Paul A. Samuelson: Economics

“When I once called myself a “Sunday painter” dabbling in stochastic finance, that was not meant to belittle finance theory as a branch of serious economic theory. Such a peculiar view was expressed again and again by the late Milton Friedman, a dizzy view that I still find incomprehensible.”

Paul A. Samuelson

New millennium, An Enjoyable Life Puzzling Over Modern Finance Theory, 2009

“There is really nothing more pathetic than to have an economist or a retired engineer try to force analogies between the concepts of physics and the concepts of economics.”

Paul A. Samuelson

Source: 1950s–1970s, Maximum Principles in Analytical Economics, 1970, p. 69
Context: There is really nothing more pathetic than to have an economist or a retired engineer try to force analogies between the concepts of physics and the concepts of economics. How many dreary papers have I had to referee in which the author is looking for something that corresponds to entropy or to one or another form of energy. Nonsensical laws, such as the law of conservation of purchasing power, represent spurious social science imitations of the important physical law of the conservation of energy; and when an economist makes reference to a Heisenberg Principle of indeterminacy in the social world, at best this must be regarded as a figure of speech or a play on words, rather than a valid application of the relations of quantum mechanics.

“I can claim that in talking about modern economics I am talking about me. My finger has been in every pie.”

Paul A. Samuelson

February 1985, in William Breit and Roger W. Spencer (ed.) Lives of the laureates
1980s–1990s
Context: I can claim that in talking about modern economics I am talking about me. My finger has been in every pie. I once claimed to be the last generalist in economics, writing about and teaching such diverse subjects as international trade and econometrics, economic theory and business cycles, demography and labor economics, finance and monopolistic competition, history of doctrines and locational economics.

“I return to economics and to economists, and to the question of why the profession’s directions have evolved in the manners evident from this book. A major conservative economist once explained that a source of his antipathy to government traced back to the defeat of his southern ancestors by a larger north economy. Here is a similar factoid. Joan Robinson once wrote that her opposition to having the U. K. enter the European Market was due to the fact that she “had more friends in [Nehru’s] India than on the continent.””

Paul A. Samuelson

Coeditor's Forword in Inside the economist’s mind: conversations with eminent economists (2007)
New millennium

Books , Question

“An American economist of two generations ago, H. J. Davenport, who was the best friend Thorstein Veblen ever had (Veblen actually lived for a time in Davenport’s coal cellar) once said: “There is no reason why theoretical economics should be a monopoly of the reactionaries.” All my life I have tried to take this warning to heart, and I dare call it to your favorable attention.”

Paul A. Samuelson

Source: 1950s–1970s, Maximum Principles in Analytical Economics, 1970, p. 76

Life , Time , Heart

“From the beginning I could not believe that the “efficient market” hypothesis was dependent on a pure Brownian motion white noise or any truly random random walk. Place a minuscule colloidal molecule on a horizontal table that covers unlimited acres. Bombard it from every direction with thousands of minute atoms; and then if you wait long enough that original molecule can have traveled a billion miles in one direction. That’s truly a random Bachelier-Einstein walk, but not my notion of economic fluctuations.”

Paul A. Samuelson

New millennium, An Enjoyable Life Puzzling Over Modern Finance Theory, 2009

Travel , Waiting , Dependency

“The existence of analogies between central features of various theories implies the existence of a general theory which underlies the particular theories and unifies them with respect to those central features. This fundamental principle of generalization by abstraction was enunicated by the eminent American mathematician E. H. Moore more than thirty years ago. It is the purpose of the pages that follow to work out its implication for theoretical and applied economics.”

Paul A. Samuelson book Foundations of Economic Analysis

Source: 1940s, Foundations of Economic Analysis, 1947, Ch. 1 : Introduction

“The very name of my subject, economics, suggests economizing or maximizing. But Political Economy has gone a long way beyond home economics. Indeed, it is only in the last third of the century, within my own lifetime as a scholar, that economic theory has had many pretensions to being itself useful to the practical businessman or bureaucrat. I seem to recall that a great economist of the last generation, A. C. Pigou of Cambridge University, once asked the rhetorical question, “Who would ever think of employing an economist to run a brewery?” Well, today, under the guise of operational research and managerial economics, the fanciest of our economic tools are being utilized in enterprises both public and private.”

Paul A. Samuelson

Source: 1950s–1970s, Maximum Principles in Analytical Economics, 1970, p. 62: Lead paragraph

Way , Home , Question , Thinking

“An evolving discipline–whether it be history or economics or astrophysics or immunology–is ever dynamically changing. Two steps forward and X steps back, so to speak. Periodically, the scholarly group registers more or less self-confidence, self-esteem, and complacency. We careerists are happiest when recent past achievements have seemed to be successful, but when still there are completable tasks dimly visible ahead.”

Paul A. Samuelson

"Foreword: Eavesdropping on the Future?" in New Frontiers in Economics (2004)
New millennium

Confidence , History , Change , Success

“Econometrics may be defined as the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference.”

Paul A. Samuelson

Paul Samuelson, Tjalling Koopmans, and Richard Stone. "Report of the evaluative committee for Econometrica." Econometrica- journal of the Econometric Society. (1954): 141-146.
1950s–1970s

“Well, I'd say, and this is probably a change from what I would have said when I was younger: Have a very healthy respect for the study of economic history, because that's the raw material out of which any of your conjectures or testings will come. And I think the recent period has illustrated that. The governor of the Bank of England seems to have forgotten or not known that there was no bank insurance in England, so when Northern Rock got a run, he was surprised. Well, he shouldn't have been.
But history doesn't tell its own story. You've got to bring to it all the statistical testings that are possible. And we have a lot more information now than we used to.”

Paul A. Samuelson

Conor Clarke, An Interview With Paul Samuelson http://www.theatlantic.com/politics/archive/2009/06/an-interview-with-paul-samuelson-part-two/19627/, Part Two (2009)
New millennium

History , Thinking , Study , Change

“What sex is to the biology classroom, stocks and investment riskiness is to the sophomore economics lecture hall.”

Paul A. Samuelson

Samuelson's Economics at Fifty: Remarks on the Occasion of the Anniversary of Publication (1998)
1980s–1990s

Sex

“My notion of a fruitful economic science would be that it can help us explain and understand the course of actual economic history. A scholar who seriously addresses commentary on contemporary monthly and yearly events is, in this view, practicing the study of history—history in its most contemporary time phasing.”

Paul A. Samuelson

New millennium, An Interview with Paul A. Samuelson, 2003

History , Understanding , Study , Science

“Moral: To understand economics you need to know not only fundamentals but also its nuances. Darwin is in the nuances. When someone preaches “Economics in one lesson,” I advise: Go back for the second lesson.”

Paul A. Samuelson

New millennium, An Enjoyable Life Puzzling Over Modern Finance Theory, 2009

Understanding

“Globalization presumes sustained economic growth. Otherwise, the process loses its economic benefits and political support.”

Paul A. Samuelson

Quoted in: Richard Duncan (2011) The Dollar Crisis, p. 232
New millennium

Support

“My mind is ever toying with economic ideas and relationships. Great novelists and poets have reported occasional abandonment by their muse. The well runs dry, permanently or on occasion. Mine has been a better luck. As I have written elsewhere, there is a vast inventory of topics and problems floating in the back of my mind. More perhaps than I shall ever have occasion to write up for publication. A result that I notice in statistical mechanics may someday help resolve a problem in finance.”

Paul A. Samuelson

February 1985, in William Breit and Roger W. Spencer (ed.) Lives of the laureates
1980s–1990s

Idea , Problem , Help

“Economics never was a dismal science. It should be a realistic science.”

Paul A. Samuelson

[Samuelson, Paul Anthony, Puttaswamaiah, K., 2002, Paul Samuelson and the Foundations of Modern Economics, 10 http://books.google.co.uk/books?id=_Lvflq4Wv-wC&lpg=PP1&pg=PA10]
New millennium

Science

“The proof of the pudding is in the eating. There was a widespread myth of the 1970s, a myth along Tom Kuhn’s (1962) Structure of Scientific Revolutions lines. The Keynesianism, which worked so well in Camelot and brought forth a long epoch of price-level stability with good Q growth and nearly full employment, gave way to a new and quite different macro view after 1966. A new paradigm, monistic monetarism, so the tale narrates, gave a better fit. And therefore King Keynes lost self esteem and public esteem. The King is dead. Long live King Milton!
Contemplate the true facts. Examine 10 prominent best forecasting models 1950 to 1980: Wharton, Townsend–Greenspan, Michigan Model, St. Louis Reserve Bank, Citibank Economic Department under Walter Wriston’s choice of Lief Olson, et cetera. … M did matter as for almost everyone. But never did M alone matter systemically, as post-1950 Friedman monetarism professed.”

Paul A. Samuelson

New millennium, An Interview with Paul A. Samuelson, 2003

Way , Dead

“With the assistance of mathematics, I can see a property of the ninety-nine dimensional surfaces hidden from the naked eye. If an increase in the price of fertilizer alone always increases the amount the firm buys of caviar, from that fact alone I can predict the answer to the following experiment which I have never seen performed and upon which I have no observations: an increase in the price of caviar alone will increase the amount the firm buys of fertilizer. In thermodynamics such reciprocity or integrability conditions are known as Maxwell Conditions; in economics they are known as Hotelling conditions in honor of Harold Hotelling’s 1932 work.”

Paul A. Samuelson

Source: 1950s–1970s, Maximum Principles in Analytical Economics, 1970, p. 67

Mathematics

“I was lucky to enter economics in 1932. Analytical economics was poised for its take-off. I faced a lovely vacuum that young economists today can hardly imagine. So much remained to be done. Everything was still in an imperfect state. It was like fishing in a virgin lake: a whopper at every cast, but so many lovely new specimens that the palate never cloyed.”

Paul A. Samuelson

Introduction to the Enlarged Edition
1940s, Foundations of Economic Analysis (1947; 1983)

Fish , Love , Imagination , Making love