul Samuelson and MIT Economics

  1. Good post. I used Samuelson’s book in my intro Econ classes and well remember his predictions that the Soviet economy was outperforming ours and would likely eclipse us in the near future. A little humility about capabilities of economics would be very helpful nowadays. I wonder how Paul Krugman would respond to your comments.

  2. Beyond this critique, “Samuelson was not troubled by Hayekian concerns about local knowledge,” both Samuelson and Solow do not seem able to perceive the role of entrepreneurs and economic freedom in producing economic growth. Samuelson was famously claiming that the Soviet economy was as successful as the US economy as late as 1989. Solow denies that economic freedom is a significant factor in economic growth when interviewed by Kling and Schulz for their 2009 “From Poverty to Prosperity.”

    Insofar as Adam Smith and the classical economists were on the right track, that the “system of natural liberty” led to prosperity, the transformation in economics led by MIT in the 1940s obliterated essential Smithian insights that had been inherent in the worldview of classical economics. But from a Samuelson/Solowian perspective, which dominated economics from the 1940s onwards, institutions and entrepreneurs are invisible. The Austrians and the new institutional economists, most of whom acknowledge Hayek as an influence, have gradually succeeded in reminding us of the importance of free enterprise in creating prosperity.

    The dominance of the MIT technocratic perspective slowed the return of Smithian insights. It is tragic that MIT’s technocratic approach dominated economics in the decades during which former colonies became independent nations. Hong Kong was fortunate enough to have had its policies designed by Cowperthwaite, an old school classical liberal. How much more prosperous would the developing world be today had classical liberal economics been the dominant paradigm in the 1940s, 50s, 60s, and 70s?

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