ZT：Pioneer who turned economics into a science

Pioneer who turned economics into a science

By Stephanie Flanders

Published: December 14 2009 02:00 | Last updated: December 14 2009 02:00

No economist alive is unmarked by the work of Paul Anthony Samuelson, who died yesterday at the age of 94. Tributes were flowing in last night to the man who did more than any other theorist to turn economics from a scattered selection of insights into a social science.

He was born on May 15 1915 in Gary, Indiana, but later claimed "truly" to have been born on January 2 1932, at his first economics course as an undergraduate at the University of Chicago, where he received a rigorous mathematical grounding in classical economics from Frank Knight, Jacob Viner, and other prewar Chicago giants. He moved to Harvard immediately on graduation in 1936, his arrival coinciding with the momentous publication of Keynes' General Theory.

Soon after receiving his doctorate, he joined the economics faculty at the Massachusetts Institute of Technology. He remained there for the rest of his life, being made one of 12 MIT institute professors in 1966.

By his own account, Samuelson came to economics at just the right time. "To a person of analytical ability, perceptive enough to realise that that mathematical equipment was a powerful sword in economics, the world of economics was his or her oyster in 1935. The terrain was strewn with beautiful theorems begging to be picked up and arranged in unified order."

A large part of Samuelson's career was spent doing just that. Welfare economics, the theories of consumption, capital accumulation, economic growth, finance and international trade all became subject to his rigorous "picking and arranging". It is difficult to name an important postwar debate in economics in which Samuelson did not play a role. He once boasted: "My finger has been in every pie."

He was awarded all the honours that the profession can bestow, including the first John Bates Clark medal in 1947 and only the second Nobel memorial prize for economics in 1970. He served as president of the American Economic Association in 1961, the Econometric Society in 1951, and the International Economic Association for the years 1965-8.

Although a prolific writer well into his old age, he may be best remembered for two books published very early in his career: The Foundations of Economic Analysis and his textbook Economics . The first laid the building blocks of formal economics as it is still practised today; the second propagated neoclassical economic ideas to millions of students.

Foundations first saw light as Samuelson's doctoral thesis, which he submitted in 1941. Kenneth Arrow, fellow Nobel laureate and professor of economics at Stanford University, California, later commented that it was "the only example I know of a doctoral dissertation that is a treatise . . . or perhaps, of a treatise that has so much originality in every part that it is entitled to be accepted as a dissertation".

In it, Samuelson showed that the same method could be applied to almost all problems in economic theory. He illustrated that two principles, maximisation (drawn from the natural sciences) and his own "correspondence principle" could be used to derive empirically meaningful results, regardless of whether the subject were international trade or consumer behaviour.

There was much originality in his writing, not least in his first academic article, published when he was 23, which introduced what was to become a core idea in microeconomics - "revealed preference", which still opens advanced textbooks in economic theory.

Samuelson, who is the maternal uncle of Larry Summers, Barack Obama's chief economic adviser, once wrote that "our subject puts its best foot forward when it speaks out on international trade", a topic on which he made influential contributions. The famous "Stolper-Samuelson result", that opening a country to trade would tend to benefit the relatively plentiful factor of production, paved the way for later work on the conditions for the equalisation of wages and capital returns across countries in a world of free trade.

Samuelson's desire to carve a role for economics in contemporary policy debates was the other abiding theme of his career. He was one of the first economists to gain wide following as a commentator in the mainstream press. His regular US economic forecasts for the Financial Times at the new year during the 1970s were widely read if, often, wildly inaccurate.

He had a mixed experience advising policymakers, such as Kennedy and other presidents, first-hand. "Often when I became a consultant to a federal agency, that precipitated its demise," he admitted. And day-to-day policy work held few attractions. He often boasted that he had never been in Washington for as long as a week.

At MIT, generations of students and faculty members received the benefit of his teaching and advice. Introducing a 1983 volume dedicated to his work, MIT professors Robert Solow and E. Cary Brown wrote "he has been more than a role model: he has been the role". Tales abound of his generosity in crediting the achievements of others as well as his own.

Samuelson's brief personal memoir, written in response to receiving the Nobel prize, showed little desire for self-modesty. The beginning explored the relative contributions of hard work, and intellect, in the making of geniuses such as Newton, Mill and others.

Relating their experiences to his own, he noted that a recent period on medication had shown him the importance of native ability: "During the period, I felt that it took the fine edge off my mind. Suddenly I realised how the other half lives! It was not that my performance suffered so visibly to the outside world: during that period I wrote one of my best articles. But to myself it was clear that I was living on capital."

Samuelson provided the basis for an increasingly mathematical approach. Many would say that the move towards impenetrable theoretical models had alienated economics from a wider audience. Perhaps his renowned textbook evened the score.

Published in 1948, the book became the set text on the subject for millions of students. Earning Samuelson not inconsiderable profit as well as fame, the book symbolises his not always successful efforts at maintaining the discipline's relevance. As a young man, he commented that "we are like highly trained athletes, who never run a race". In years to come, there will be fewer economists trained directly by Paul Samuelson or his work, but all will find themselves running on tracks he built.