- Person
- Paul Samuelson
- Lived
- 1915–2009
- Field
- Economics
- From
- American
The story
Paul Samuelson's research reached into almost every corner of economics. He worked by applying a few powerful mathematical ideas, above all maximisation, to a wide range of problems. Two of his most influential contributions concern how people choose and how societies should provide things that everyone shares.
In consumer theory, he pioneered the revealed preference approach in 1938 and developed it further in 1948. Economists had usually started from an assumed utility function or preference ordering, something no one could observe directly. Samuelson instead imposed conditions directly on the choices people actually make, so that their preferences could be discerned from their observed behaviour. Revealed preference theory is still used to analyse consumer behaviour.
In welfare economics and public finance, Samuelson is particularly known for his work on determining the optimal allocation of resources when an economy has both public goods and private goods. Public goods can be enjoyed by many people at once without being used up. In his 1954 paper The Pure Theory of Public Expenditure he set out what is now called the Samuelson condition: a public good should be provided up to the point where the combined benefit to everyone who uses it equals the cost of providing it. In 1950 he also showed the limits of national income figures for comparing social options.
His other work was equally wide. In 1941, with Wolfgang Stolper, he derived the Stolper-Samuelson theorem, which explains how changes in the prices of traded goods affect wages and returns to capital. In 1958 he gave a rigorous form to the overlapping generations model, used to study how people of different ages save and trade over their lifetimes, and in finance he is known for work on the random walk and efficient-market hypotheses.
He also popularised the Lindahl-Bowen-Samuelson conditions, criteria for deciding whether an action will improve welfare. The Nobel committee singled out exactly this range, noting that he had shown the fundamental unity of economic problems and methods.
Why it matters
Samuelson's ideas still guide how economists study consumer choices and the provision of goods that everyone shares.
About Paul Samuelson
MIT economist who gave modern economics its mathematical foundations, wrote the best-selling economics textbook of all time and became the first American to win the Nobel Prize in economics.
More about Paul Samuelson
- Paul Samuelson helped make MIT economics world-classWhen Paul Samuelson joined MIT in 1940, its economics department trained no graduate students; within two decades it ranked first in the field.
- Paul Samuelson wrote the best-selling economics textbookPaul Samuelson's Economics: An Introductory Analysis, first published in 1948, became the best-selling economics textbook of all time, translated into 40 languages.
- Paul Samuelson made mathematics the language of economicsPaul Samuelson's Foundations of Economic Analysis, published in 1947 from his Harvard thesis, showed how mathematics could make economics a rigorous science.
Sources
- Paul Samuelson Wikipedia
- Samuelson condition Wikipedia
- Stolper–Samuelson theorem Wikipedia
Another act of tikkun olam. This is part of tikkun olam, the Jewish idea of repairing the world, and every one of us can add to it.