The Economic Observer MiG/Wen
How the last generalist of economics was refined
On December 28, 1947, Paul Douglas, president of the American Economic Association, awarded the first John Bates Clarke Prize to Paul Samuelson, who was only 32 years old and had just been hired as a full professor at MIT. Awarded every two years, the prize is given to under the age of 40 recognized as "the young economist who has made the most outstanding contribution to the main parts of economic thought and knowledge". Considering that kenneth Bolding, George Stigler and other candidates are equally well-known, and Samuelson will still be eligible for the award in the next few years, this marks that he has become one of the best american economists in the new generation.
The Clark Prize judges proved to be extremely correct: Samuelson had just provided a generalized, mathematical, and physical framework for economic analysis through his monograph "Fundamentals of Economic Analysis" published by Harvard University Press, and the textbook "Economics: Introductory Analysis", published five months after winning the award, reshaped the picture of all areas of the introductory economics course; Samuelson became president of the Econometric Society four years later, president of the American Economic Society at the age of 46, and was awarded the second Nobel Prize in Economics at the age of 55. Become the first American to receive this award.
In his acceptance speech, Douglas said Samuelson "made a profound contribution to employment, production, distribution, and the theory of value." Strictly speaking, this long list of contributions should also be added to consumer theory, international trade theory, and welfare economics. In 1970, the Royal Swedish Academy of Sciences praised Samuelson in the Nobel Prize announcement in economics for "involving almost all fields of contemporary Western economics, rewriting the core economic theory in large quantities, and achieving results comparable to classical economic theory in many fields", and contributed to improving the level of analysis in economic science by developing static and dynamic economic theories.
Samuelson's five-volume Collection of Scientific Papers alone contains 388 of his papers over a 50-year period. Microeconomic theory, static and dynamic equilibrium, partial and general equilibrium and welfare equilibrium... Samuelson rewrote the core of mainstream economic theory. From the axiom of show preference in consumer behavior theory, to the Samuelson-Storpa theorem in international trade theory and the factor price equilibrium theorem that perfected the Heckshel-Ohlin model, as well as the interaction between the multiplier and acceleration principles in macroeconomic theory, capital accumulation and economic growth, and even the social welfare function in welfare economics, he has left his name and footprint in various branches of economics. No wonder he was able to confidently declare, "My fingers have moved every piece of pie." I declared myself the last generalist in economics and have covered a wide range of fields such as international trade and econometrics, economic theory and economic cycles, demographics and labor economics, finance and monopoly competition, the history of economic theory, and location economics. ”
Samuelson's colleague at MIT and Nobel laureate in economics, Robert Morton, said, "Paul deserves six Nobel Prizes in Economics. He has made groundbreaking contributions in every area of research involved. In this sense, the subtitle of Samuelson's biography by Roger Barkerhaus, a professor of economic history and economics at the University of Birmingham, is precisely summarized: "The Life of the Founders of Modern Economics." "But in comparison, we're strangers to Samuelson's life before he turns 32, except that he only knows that he earned a bachelor's degree from the University of Chicago at the age of 20 and a Ph.D. from Harvard University at the age of 26." And this is precisely the theme of Samuelson's Biography: The Life of the Founders of Modern Economics (Volume I) (Jiang Jingyong and Ke Shanshan/Translation, CITIC Press, October 2020): "How Samuelson Became Samuelson." ”
In the view of the author Barkhouse, he hopes to interpret Samuelson as a "transitional figure" of "the narrower, more theoretical and mathematical 'neoclassical' economics that emerged after World War II", recreating the early years of this "precocious economist whose economic thought is not as 'orthodox' as people usually think". However, I believe that the reference to "transitional figures" should be translated as "characters from above and below", because Samuelson's greatest contribution was to pioneer the neoclassical synthesis, to introduce the interventionist theory of Keynesian economics into the supply and demand analysis framework of neoclassical economics, and to unify microeconomics and macroeconomics, individual economics and total economics through the use of mathematical economics and the use of formal statistical methods.
The observable significance of economic theory
Fundamentals of Economic Analysis is a revised version of Samuelson's doctoral dissertation of the same name. Samuelson won the David Welsh Award for best paper in economics at Harvard University for this paper. The subtitle of the paper, "The Observable Meaning of Economic Theory"—perfectly illustrates Samuelson's ambitious purpose of writing, namely: that economic problems in various fields have a certain common structure, that "there are similarities between the core features of various theories", which means that there is some kind of theory that generalizes a particular problem, "it is the basis of a particular theory and unifies it with these core features"; more importantly, there are "meaningful theorems that are similar in form" and "formally" in different fields. It means that these theorems have the same mathematical structure, and that "meaningful" means that these theorems have an effect and operational significance on observable things, and belong to "hypotheses about empirical data that can be tested or refuted under ideal conditions"; these structures and hypotheses can only be presented by abstraction of the details of concrete problems.
All in all, Samuelson was convinced that economic theory without mathematical forms was unsystematic and unclear—that economic theory should have an impact on things that could be observed and measured after a high degree of abstraction, and that if it could not be described mathematically, then "it must be viewed with a skeptical eye, because it is vague."
Fundamentals of Economic Analysis can be described as Samuelson's primary contribution to the mathematical physics and chemistry of economics, transforming the problems of consumption, production, and trade involved in economics into calculus extreme value problems, and expressing the theme of economics in mathematical form as the "problem of maximizing or minimizing individual behavior based on rational choice under constraints" that we are familiar with today; at the same time, he believes that group behavior cannot be studied in the same way. There are two types of equilibrium systems – it may be the result of behavior optimization (involving comparative static analysis), or it may be a stationary point in a dynamic system (involving dynamic random equalization). In fact, this provides the direction, framework and tools of mathematical analysis for economic theory, constructs the theoretical framework and discourse system of contemporary economics, and promotes the transformation of economics from norms to empirical evidence.
In 1940, 70 percent of the economic theory articles in the American Economic Review, the authoritative journal of the American Economic Association, did not use mathematics at all. After Samuelson's doctoral thesis passed, Edwin Wilson, one of the examiners, urged him to rewrite and expand the paper at length so that it could be accepted by "the predominantly non-mathematical economists" who "helped them understand its value or rigorous mathematical economics, many of whom were skeptical."
Through his works such as Fundamentals of Economic Analysis and his co-authored Linear Programming and Economic Activity, Samuelson shifted the analytical approach of economics from the most used textual descriptions and emoticons before the 1930s to the path of mathematical, physical, and quantitative. Arguably, Samuelson redefined economics. His efforts have had such a profound impact on his fellow economists that Fellow Nobel laureate Robert Lucas would admit, "If I can't mathematically explain a problem in economic theory, then I don't know what I'm doing." I even think that mathematical analysis is not one of many methods of studying economic theory, it is the only method. Economic theory is mathematical analysis. ”
Interestingly, Samuelson's biography recounts the academic collision and exchange between Fundamentals of Economic Analysis and Game Theory and Economic Behavior, published almost simultaneously by Johann von Neumann and Oscar Morgenst. Samuelson said almost 50 years later that von Neumann's theoretical innovations greatly contributed to the development of "indispensable modern methods" such as nonlinear programming, convex set theory, game theory, and optimal control theory, but the only real innovation he himself could read in von Neumann's work was "the philosophical complexity of multiplayer games", and beyond that, there was nothing new in von Neumann's "so-called non-physical mathematics" and "more modern mathematics". Although von Neumann found The Basics of Economic Analysis "very interesting and exhaustive", he was unable to "pay more effort" to "read it carefully" because of his limited time.
"I can write a country's economics textbook"
Samuelson's name is better known to more people outside academic circles than his textbook Economics: At the time of Samuelson's death, the introductory textbook on economics had been published in 19 editions, translated into more than 40 languages, and sold more than 4 million copies worldwide in English alone. That's why Samuelson proudly says, "If I can write a country's economics textbook, I don't have to care who makes the country's laws or who drafts sophisticated treaties." Although the three years of writing the first edition far exceeded Samuelson's initial estimate of three months, "contact with the hearts of thousands of people throughout the ages was a once-in-a-lifetime opportunity for scholars." The economics textbook used by President Kennedy at Harvard University was Samuelson's textbook, and after taking office, he formulated a tax reduction plan based on Samuelson's suggestions, so many experts said that Samuelson's most influential "student" was actually Kennedy.
At the beginning of the preface to the first edition of Economics, Samuelson writes: "This book is primarily for readers who have embraced economics as part of a comprehensive education... It aims to illustrate the economic system and problems of American civilization in the mid-20th century. National income is the central theme of the book. In this textbook, he combines the microeconomics part of the neoclassical economics represented by Marshall with the income determinism part of Keynesian economics. In the third edition, he bluntly stated that his "integrated" system is to "eliminate the conflict between aggregate macroeconomics and traditional microcosm and make it a complementary whole." Many scholars believe that Samuelson's "Economics" did not actually establish a solid microeconomic foundation for macroeconomic analysis, but in turn created a macroeconomic "hypothetical condition" for microeconomic analysis that emphasizes full employment. But after this book, whether or not samuelson's academic views were endorsed, all economics textbooks followed the analytical framework of this micro-macro division.
Samuelson's biography shows the flux of Samuelson's writing and scholarly thought by retrospectively comparing the chapter changes and revision details of different editions of the Economics manuscript: in the first edition, Samuelson seemed to consider only the theory of savings, investment, and income determination as part of the theory of the business cycle, and did not fully agree with Keynes's view of the business cycle theory as a supplement to the theory of employment in The General Theory of Money, Interest, and Employment, but had accepted Keynes's application of traditional neoclassical economic theory Assertion of the "full employment" prerequisite.
Fundamentals of Economic Analysis, though published by Harvard University Press seven years after Samuelson arrived at MIT, is essentially a product of his time at Harvard; in contrast, Economics is entirely a work in the MIT sense, intended to meet the needs of MIT's new humanities curriculum for the "good writing and expression" of third-year science students, as MIT's then-head of the Department of Economics asked: " If students like it, your economics is good economics. Write whatever you like, as concise and easy to understand as possible. In writing, Samuelson also referred to the textbook "Economic Processes" written by colleagues at MIT 10 years ago and various feedback suggestions, but he finally decided to write this book for a wider audience of undergraduate students who took basic economics courses in the United States." The book dominated the rapidly growing market for introductory economics textbooks, so much so that some have claimed that all of them mimic Samuelson's books."
On the other hand, "Economics is also a book of Samuelson's own, showing the dramatic changes that Samuelson has undergone since completing his Harvard doctoral dissertation." During World War II, Samuelson participated in the consulting work of government agencies and scientific research institutions such as the National Resource Planning Commission, the MIT Radiation Laboratory, and the Wartime Production Committee, and was familiar with the acquisition, construction and use of statistical data. Samuelson believes that if World War I was a chemist's war, then World War II can be said to be both a physicist's war and an economist's war. Buckhouse notes that this view reflects Samuelson's beginnings of a face that "a mixed economy guided by wise planners and operated by businesses through markets can also work", allowing the United States to experience unprecedented prosperity and win the war, even if this "left-wing" ideology has led him to be skeptical and attacked by conservatives in the process of writing textbooks. Samuelson is arguably no longer an ivory-tower economist, and "the war gave him the expertise he needed to write textbooks, which he probably would not have been able to write in 1940."
Life is meaningful only if it is related to economics
"For economists of a particular age, reading a biography of Paul Samuelson doesn't require any reason." Buckhouse begins his foreword by saying, "His life is meaningful only when it is interrelated with his economics." So there is enough reason to think that this book is a biography of Samuelson's thought—a story about the evolution of his ideas—rather than his personal life. ”
However, the key nodes of personal experience often also affect the development and evolution of ideas. Samuelson mentioned in Economics that any society must solve three economic problems: what is produced? How is it produced? Produced for whom? Similarly, the first 33 years of Samuelson's life were inseparable from three important moments: Did Schumpeter say anything at his doctoral dissertation defense? Why did he teach at MIT after graduating from Harvard? Why didn't he accept an olive branch from the University of Chicago's economics department? For lovers of economic history and economics essayists, Samuelson's biography provides satisfactory answers to all three questions about old things by consulting secrets and combing through materials.
One of the most famous passages in economics was that no one was willing to ask questions at Samuelson's doctoral dissertation defense in 1941, because no one could read the groundbreaking paper. It is said that at the end of the plea, Joseph Schumpeter, one of the members of the defence committee with a great sense of humor, turned to another member, later Nobel Laureate Vasily Lyontif, "Vasily, have we passed?" ”
According to Buckhouse, this statement actually refers to samuelson's "general" oral exam at the end of his first year at Harvard (May 18, 1936), "the questions asked by the examinees depend entirely on who is the examiner present", but the exam went well. Nobel laureate Robert Solo knew three examiners, Schumpeter, Lyontief and Seymour Harris: "They all believed that this was said with sincerity. "As for the Doctor's Reply on December 4, 1940, the Defence Committee consisted of Schumpeter, Chairman, wilson, Eduard Chamberlain, Overton Taylor, and other members, and Lyontief was not present." The committee agreed that Samuelson excelled in general economic theory, as he did in the field of mathematical economics," and Schumpeter was probably too busy to read the paper in advance because he had asked questions from which he could have found answers.
In Buckhouse's view, the decision to leave Harvard in October 1940 to teach at MIT was Samuelson's choice; although he accepted a lecturership at Harvard that could be renewed years later, MIT offered a higher-ranking assistant professorship with better salaries and conditions; although the Department of Economics and Social Sciences at MIT at that time was only a teaching department dedicated to serving science and engineering and had not yet enrolled graduate students, it was obviously not as strong as Harvard's economics department. "But geographically it's only two miles from Harvard, and Samuelson can keep in touch with his friends and former colleagues."
What's more, Samuelson "has always been regarded as an expert in mathematical economics," but there are few positions in the field of economics at Harvard, and the chances of being promoted to tenure are even slim; at the same time, his Jewish ancestry may have made him difficult in Harvard's rampant anti-Semitic environment. Some professors, including Harold Hutchins Burbank, then chair of the department, had a clear resistance to Samuelson, which may be attributed to political aversion to Keynesians and liberals, questioning and guarding against those who were smarter than them, or prejudices against mathematical economics, "but it is common to disguise anti-Semitic views with such expressions." Even Schumpeter, a staunch supporter of Samuelson, threatened that Harvard's economics department would resign himself, and while feeling guilty about the racial stereotypes at the time, said: "If it's because of anti-Semitism, I can understand it; but it's only because he [Samuelson] is better than them." ”
At the end of 1946, the Economics Department of the University of Chicago decided to appoint Samuelson as an associate professor from 1947, earning $7,500 a year, but Robert Hutchins, the president emeritus of the University of Chicago, believed that "Samuelson was a highly intelligent heretic." Samuelson himself declined the offer of his undergraduate alma mater after months of hesitation and vacillation, and the Economics Department at the University of Chicago was unable to introduce what Harvard professor Alvin Hansen called "system builder" Samuelson and "a popular figure in the field" Milton Friedman.
Surprisingly, Buckhouse found that Friedman, who had been at the University of Chicago since September 1946, wrote to George Stigler complaining: "We don't know how the story ends, but regardless of the ending, I'm worried that it means we lose." Keynesians hold the right to vote and use the means by which they use it. This makes it clear that "it was Samuelson's so-called Keynesianism that annoyed those who opposed his introduction" (such as Frank Knight, Lloyd Mintz, and Greg Lewis), which threatened to plunge the University of Chicago's economics department into a factional split.
However, I believe that "Samuelson's Biography (Volume II)" will have more to say about two old classmates, old friends, and academic nemesis, and will make them flesh and blood, personality, and vivid. However, those who have read their works are not difficult to find their admiration and maintenance of free market, free will, and free choice, their vigilance and concern about the alienation, expansion, and abuse of public power, and their emphasis and insistence on the disadvantaged groups in the market to obtain relief power from the operation of the market itself; and their methodological disputes about the relevance and verifiability of economic theories have also prompted the economic community to better think about and understand the status, role and limitations of mathematics as an economic tool. Any one-sided, unclear, ulterior motives to promote one or the other is unfair to the two masters who also lived to the age of 94.
Stand on the shoulders of giants and make ladders for giants
In Samuelson's words, his or her foray into economics came at an opportune time: "For a man with analytical skills who is fully aware that mathematical tools are a powerful weapon in the field of economics, the world of economics in 1935 belongs to him or her." The field is full of wonderful theorems, waiting for people to pick up and sort out. ”
Buckhouse emphasizes that the story of Samuelson, whom he tells in his biography, "is also the story of a series of intersecting groups of economists who have witnessed a period of dramatic change in economics" and that "it is not only Samuelson who has changed, but also because economics has been very different from 10 years ago." Just as Göttingen, which belongs to Gauss, Riemann, Dirichlet, Jacobi, Hilbert and Klein, or Copenhagen, which brings together Bohr, Born, Heisenberg, Pauli, Dirac, de Brogli, Jordain, Pauli, Landau and others, if the "academic community" or "knowledge community" emphasizes the dedication and purpose of scholarship, highlights the convergence and cohesion of scholars' wisdom, the synergy and assistance of academic forces, crosses the boundaries of disciplines, faculties and institutions, and actively promotes the cross-integration of knowledge and the sharing and cooperation of resources. Genius is more likely to be born in a group of geniuses.
Even in Samuelson's undergraduate years at the University of Chicago, it is not difficult to find traces of this cascade of academic origins and group progress. Although his old chancellor Hutchins later had a bad impression of him, he benefited from the accumulation of multidisciplinary knowledge of sociology, anthropology, physics, biology, etc. in hutchins' general education; although he described the economics department of the University of Chicago as a "scholastic school" and "the stronghold of dogmatic conservatives", he received rigorous and demanding training in traditional economic theory; he not only worked with Frank Knight, Alan Director, Paul Douglas, Henry Simmons, Jacob Douglas, and others; he was trained in rigorous traditional economic theory; he not only worked with Frank Knight, Alan Director, Paul Douglas, Henry Simmons, and Jacob Douglas. Well-known economists such as Vajna maintained long-standing contacts and became acquainted with a large number of future eminent scholars such as Stigler, Friedman, Martin Brown finbrenner, Alan Wallis, and so on; "His writings retain traces of his teachers' economic research." In the articles he wrote as a student, there were widespread doubts about the applicability of mathematical theory, some of which loomed in his best-selling textbooks."
Competing with other scholars can also promote the accumulation and development of intellectual knowledge throughout the discipline. Even when Samuelson won the Clark Prize, he was not the only creator of the mathematical, physical, and chemical path of economics: the Cowles Committee mathematicalized economics on the basis of Walras's general equilibrium theory; Samuelson's input-output analysis method at Harvard University, Lyon Tiffe, was validated by the U.S. Air Force and the U.S. Department of Labor; von Neumann and Oscar Morgan Stern used advanced mathematical techniques such as Samuelson's unused fixed-point theorem in Game Theory and Economic Behavior; Econometric techniques were carried forward by The Public Balance Multiplier Analysis method used by Treve Havelmore at the Cowles Commission and by Wesley Mitchell in the quantitative research tradition established by the State Bureau of Economic Research, respectively; Simon Kuznets' analysis and research on time series data, business cycles, and economic growth imbalances paved the way for Friedman's durable income hypothesis and others' life-cycle income hypothesis and relative income hypothesis.
As for how Samuelson attracted a large number of well-known economists such as Robert Solo, Franco Modigliani, Robert Engel, Daniel McFadden and so on to the Massachusetts Institute of Technology, and how he trained a large number of outstanding students who have won the Nobel Prize, such as Lawrence Crowing, Joseph Stiglitz, George Akerof, Robert Mondale, Robert Merton, Paul Krugman, etc., I am afraid that "in what ways Did Samuelson after 1948 significantly change his thinking" This question will be another story in Samuelson's Biography (Volume II).
Samuelson once said confidently, "When you talk about contemporary economics, you talk about me." "He is both a giant standing on the shoulders of giants and a giant who is willing to be a ladder. Standing on his shoulders included "almost everyone who studied modern economics." You can oppose him, criticize him, question him, but you cannot ignore him, ignore him, and avoid him, because behind him are entire generations or even generations of economic masters, and generations of economists and economists who, as he put it, "are dreaming of the prosperity that a liberal democratic market economic system can bring." In that sense, when we talk about Samuelson, we're talking about generations as well.