Paul A. Samuelson

Paul A. Samuelson

Born: 1915. Died: 2009.

Biography

Perhaps more than anyone else, Paul A. Samuelson has personified mainstream economics in the second half of the twentieth century. The writer of the most successful principles textbook ever (1948), Paul Samuelson has been not unjustly considered the incarnation of the economics 'establishment' - and as a result, has been both lauded and vilified for virtually everything right and wrong about it.

Paul Samuelson's most famous piece of work, Foundations of Economic Analysis (1947), one of the grand tomes that helped revive neo-classical economics and launched the era of the mathematization of economics. Samuelson was one of the progenitors of the Paretian revival in microeconomics and the Neo-Keynesian Synthesis in macroeconomics during the post-war period.

The wunderkind of the Harvard generation of 1930s, where he studied under Joseph Schumpeter and Wassily Leontief had a prodigious grasp of economic theory which has since become legendary (an unconfirmed anecdote has it that at the end of Samuelson's dissertation defense, Schumpeter turned to Leontief and asked, "Well, Wassily, have we passed?"). Paul Samuelson moved on to M.I.T. where he built one of the century's most powerful economics departments around himself. He was soon joined by Robert Solow who was to be come Samuelson's sometime co-writer and partner-in-crime.

Samuelson's specific contributions to economics have been far too many to be listed here - being among the most prolific writers in economics. Samuelson's signature method of economic theory, illustrated in his Foundations (1947), seems to follow two rules which can also been said to characterize much of neo-classical economics since: with every economic problem

(1) reduce the number of variables and keep only a minumum set of simple economic relations;

(2) if possible, rewrite it as a constrained optimization problem.

In microeconomics, he is responsible for the theory of revealed preference (1938, 1947). This and his related efforts on the question of utility measurement and integrability (1937, 1950) opened the way for future developments by Gerard Debreu, Georgescu-Roegen and Uzawa. He also introduced the use of comparative statics and dynamics through his 'correspondence principle' (1947) which was applied fruitfully in his contributions to the dynamic stability of general equilibrium (1941, 1944). He also developed what are now called 'Bergson-Samuelson social welfare functions' (1947, 1950, 1956) and, no less famously, Samuelson is responsible for the harnessing of "public goods" into neo-classical theory (1954, 1955, 1958).

Samuelson was also instrumental in establishing the modern theory of theory of production. His Foundations (1947) are responsible for the envelope theorem and the full characterization of the cost function. He also made important contributions to the theory of technical progress (1972). His work on the theory of capital is also well known, if contentious. He demonstrated one of the first remarkable 'Non-Substitution' theorems (1951) and, in his famous paper with Robert Solow (1953), initiated the analysis of dynamic Leontief systems. This work was famously reiterated in his famous 1958 volume on linear programming with Robert Dorfman and Robert Solow, wherein we also find a clear introduction to the 'turnpike' conjecture of linear von Neumann systems. Paul Samuelson was also Joan Robinson's main adversary in the Cambridge Capital Controversy - introducing the 'surrogate' production function (1962), and then subsequently (and graciously) relenting (1966).

In international trade theory, he is responsible for the Stolper-Samuelson Theorem and, independently of Abba Lerner, the factor price equalization theorem (1948, 1949, 1953) as well as (finally) resolving the age-old 'transfer problem' relating terms of trade and capital flows a well as the Marxian transformation problem (1971) and other issues in Classical economics (1957, 1978).

In macroeconomics, Paul Samuelson's multiplier-accelerator macrodynamic model (1939) is justly famous, as is his presentation of the Phillips Curve (1960) to the world. He is also famous for popularizing Maurice Allais's 'overlapping generations' model which has since found many applications in macroeconomics and monetary theory. In many ways, his work on speculative prices (1965) effectively anticipates the efficient markets hypothesis in finance theory. His work on diversification (1967) and the 'lifetime portfolio' (1969) is also well known.

Paul Samuelson's many contributions to neo-classical economic theory were recognized with a Nobel Memorial prize in 1970.

Major Books of Paul A. Samuelson

- Abstract of a Theorem Concerning Substitutability in Open Leontief Models, 1951, in Koopmans, editor, Activity Analysis of Production and Allocation
- Collected Scientific Papers, Volumes I & II, 1966; Volume III, 1970; Volume IV, 1978; Volume V, 1986
- Constancy of the Marginal Utility of Income, 1942, in Lange et al, editors, Studies in Mathematical Economics
- Economics, with William D. Nordhaus, 1958
- Economics: An Introductory Analysis, 1948
- Efficient Programs of Capital Accumulation in Terms of the Calculus of Variations, 1960, in Arrow, Karlin and Suppes, editors, Mathematical Models in Social Science
- Foundations of Economic Analysis, 1947
- Inside the Economist's Mind, with William A. Barnett, 2007
- Linear Programming and Economic Analysis, with R.Dorfman and R.M. Solow, 1958
- Macroeconomics, with William D. Nordhaus, 1989
- Marx as a Mathematical economist, 1974, in Horwich and Samuelson, editors, Trade, Stability and Macroeconomics
- Microeconomics, with William D. Nordhaus, 1991
- Readings in Economics, with Robert L. Bishop and John R. Coleman, 1952

Major Articles of Paul A. Samuelson

- 1937, Some Aspects of the Pure Theory of Capital, QJE
- 1937, A Note on Measurement of Utility, RES
- 1938, A Note on the Pure Theory of Consumer's Behaviour, Economica
- 1938, Numerical Representation of Ordered Classifications and the Concept of Utility, RES
- 1939, Interaction Between the Multiplier Analysis and the Principle of Acceleration, RES
- 1941, The Stability of Equilibrium: Comparative Statics and Dynamics, Econometrica
- 1944, The Relation Between Hicksian Stability and True Dynamic Stability, Econometrica
- 1947, Some Implications of Linearity, Econometrica
- 1948, Consumption Theory in Terms of Revealed Preference, Economica
- 1948, International Trade and the Equalisation of Factor Prices, EJ
- 1949, International Factor-Price Equalisation Once Again, EJ
- 1950, The Problem of Integrability in Utility Theory, Economica
- 1950, Probability and the Attempts to Measure Utility, Economic Review
- 1950, Evaluation of Real National Income, OEP
- 1952, Economic Theory and Mathematics: An Appraisal, AER
- 1952, Spatial Price Equilibrium and Linear Programming, AER
- 1953, Prices of Factors and Goods in General Equilibrium, RES
- 1953, Consumption Theorems in Terms of Overcompensation Rather than Indifference Comparisons, Economica
- 1953, Balanced Growth under Constant Returns to Scale, with R.M. Solow, Econometrica
- 1953, Utility, Preference and Probability, Econometrie
- 1954, The Pure Theory of Public Expenditure, REStat
- 1955, Diagrammatic Exposition of a Theory of Public Expenditure, REStat
- 1956, Social Indifference Curves, QJE
- 1956, A Complete Capital Model Involving Heterogeneous Capital Goods, with R.M. Solow, QJE
- 1957, Wages and Interest: A modern Dissection of Marxian Economic Models, AER
- 1958, An Exact Consumption-Loan Model of Interest with or without the Contrivance of Money, JPE
- 1958, Aspects of Public Expenditure Theories, REStat
- 1959, Reply to Lerner, JPE
- 1960, Analytical Aspects of Anti-Inflation Policy, with R.M. Solow, AER
- 1962, Parable and Realism in Capital Theory: The Surrogate Production Function, RES
- 1965, Proof that Properly Anticipated Prices Fluctuate Randomly, Industrial Management Review
- 1965, Rational Theory of Warrant Pricing, Industrial Management Review
- 1965, A Theory of Induced Innovation along Kennedy-Weizsacker Lines, REStat
- 1965, Using Full Duality to Show that Simultaneously Additive Direct and Indirect Utilities Implies Unitary Price Elasticity of Demand, Econometrica
- 1965, A Catenary Turnpike Theorem Involving Consumption and the Golden Rule, AER
- 1965, Economic Forecasting and Science, Michigan Quarterly Rev (extracts)
- 1966, The Non-Switching Theorem is False, with D.Levhari, QJE
- 1966, A Summing Up, QJE
- 1966, The Pasinetti Paradox in Neoclassical and More General Models, with F. Modigliani, RES
- 1967, General Proof that Diversification Pays, J of Finance and Quantitative Analysis
- 1968, What Classical and Neoclassical Monetary Theory Really Was, CJE
- 1969, Lifetime Portfolio Selection by Dynamic Stochastic Programming, REStat
- 1970, The Fundamental Approximation Theorem of Portfolio Analysis in Terms of Means, Variances and Higher Moments, RES
- 1971, Understanding the Marxian Notion of Exploitation: A summary of the So-Called Transformation Problem Between Marxian Values and Competitive Prices, JEL
- 1972, Unification Theorem for the Two Basic Dualities of Homothetic Demand Theory, PNAS
- 1972, Maximum Principles in Analytical Economics, AER
- 1974, Complementarity: An Essay on the 40th Anniversary of the Hicks-Allen Revolution in Demand Theory, JEL
- 1975, Maximum Principles in Analytical Economics, Synthese
- 1978, The Canonical Classical Model of Political Economy, JEL
- 1980, Heckscher-Ohlin Trade Theory with a Continuum of Goods, with Rudiger Dornbusch and Stanley Fischer , QJE
- 1985, Modes of Thought in Economics and Biology, AER
- 1987, How Economics Has Changed, JEE
- 1991, Statistical Flowers Caught in Amber, StS
- 1992, Conserved Energy Without Work or Heat, PNAS
- 1994, The Classical Classical Fallacy, JEL
- 1999, Our Wassily: W.W. Leontief (1905-1999)
- 2005, The Limits of Free Trade, JEP

Quotes from Paul A. Samuelson

- "I don't care who writes a nation's law -or crafts its advanced treaties- if I can write its economics textbooks." (from "Hard Act to Follow? Here Goes", by Sylvia Nasar, 1995)

- "Wall Street indexes predicted nine out of the last five recessions!" (from "Science and Stocks", published in Newsweek, 1996)

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