Pol Semiuelson

Pol Semiuelson

American economist, Nobel Memorial Prize in Economics, 1970
Date of Birth: 15.05.1915
Country: USA

Biography of Paul Samuelson

Paul Anthony Samuelson was an American economist and the recipient of the Nobel Memorial Prize in Economic Sciences in 1970. He was born in Gary, Indiana to Frank and Ella Samuelson. In 1935, at the age of under twenty, he earned a bachelor's degree from the University of Chicago, where he was taught by economists such as Frank Knight, Jacob Viner, and Henry Simons. His subsequent career as a graduate student at Harvard University became legendary. He earned a master's degree in economics in 1936 and was appointed as a junior fellow at Harvard, a high level of recognition bestowed upon him by the university. When he completed his oral exam, the professors jokingly asked him, "Did we pass the exam?" He received his Ph.D. in economics in 1941, and his dissertation also won him the David Wells Prize.

Prior to earning his Ph.D., Samuelson made significant contributions to the methodology used in all areas of economic analysis. His precise application of mathematics in analyzing fundamental economic theories illuminated the constraints that limited these theories, thereby enhancing their ability to reflect real-world problems. His first published work in 1938 focused on the theory of "revealed preference" of consumers. According to the traditional approach to consumer theory, individuals "maximize utility" (seek to maximize satisfaction of their needs) when they purchase goods or services. This theory could not be tested as utility, being a qualitative concept, cannot be measured. However, Samuelson proved that utility maximization could be determined by comparing consumer choices before and after price changes. Rational consumers would not buy goods and services at higher prices if they could have consumed them at lower prices. This theory paved the way for important new developments in price index theory and the measurement of national income.

In 1940, Samuelson became an assistant professor of economics at the Massachusetts Institute of Technology (MIT). In 1947, he was promoted to a professorship and from 1966, he held the position of Institute Professor. During his long career at MIT, Samuelson played a key role in transforming the economics department into a leading center. In addition to teaching economics, he also worked in the radiation laboratory at MIT (1945) and taught international economic relations at the Fletcher School of Law and Diplomacy (1945). During World War II, from 1941 to 1943, he served as a consultant to the National Resources Planning Board, and in 1945, he served as a consultant to the Office of War Production.

His book "Foundations of Economic Analysis," published in 1947 based on his doctoral dissertation, became one of the most significant economic works of the century. It provided a solid foundation for the mainstream of economic theory. Though the style of the book was heavily mathematical, Samuelson argued that such rigor was necessary for economic analysis. According to him, without it, economists would simply engage in "mental gymnastics of the most depraved kind."

While many economists, including Simon Kuznets, Wassily Leontief, and Gunnar Myrdal, opposed the increasing use of complex mathematics in economics, arguing that it distanced the discipline from the essence of economic relationships and real-world problems, Samuelson believed that the application of advanced mathematical methods was crucial for clear and unambiguous economic analysis and that its theorems carried empirical significance. His colleagues' growing support for his views brought about a fundamental change in the methods and approaches of economic science. In "Foundations of Economic Analysis," the integration of higher mathematics with analysis became the starting point for a unified approach to both static and dynamic theory, for which Samuelson would eventually receive the Nobel Prize. In this book, Samuelson argued that in various areas such as production and consumption theory, international trade theory, public finance, and welfare economics, almost all important results could be derived through mathematical reasoning subject to certain constraints. He also insisted that static predictions of economic models and their dynamic behavior were interrelated, a position known as the principle of correspondence.

Although Samuelson made significant contributions to the neoclassical theory of prices, his most outstanding contribution to economic science was the development of stability analysis. Stability analysis relates to the general theory of prices or the dynamic situation where prices are determined under conditions of disequilibrium, where the rate of price change is determined by the excess of demand over supply. This analysis also required the mathematical precision of business cycle theory. Analytical economics became the central theme that ran through Samuelson's wide range of research after the publication of "Foundations of Economic Analysis." His lucid explanations of mathematical and general theoretical principles of applied economics made his book "Economics: An Introductory Analysis" a classic work after its publication in 1948. The book went through many editions and was translated into Russian, Japanese, Hungarian, Arabic, and many other languages. The early editions characterized the changes that occurred by the end of World War II, and as global economic problems evolved, the content of the book was adjusted accordingly.

From the outset, Samuelson, reflecting the public concern over inflation and unemployment, showed great interest in the use of fiscal and monetary policies, leading to the "neoclassical" synthesis of contemporary mainstream economics. As a Keynesian, he believed that achieving full employment required intervention through policy regulation and that neoclassical theory was valid only when full employment was achieved. Despite being a staunch advocate of general equilibrium analysis, he recognized its limitations when applied to real-world realities. At the same time, he carefully analyzed both Karl Marx's theories and the concepts of the "New Left." Samuelson's pioneering research continued in the late 1940s and throughout the 1950s, with his main ideas and analytical methods gaining increasingly broad recognition. From the mid-1970s and onwards, his articles on "factor-price equalization" in international trade showed that free trade between countries would help reduce income differentials between labor and capital in those countries. These articles received more references than any of his other works. He also theoretically classified the meaning of gains from trade, asserting, for example, that a rapid increase in Japanese exports would lead to an extremely large increase in Japan's income compared to the rest of the world. This work closely corresponded to the economic processes that occurred after World War II.

Being a prolific author, Samuelson published numerous books and articles on a wide range of topics. In the book "Linear Programming and Economic Analysis" (1958), co-authored with economists Robert Dorfman and Robert Solow, he emphasized the analytical technique proposed by mathematician George Dantzig and economist Leonid Kantorovich, which could be applied to solving practical resource allocation problems in both the private business sector and the public sector.

In the same year, Samuelson published the work "An Exact Consumption Loan Model With or Without the Social Contrivance of Money." This work represents one of the most original contributions to economic theory. The model resembles Franco Modigliani's famous "life-cycle hypothesis." In Samuelson's model, middle-aged individuals lend a portion of their income to young people in the form of loans, allowing them to earn interest on those loans in old age. This work raises new questions for demographic and monetary economics and provides a logical sequence to the theory of interest rate determination. Other works made fundamental contributions to the theory of optimal economic growth ("the customs union theorem"), capital, general equilibrium, and public goods.

In the 1960s, Samuelson's role as a consultant grew. Although he served as an advisor to many government agencies and private organizations, his national recognition came as an advisor to President John F. Kennedy. Samuelson referred to himself as a member of the "right-wing of Democratic economists, supporters of the New Deal." Although he often disagreed publicly with his colleague, economist Milton Friedman, who was an economic commentator for the magazine "Newsweek," they both highly valued each other's work in the field of economic theory.

In 1970, Samuelson received the Nobel Prize in Economic Sciences "for his contributions to the development of static and dynamic economic theory and for raising the level of analysis in the field of economics." Despite receiving the Nobel Prize, Samuelson continued to publish numerous works on various topics, including Marxist theory of labor exploitation and optimal social security systems. His orthodox views on economics faced criticism from Marxist economists Mark Linder and Julius Sensat, who released the book "Anti-Samuelson" in 1977. However, it remains a fact that few Marxists have delved as deeply into the problems of economic theory from the perspective of the left as Samuelson did.

In 1938, Samuelson married Marion Crawford. They had two daughters and four sons. After the death of his first wife, he married Risha Eckaus in 1981.

In addition to the Nobel Prize, Samuelson received numerous awards and honors, including the John Bates Clark Medal from the American Economic Association (1947) and the Albert Einstein Award from Yeshiva University (1971). He served as president of the American Economic Association, the Econometric Society, and the International Economic Association. He received fellowships from the Guggenheim, Ford, and Carnegie foundations. He was a member of the National Academy of Sciences, the American Academy of Arts and Sciences, the American Philosophical Society, and a fellow of the British Academy of Sciences. He was awarded honorary degrees from Harvard University and the Catholic University of Leuven, as well as the universities of Chicago, Indiana, Michigan, Keio, Southern California, Pennsylvania, Rochester, East Anglia, Northern Michigan, and Massachusetts.