The Samuelson Story

I am still reading the Backhouse intellectual biography. What a monumental effort! By comparison, it makes Sebastian Mallaby’s biography of Alan Greenspan look like a summer vacation project. But I recommend Mallaby to anyone. Backhouse is for people with a pretty narrow interest in the history of economic thought.

A few more comments.

1. Backhouse sees Samuelson as making a major contribution to clarifying Keynes. I disagree. At most, Samuelson provided the freshman interpretation. But for intermediate courses and above, Hicks was the go-to clarifier, and he preceded Samuelson. Backhouse agrees that the intermediate courses left Samuelson behind.

It seems that a lot of the initial confusion about the simple Keynesian multiplier concerned the process by which it was supposed to play out. You can write down Y = C + I + G and C = a + bY and then solve for Y and C in terms of the other letters, but nobody in the 1930s or 1940s thought in terms of such an instantaneous equilibrium. Instead, they thought in terms of a solution being ground out over time, iterating back and forth between the two equations. There were any number of plausible lag structures, and also a variety of plausible definitions of investment, consumption, and savings.

As Backhouse points out, in hindsight it appears that Keynesian economists were floundering unnecessarily in their attempts to deal with what we now regard as the simplest class of models. Perhaps without Samuelson the floundering would have been worse and more long-lasting. I am not convinced.

But the main reason I do not give Samuelson credit for clarifying Keynes is that Keynesian economics remains unclear to this day. And economists who call themselves Keynesians would be the first to admit that.

2. The conventional narrative is that Samuelson made mid-century economics. His prodigious talent shaped the profession. Backhouse sticks with this narrative.

I would pose an alternative narrative, which is that mid-century economics made Samuelson. Sometimes a movement needs to create a larger-than-life figure. In religion, the larger-than-life figure might be Christ or Mohammed or the Buddha. In a nation at war, it might be Napoleon or Churchill.

In the (seemingly) secular world of Olympic sports, the broadcast network will try to make a few athletes larger than life. And speaking of Keynes, he became a larger-than-life figure in the movement to promote activist macroeconomic policy.

With his unbounded ego, Samuelson moved easily into his heroic role. He was a legend in his own mind, given to overstating both the rigor of his mathematics and the significance of his analysis. Had he appeared at a different point in history, this might have earned him scorn and derision. But when Samuelson arrived as a graduate student at Harvard, there was a strong latent desire, particular among younger economists, to show that they were scientists and to show that they, unlike their elders, knew how to prevent and cure Depressions. So instead of pushing back against his arrogance, his peers heaped praise on his work. In the process, they were raising their own status relative to older economists while creating a new and more exalted public image of the economics profession.

By the way, I think that the same thing happened, to a lesser degree, with some of the stars of 1970s macro, such as Robert E. Lucas, Jr., and Christopher Sims. Some of their peers saw an opportunity to raise their own status by characterizing Lucas and Sims as intellectual giants who towered over everyone else.

My own view is that in economics there are no towering giants, in the sense of economists whose aptitude for the subject far exceeds that of others in their cohort. Some economists are a bit more creative than others, some work much harder than others (Samuelson was certainly exceptional in the efficiency and extent of his work effort), and some play the academic game much better than others. But the distribution of rewards ends up being much more skewed than the distribution of talent.

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4 Responses to The Samuelson Story

  1. B.B. says:

    I do believe the overlapping generations model was a major conceptual breakthrough. It may seem obvious in retrospect; great ideas often do.

    He was a pioneer in the underpinnings of the efficient market hypothesis, and the economics of speculation. He revolutionize finance.

    His insight about how much economics can be understood as constrained maximization or minimization still seems valid.

    Macro was never his strong point.

    Math is just a language. One can say nonsense in math, just like one can say nonsense in French. That is not a criticism of French, or math. I find ideologues who spout nonsensical theories are often hostile toward mathematical rigor because rigor exposes their humbug. “Supply side economics” is one example.

  2. Matthew Gelfand says:

    Thoughtful and thought provoking, as always, Arnold. I would give more credit to Samuelson than you suggest, however. One part of his “Foundations” translated Keynes into mathematical terms, which supported a more thorough vetting of Keynes’s work early on. (Although perhaps Hicks said all that needed saying. I shall have to re-read his book.) In addition, another part of Samuelson’s Foundations works out the entire model of consumer choice under neoclassical assumptions, which I thought was quite elegant if only a partial model. All the rest of consumer theory the profession has written since then has been generalizing the model to more general non-classical assumptions and the implications of those more realistic situations. While Samuelson may have been too “mathy,” as we call it now, his math did help to identify many counter-intuitive findings in the theory of international trade, the randomness of market equilibrium (efficient market hypothesis) and other subject areas.

  3. Adam says:

    Related: the divide between Austrian econ models of entrepreneurship as the creative making of possibilities, and neoclassical econ models of entrepreneurship as simply submerged in the characteristics of the situation https://sweettalkconversation.com/2016/05/29/how-the-entrepreneur-creates-and-is-created/

  4. Andrew' says:

    Wow, very in depth.

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