Samuelson

From the NYT obituary (via Cafe Hayek) of one of the greatest statist economists of the twentieth century-

Mr. Samuelson attracted a brilliant roster of economists to teach or study at the university, among them…Paul Krugman…Joseph E. Stiglitz.

Mr. Samuelson wrote one of the most widely used college textbooks in the history of American education. The book, “Economics,” first published in 1948, was the nation’s best-selling textbook for nearly 30 years….

“I don’t care who writes a nation’s laws — or crafts its advanced treatises — if I can write its economics textbooks,” Mr. Samuelson said.

His textbook taught college students how to think about economics….

The textbook introduced generations of students to the revolutionary ideas of John Maynard Keynes… No student would ever again rest comfortably with the 19th-century nostrum that private markets would cure unemployment without need of government intervention.

[…]

Mr. Samuelson also formulated a theory of public goods — that is, goods that can be provided effectively only through collective, or government, action….Public goods, he concluded, cannot be sold in private markets because individuals have no incentive to pay for them voluntarily.

[…]

…President Herbert Hoover, he noted, had never referred to Keynes other than as “the Marxist Keynes.”

“I never quite understood that venom, Mr. Samuelson said.

[…]

Mr. Samuelson said he had never regarded Keynesianism as a religion, and he criticized some of his liberal colleagues for seeming to do so, earning himself, late in life, the label l’enfant terrible, emeritus. The experience of nations in the second half of the century, he said, had diminished his optimism about the ability of government to perform miracles.

If government gets too big, and too great a portion of the nation’s income passes through it, he said, government becomes inefficient and unresponsive to the human needs “we do-gooders extol,” and thus risks infringing on freedoms.

But, he said, no serious political or economic thinker would reject the fundamental Keynesian idea that a benevolent democratic government must do what it can to avert economic trouble in areas the free markets cannot. Neither government alone nor the markets alone, he said, could serve the public welfare without help from the other.

“Benevolent democratic government.” And then there was the tooth fairy.

Shouldn’t be news to anyone sympathetic to the Austrians, or anyone who’s read him, but this is what the late great Samuelson said about the Soviet Union, right before it collapsed-

The Soviet Union is proof that, contrary to what many skeptics had earlier believed, the socialist command economy can function and even thrive.

One of his critics (he has been attacked both from the left and the right, which is the mark of a pragmatist), Mark Skousen, writes

Samuelson spent whole chapters in serious discussion of the socialist economics of the Soviet Union and China, while writing little or nothing on the success stories of West Germany, Japan, the East Asian Tigers or Chile…. He had numerous sections on ‘market failure,’ while offering little on ‘government failure.’ He criticized laissez-faire, favored progressive taxation and endorsed the pay as you go Social Security program.

Unfortunately, he’s not the first and surely won’t be the last…statist.

Skousen also quotes conservative economist Wallich who despite arguing that, in Skousen’s words, “freedom leads to lower economic growth, greater income inequality, and less competition” concluded-

The ultimate value of a free economy is not production, but freedom, and freedom comes not as a profit, but at a cost.

Freedom.

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Comments

  • euandus2  On December 15, 2009 at 1:08 am

    With time, I believe the mathematical “problem solving” orientation of twentieth-century economics will be viewed as piece-meal and insufficient, especially as we look at the viability of the market-mechanism itself in the wake of the financial crisis. Relatedly, Samuelson’s “mathematization” of economics treats the discipline as though it were a science–ignoring the inherent limits to prediction of a human system, whether social, political or economic. For more, pls see http://euandus3.wordpress.com/2009/12/14/paul-samuelson-the-20th-century-economist-has-passed/

    • Aristotle The Geek  On December 15, 2009 at 1:36 am

      # “The ‘big picture’ questions raised by the financial crisis of 2008 include matters like ‘too big to fail’ and the viability of the market-mechanism itself that go beyond solving particular problems.”
      # “I am reminded of Alan Greenspan’s testimony before Congress shortly thereafter, when he admitted a fundamental flaw in his free market paradigm assumptions. Clearly, more thought is needed into the nature of a market and how its basic contours can be altered; government regulation alone is not sufficient.”
      It all depends on what one, Greenspan included, is after. The market cannot be controlled from the top, or regulated. If people haven’t realized it after going through multiple disasters, and having seen the command economies collapse, I don’t think they ever will.

      Markets don’t promise perfection, or “full employment” whatever that might be. But every disaster can be explained by government intervention, however “noble” the motives might have been.

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