The Changing Face of Economics: Conversations with Cutting Edge Economists

11. Paul A. Samuelson

chapter 11 Paul A. Samuelson Professor (Emeritus) of Economics, Massachusetts Institute of Economics  This interview was conducted by mail in May 2003. Paul read the introduction and earlier interviews and was kind enough to answer the following questions. You are probably the person who is most responsible for shaping modern economics. Are you happy with the way it has turned out? How do you view new fruitful trends and view others as likely dead ends? I hesitate to speak off the cuff about your last question. I am reminded that the great physicist Lord Rayleigh was asked early in the last century, “What do you think of quantum mechanics?” He replied, “You must not ask a scholar over sixty that question.” Actually , this was excessive modesty since Max Planck’s ‹rst breakthrough owed much to Rayleigh’s investigations of black-body radiation ’s observable frequency distributions. I am well over sixty and feisty with pro and con judgments about new century trends in economics . However, research deadlines usurp my time for leisurely re›ection. I go with A. E. Housman, the poet who wrote A Shropshire Lad in his spare time between his admired publications as a classic scholar. “Why did you not include item A in your collection  309 of papers? Do you not think it good?” he was asked by a colleague. He replied, “I do think it good, but not good enough for me.” Rather than compose evaluations that lack coherence and detailed understandings, I’ll take a pass. Where the in›uence of 1947 Foundations is concerned, one must understand that this 1937–1945 composition was exceedingly lucky in its timing. At that time it was still the case that so much of literary economics could still bene‹t from straightforward intermediate applied mathematics. That is why, in many diverse places around the globe, a baker’s dozen of graduate students would meet to discuss and learn from this book, which was written largely in the latter 1930s, when I myself was a privileged Harvard Junior Fellow leisurely learning the tools that it contained. For almost forty years the book went through successive printings that corrected its various typos but left its original text untouched. In 1983 I ‹nally decided to enlarge it, strictly by adding compact analyses of the very many subsequent postwar theoretical developments: linear and nonlinear programming; Arrow-DebreuMcKenzie general equilibrium; post Heckscher-Ohlin and Jones trade theories, stochastic and intertemporal maximizing; modern ‹nance theory a la Markowitz, Modigliani, Mandelbrot, Merton, Bachelier, Tobin, Sharpe, Fama; also many Ramsey and von Neumann goodies. In this effort completeness and not pedagogical verve was my goal. The result: moderate sales and impact from what, objectively speaking, was a better book. Why? Presumptively because the endof -century generation had by then been converted to the newer, more technical economics, and for whom learned journals and books had proliferated mightily to teach those willing to learn. Foundations, your long-time best-selling pattern-setting elementary Economics, and ‹ve (soon to be seven) volumes of Collected Scienti‹c Papers have given you perhaps the reputation of Mr. Neoclassical Economics . Is that take right? And how do you feel about it? Mine is a more nuanced view. If the label neoclassical excludes the Keynesian abandonment of Marshallian-Wicksellian-Walrasian belief in Say’s Law as a guarantor of quasi-full-employment equilibrium , then I am a heretic. Decades ago I initiated the popular notion of a neoclassical synthesis. Its two-word essence was that by use of non–Say’s Law macro tools, a modern mixed economy could restore to relevance the microeconomic verities absent from Great the changing face of economics 310 Depression or hyperin›ation scenarios in economic history. My prescriptions and policy nostrums were not at all identical to Milton Friedman’s monistic monetarism. But to “new classicist, rational expectationists” Robert Lucas or Tom Sargent, we might be lumped together as odd-couple bedfellows. (That would annoy two people!) Bona ‹de neoclassicists—such as Sweden’s Eli Heckscher or Gustav Cassel—were admirers of laissez-faire. In Foundations, I tirelessly stressed how empirical realities of technology and divided knowledge could vitiate Adam Smith’s comfortable views on goodthing Invisible Hands. What I learned from Abram Bergson was how to distinguish between the ef‹ciencies of (the in‹nite) Pareto Optima and the spread of distributive inequalities that they entailed. (My personal credo mandates: Never think...