Paul Samuelson

• 1. Introduction

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  Paul Samuelson stood at a lectern in a University of Chicago classroom on the 2nd of January, 1932, and later said that was the exact moment he was born as an economist. He was sixteen years old. The lecture that morning was on Thomas Malthus, the British economist whose work on population growth had unsettled readers for over a century. Something clicked for Samuelson that could not be undone. What was it about that classroom, that subject, that particular morning that set off seven decades of work reshaping how the entire world thinks about money, markets, and government? And how did a pharmacist's son from Gary, Indiana, end up rewriting, in the Nobel committee's own words, considerable parts of economic theory?

• 2. Gary to Cambridge

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  Frank Samuelson was a pharmacist in Gary, Indiana, a brand-new steel town when the family settled there. Paul Samuelson was born on the 15th of May, 1915, and later described his family as upwardly mobile Jewish immigrants from Poland who had prospered considerably during the First World War, because Gary's steel mills were running at full capacity. In 1923, the family moved to Chicago, where Paul graduated from Hyde Park High School.

  At the University of Chicago, he earned his Bachelor of Arts in 1935 and felt a nagging dissonance between the prevailing neoclassical economics and the way the economic system actually appeared to behave. Henry Simons and Frank Knight were formative influences during those undergraduate years. He credited them openly.

  Harvard followed. He completed a Master of Arts in 1936 and studied under a remarkable group: Joseph Schumpeter, Wassily Leontief, Gottfried Haberler, and Alvin Hansen, whom economists called the American Keynes. His doctoral dissertation won the David A. Wells Prize in 1941 as the best economics dissertation at Harvard that year. That thesis, titled Foundations of Analytical Economics, would become the seed of his most celebrated book.

• 3. The Move to MIT

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  Samuelson joined MIT as an assistant professor in 1940 and never left. His biographer argues that anti-Semitism at Harvard drove the move, a charge Samuelson himself confirmed in a 1989 letter to his friend Henry Rosovsky. In that letter, he named names: Harold Burbank, the department chair, along with Edward Chamberlin, John H. Williams, John D. Black, and Leonard Crum. The anti-Semitism at Harvard economics, he wrote, rested above all on Burbank.

  At MIT he rose from assistant professor to associate professor in 1944, then to full professor of economics in 1947, and eventually to Institute Professor beginning in 1962. That title, Institute Professor, is MIT's highest academic rank. He also served a wartime stint in the Radiation Laboratory from 1944 to 1945 and held a part-time position at the Fletcher School of Law and Diplomacy in 1945. A Guggenheim Fellowship followed from 1948 to 1949.

  His family became a dynasty of sorts. His brother Robert Summers was an economist. His sister-in-law was Anita Summers. His brother-in-law was Kenneth Arrow. His nephew was Larry Summers. Economic thought, it turned out, ran deep in both directions through that bloodline.

• 4. Foundations of Economic Analysis

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  Samuelson's 1946 book Foundations of Economic Analysis is considered his magnum opus. It grew directly from that prize-winning dissertation and drew its inspiration, unusually, from the classical methods of thermodynamics. The book proposed to examine underlying analogies between central features of theoretical and applied economics and to show how operationally meaningful theorems could be derived using a small set of analogous methods.

  Two hypotheses anchored the whole structure. First: all actors, whether firms or consumers, are engaged in maximizing behavior. They may be chasing profit, utility, or wealth, but the drive to maximize provided a single common model for every agent in an economic system. Second: economic systems tend toward stable equilibrium. Samuelson was less interested in the equilibrium itself than in what happens when it is disturbed. How does a market respond when a tax changes, or a new technology arrives? The book made comparative statics, the analysis of how equilibrium shifts when one parameter changes, formally rigorous.

  The chapter on welfare economics developed what became known as the Bergson-Samuelson social welfare function: a mathematical way to represent any belief system that ranks different social configurations as better, worse, or equal. Samuelson called mathematics the natural language for economists, and this book was the argument in full.

• 5. The Textbook That Taught the World

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  In 1948, Samuelson published Economics: An Introductory Analysis. It sold more than 300,000 copies of each edition between 1961 and 1976, was eventually translated into forty-one languages, and by sometime before 1988 had become the best-selling economics textbook of all time. As of 2018, total sales had crossed four million copies.

  Samuelson was blunt about his ambition. He was once quoted as saying, let those who will write the nation's laws if I can write its textbooks. The book was written in the shadow of the Great Depression and the Second World War, and its central preoccupation was how to avoid, or at least soften, the recurring slumps in economic activity. It was the second American textbook to introduce Keynesian economics, following Lorie Tarshis's 1947 Elements of Economics. But Samuelson's version reached an entirely different scale.

  He did not shy away from the stakes. He wrote in the book that the widespread creation of dictatorships and the resulting Second World War stemmed in no small measure from the world's failure to address the Great Depression adequately. That was not a throwaway line; it was a thesis about the political consequences of economic failure. William F. Buckley Jr. devoted an entire chapter of his 1951 book God and Man at Yale to attacking both Samuelson's and Tarshis's textbooks, characterizing them in the words of economist Paul Davidson as communist inspired. Buckley defended those criticisms for the rest of his life. William Nordhaus joined Samuelson as co-author on the 12th edition, published in 1985.

• 6. Advising Presidents and Sparring with Friedman

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  Samuelson served as an economic adviser to President John F. Kennedy and President Lyndon B. Johnson. He was also a consultant to the United States Treasury, the Bureau of the Budget, and the President's Council of Economic Advisers. These were not ceremonial roles; Samuelson's version of Keynesian economics, what he called a Cafeteria Keynesian approach, meaning he accepted only what he found genuinely sound in Keynes, shaped American economic policy during a critical postwar generation.

  For years he wrote a weekly column in Newsweek alongside Milton Friedman of the Chicago School, the two of them representing opposite poles of economic thought: Samuelson the Keynesian, Friedman the monetarist. Together with Henry Wallich, their 1967 columns earned Newsweek a Gerald Loeb Special Award in 1968.

  Samuelson was not gentle in print. He called unregulated markets fundamentally unstable, writing that free markets do not stabilise themselves, that zero regulating is vastly suboptimal to rational regulating. He dismissed libertarianism with the blunt phrase it is its own worst enemy. He attacked Friedman and Friedrich Hayek by name, arguing their opposition to state intervention tells us something about them rather than something about Genghis Khan or Franklin Roosevelt. He called it paranoid to warn against inevitable slippery slopes once any commercial freedom is infringed.

• 7. The Nobel and the Legacy

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  In 1970, the Swedish Royal Academies awarded Samuelson the Nobel Memorial Prize in Economic Sciences, making him the first American to receive it. The committee's citation said he had done more than any other contemporary economist to raise the level of scientific analysis in economic theory, and that he had simply rewritten considerable parts of economic theory. He was also one of the founders of neo-Keynesian economics and a central figure in building the neoclassical synthesis, the framework blending Keynesian and neoclassical principles that still dominates mainstream economics today.

  In 1996, he received the National Medal of Science. In 2003, he was among the ten Nobel Prize-winning economists who signed a statement opposing the Bush tax cuts. His collected scientific papers run to 388 items, and Stanley Fischer wrote that taken together they are unique in their verve, breadth of economic and general knowledge, mastery of setting, and generosity of allusions to predecessors.

  The mathematician Stanislaw Ulam once challenged Samuelson to name a single theory in the social sciences that is both true and nontrivial. Samuelson eventually answered with David Ricardo's theory of comparative advantage, noting that it is not trivial because thousands of important and intelligent men have never been able to grasp the doctrine for themselves or to believe it after it was explained to them. Samuelson died on the 13th of December, 2009, after a brief illness, at the age of 94. MIT president Susan Hockfield said he had transformed everything he touched, including the investment practices of MIT itself.