The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1970
Paul A. Samuelson
"In this age of specialization, I sometimes think of
myself as the last 'generalist' in economics," wrote Paul Anthony
Samuelson, Professor of Economics at the Massachusetts Institute of
Technology, "with interests that range from mathematical
economics down to current financial journalism. My real interests
are research and teaching... " His work in economic theory has
been in modern welfare economics, linear programming, Keynesian
economics, economic dynamics, international trade theory, logic
choice and maximization. In terms of economic philosophy,
Professor Samuelson calls himself "a 'modern' economist... in the
right wing of the Democratic New Deal economists."
He was born in Gary, Indiana, in 1915. He received the degree of
Bachelor of Arts from Chicago University in 1935, and the degrees of
Master of Arts in 1936, and Doctor of Philosophy in 1941 from
Harvard
University. He was a Social Science Research Council predoctoral fellow
from 1935-1937, a member of the Society of Fellows, Harvard
University, 1937-1940, and a Ford Foundation Research Fellow from
1958-1959. He received honorary Doctor of Laws degrees from
Chicago University and Oberlin College in 1961, and from Indiana University and East Anglia
University (Eng.) in 1966.
He was awarded the David A. Wells Prize in 1941 by Harvard
University, and the John Bates Clark Medal by the American
Economic Association in 1947, as the living economist under
forty "who has made the most distinguished contribution to the
main body of economic thought and knowledge."
Even while a graduate student at Harvard, he had already won
international renown and had made significant contributions to
economic theory. Confronted by contradictions, overlaps, and
fallacies in the classical language of economics, he sought
unification - and clarification - in mathematics. In his first
major work, Foundations of Economic Analysis, published in
1947, he demonstrated that this approach worked. He told
economists that they had been practicing "mental gymnastics of a
peculiarly depraved type," and that they were like
"highly-trained athletes who never run a race." He was not
claiming mathematics as the cure-all or end-all of economic
analysis, but he was insisting that mathematics was essential to
an understanding of what economics was all about.
His Economics: An Introductory Analysis, first published
in 1948, has become the best selling economics textbook of all
time. The textbook has sold more than a million copies and has
been translated into French, German, Italian, Hungarian, Polish,
Korean, Portuguese, Spanish and Arabic. It is now in its fifth
edition. "The book's emphasis on different themes has changed
with the changing of the nation's economic problems," wrote
Business Week in 1959. "The first edition was dominated by
the end-of-the-war worry that widespread unemployment would
return... later editions put growing stress on fiscal and
monetary controls over inflation. In the later editions Samuelson
has worked toward what he calls a 'neoclassical synthesis' of
ancient and modern economic findings. Briefly, his synthesis is
that nations today can successfully control either depression or
inflation by fiscal and monetary policies... Some economists feel
that Samuelson's book... is really his greatest contribution. It
has gone a long way toward giving the world a common economic
language."
He was co-author of Readings in Economics, published in
1955, and has co-authored numerous other works in the field. His
latest book is Linear Programming and Economic Analysis,
written in collaboration with Robert Dorfman and Robert Solow and sponsored by a grant
from the Rand
Corporation. Mathematical economics is applied to practical
problems in international trade, transportation and marketing,
competitive strategy in business and government, industrial
production, and defense planning. Such complex problems of choice
can now be analysed by the mathematical economics which Professor
Samuelson has developed.
He came to M.I.T. in 1940 as an Assistant Professor of Economics
and was appointed Associate Professor in 1944. He served as a
staff member of the Radiation Laboratory from 1944-1945, was Professor
of International Economic Relations (part-time) at the Fletcher School of
Law and Diplomacy in 1945. He was appointed Professor at
M.I.T. in 1947 and is now an Institute Professor. He was a
Guggenheim Fellow from
1948-1949.
Professor Samuelson has served widely as a consultant. He worked
for the National Resources Planning Board from 1941-1943 (in
charge of war-time planning for continuing full employment); the
War Production Board and Office of War Mobilization and
Reconstruction in 1945 (economic and general planning program);
the United
States Treasury, 1945-1952; the Bureau of the Budget in 1952;
the Research Advisory Panel to the President's National Goals
Commission from 1959-1960; the Research Advisory Board Committee
for Economic Development in 1960. He was a member of the National
Task Force on Economic Education from 1960-1961 and has been a
consultant to the Rand Corporation since 1949. He is an informal
consultant for the United States Treasury and the Council of
Economic Advisors. He is also a consultant to the Federal Reserve
Bank. He was Economic Advisor to Senator, candidate, and
President-elect Kennedy and was the author of the January 5, 1961
"Samuelson Report on the State of the American Economy to
President-elect Kennedy." His consultation for the government has
brought him national recognition as an economic advisor. In 1965
he was elected president of the International Economic
Association.
Contributing in 1958 to a symposium sponsored by the Committee
for Economic Development on "What is the most important economic
problem to be faced by the United States in the next twenty
years?" Professor Samuelson answered, "The threat of
inflation."
"The history of the twentieth century," he wrote, " - America's
century! - has been pretty much a history of rising prices...
inflation is itself a problem. But the legitimate and hysterical
fears of inflation are - quite aside from the evil of inflation
itself - likely, in their own right, to be problems. In short, I
fear inflation. And I fear the fear of inflation. Avoiding
inflation is not an absolute imperative, but rather is one of a
number of conflicting goals that we must pursue and that we may
often have to compromise. Even if the military outlook were
serene - and it is not - modern democracies must expect in the
future to be much of the time at, or near, the point where
inflation is a concern. Our greatest economic problem will be to
face that concern realistically, to weigh inflation's
quantitative evil against the evils of actions taken against it,
to develop methods of adjusting to the residue of inflation which
attainment of the 'golden mean' might involve. The challenge is
great but the prognosis is cheerful."
In an interview in 1960 with U.S. News World Report,
Professor Samuelson talked about a new kind of inflation - what
he called "cost-push." As contrasted to the familiar kind of
inflation - where too much spending power pulls up prices and
wages - cost-push inflation is "a force that operates year-in and
year-out, whenever we are at high employment, to push up prices.
It's a price creep, not a price gallop; but the bad thing about
it is that, instead of setting in only after you have reached
overfull employment, the suspicion is dawning that it may be a
problem that plagues us even when we haven't arrived at a
satisfactory level of employment."
In his report to President-elect Kennedy in 1961 on the state of
the American economy, he wrote: "Various experts, here and
abroad, believe that the immediate postwar inflationary climate
has now been converted into an epoch of price stability. One
hopes this cheerful diagnosis is correct. However, a careful
survey of the behavior of prices and costs shows that our recent
stability in the wholesale price index has come in a period of
admittedly high unemployment and slackness in our economy. For
this reason it is premature to believe that the restoration of
high employment will no longer involve problems concerning the
stability of prices.
"Economists are not yet agreed how serious this new malady of
inflation really is. Many feel that new institutional programs,
other than conventional fiscal and monetary policies, must be
devised to meet this new challenge. But whatever the merits of
the varying views on this subject, it should be made manifest
that the goal of high employment and effective real growth cannot
be abandoned because of the problematical fear that re-attaining
prosperity in America may bring with it some difficulties; if
recovery means a reopening of the cost-push problem, then we have
no choice but to move closer to the day when that problem has to
be successfully grappled with."
In this report to President-elect Kennedy, Professor Samuelson
made certain minimal policy recommendations "that need to be
pushed hard even if the current recession turns out to be one
that can be reversed by next summer at the latest." He urged
strong support of pledged expenditure programs, including:
increasing defense expenditures and foreign aid on a basis of
merit and need, vigorously pushing educational programs, high
priority for urban renewal and health and welfare programs,
highest priority on improving unemployment compensation,
acceleration of useful public works and highway construction
programs, help for depressed areas programs, and natural resource
development projects.
To stimulate residential housing, he recommended reducing
mortgage rates, mortgage discounts, insurance fees, and extension
of maximum amortization periods, and a step-up in the Federal
National Mortgage Association mortgage purchasing program. In
monetary policy he specifically urged more reliance upon short
term issues (to nudge a reduction in long term rates), and
decisive actions to improve our international balance of payments
position.
On the question of unemployment levels, Professor Samuelson made
these comments in an interview with U.S. News World Report
in December, 1960: "I think, without question, that unemployment
of more than 6 per cent is something to be concerned about. You
don't push the panic button, but you don't relax and enjoy it
either... I myself don't believe in a numbers game in which you
give a maximum tolerable percentage, because I think, truly, it
does vary with the times... I would hesitate to specify the
figure today, but I will say this: it would be, in my mind, less
than a 4 per cent figure - that is, for the period ahead. I would
not, realistically, think we could hope for a 2 per cent figure
in the near future, as certain European countries have been able
to do. But I do think that if we are pretty zealous in this
matter and insist upon getting low figures - say, 3.5 per cent -
then our very success in accomplishing that may lead to a new
epoch just beyond when we could hope to go below 3 per cent...
"
A further question in the interview asked what degree of
responsibility the government has to insure high employment.
Replied Professor Samuelson: "I think I would say simply that the
American people have expressed the choice that it is their
concern to see that large departures from high employment will
not be tolerated... I never look upon the government as something
in Washington that does something to us or for us. I think of
public policy as a way in which we organize our affairs, and so I
do think it is part of fiscal responsibility and monetary-policy
responsibility to be discontented with the sort of unemployment
we had in the prewar decade, and with the sort of exuberant booms
leading to crises and panics that we have had throughout the
history of our capitalistic system."
Summing up, he made this prediction for the decade: "I think the
'60s will give us the potentiality of very good growth. More and
more of our social problems of the past are, in fact, being
licked. So I would face the '60s not complacently, but
optimistically."
Professor Samuelson has been active in a number of honorary and
professional organizations. He is a member of the American Academy of Arts
and Sciences, a fellow of the American
Philosophical Society and the British Academy;
he is a member and past President (1961) of the American Economic
Association; he is a member of the editorial board and
past-President (1951) of the Econometric Society; he is a fellow,
council member and past Vice-President of the Economic Society.
He is a member of Phi Beta Kappa.
He is the author of hundreds of articles in journals and
magazines.
He lives with his wife and six children (including triplet boys)
in Belmont, Mass.
From Nobel Lectures, Economics 1969-1980, Editor Assar Lindbeck, World Scientific Publishing Co., Singapore, 1992
This autobiography/biography was written at the time of the award and first published in the book series Les Prix Nobel. It was later edited and republished in Nobel Lectures. To cite this document, always state the source as shown above.
Paul A. Samuelson died on 13 December, 2009.
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