The Fall of the House of Samuelson
The Nobel laureate economist Paul Samuelson believed that because governments knew how to stop depressions, voters would insist that they use this knowledge. But he was only half right: Though governments do know how to stop a slide into another Great Depression, they are haunted by fears of large fiscal deficits.
LONDON – To read The Samuelson Sampler in the shadow of the Great Recession is to gain a glimpse into the mindset of a bygone era. The sample is of the late Paul Samuelson’s weekly columns for the magazine Newsweek from 1966-1973.
Samuelson, a Nobel laureate, was the doyen of American economists: his famous textbook, Economics went through 14 editions in its author’s lifetime, introducing future economists worldwide to the rudiments of their craft. If not the sole originator, he was the great popularizer of the “neoclassical synthesis” – the mix of neoclassical and Keynesian economics that defined the mainstream of the field for 50 years.
Samuelson was a convinced Keynesian, though in a limited sense. He dismissed most of Keynes’s attack on the orthodox economics of his day as unnecessary, writing “had Keynes [started] with the simple statement that he found it realistic to assume that money wages…were sticky and resistant to downward movements...most of his insights would have remained just as valid.” For Samuelson, Keynes’s real contribution was the tools he gave governments to prevent depressions.