A pharmacist’s son from a steel town
Paul Anthony Samuelson was born on May 15, 1915, in Gary, Indiana, a brand-new steel town on the southern shore of Lake Michigan. His father, Frank Samuelson, was a pharmacist, and his mother was Ella Lipton. He later described his family as “upwardly mobile Jewish immigrants from Poland” who had done well during the First World War, when Gary’s mills were booming.
In 1923 the family moved to Chicago, and Paul grew up in the Hyde Park neighbourhood, a short walk from the University of Chicago. At Hyde Park High School a teacher sparked his interest in the stock market. He was a quick, precocious student, and in 1931, at the age of sixteen, he entered the university next door.
“Born as an economist”
Samuelson liked to say that he had been born as an economist at 8 a.m. on January 2, 1932, in a University of Chicago classroom. The lecture that morning was on Thomas Malthus and his grim theory of population, and the young student was hooked. Chicago’s economics department was a remarkable place to start. He studied with Frank Knight and Henry Simons and, while still an undergraduate, sat in Jacob Viner’s graduate course alongside two future giants of the opposing camp, Milton Friedman and George Stigler.
He took his bachelor’s degree in 1935 and moved to Harvard, where he earned a master’s degree in 1936 and a doctorate in 1941. At Harvard he studied under Joseph Schumpeter, Wassily Leontief, Gottfried Haberler and Alvin Hansen, the leading American interpreter of John Maynard Keynes. His dissertation won the David A. Wells Prize for the best economics thesis at Harvard, and it became the basis of his first great book.
Across the river to MIT
Despite his brilliance, Harvard did not keep him. In 1940 Samuelson accepted a post as assistant professor at the Massachusetts Institute of Technology, a few miles down the Charles River, and he stayed there for the rest of his life. His biographer, Roger Backhouse, argues that a central reason for the move was the antisemitism then widespread at Harvard. In a 1989 letter to his friend Henry Rosovsky, Samuelson himself blamed antisemitism in Harvard’s economics department above all on its chairman, Harold Burbank.
At MIT he found freedom. The economics department he joined did not yet train graduate students; Samuelson later said it rose from a “mediocre service department” to number one in the rankings between 1941 and 1960, and he was the main reason. During the Second World War he also worked at MIT’s Radiation Laboratory, the wartime centre for radar research, in 1944 and 1945. He was promoted to associate professor in 1944 and full professor in 1947, and for a time also taught international economic relations part-time at Tufts University’s Fletcher School of Law and Diplomacy.
Rewriting economic theory in mathematics
In 1947 Samuelson published Foundations of Economic Analysis, developed from his prize-winning thesis. Economists of the time often argued in words and diagrams; Samuelson insisted that mathematics was the natural language of the discipline. Borrowing methods from physics and thermodynamics, he showed that a vast range of economic problems, from how consumers spend their money to how firms set output, could be analysed with the same tools of maximisation and equilibrium. In its first pages he chided economists for practising “mental gymnastics of a particularly depraved type.” The book became a landmark that later economists returned to again and again.
Over seven decades he published hundreds of papers; his Collected Scientific Papers contain 388 of them, and he called himself the last “generalist” in economics. He developed the theory of revealed preference, which reads people’s preferences from the choices they actually make. With Wolfgang Stolper he showed how trade affects wages, in the Stolper–Samuelson theorem. He set out the modern theory of public goods, such as defence or clean air, that markets alone tend to under-supply. His overlapping-generations model became a standard tool for studying pensions, savings and national debt, and his work on how well-informed markets set prices helped lay the groundwork for the efficient-market theory of finance.
The textbook that taught the world
Samuelson’s widest influence came through a book written for beginners. Economics: An Introductory Analysis, first published in 1948, began as a text for MIT’s required undergraduate course. Written in the shadow of the Great Depression and the Second World War, it explained to ordinary students, in lively prose, how Keynesian ideas about total spending could be used to fight unemployment and tame the boom-and-bust cycle, while preserving a market economy.
For Samuelson the stakes were not merely academic. In the textbook he wrote that it was “not too much to say that the widespread creation of dictatorships and the resulting World War II stemmed in no small measure from the world’s failure to meet this basic economic problem adequately”, the problem of mass unemployment that had crippled the 1930s. Teaching a generation how to prevent another depression was, in his eyes, a contribution to peace. The book introduced business cycles and the management of total demand into the standard college curriculum, and it praised the “mixed economy” of private enterprise and government as the practical middle way.
It became the best-selling economics textbook of all time. Through nineteen English editions, the later ones co-written with William Nordhaus from 1985, it sold around four million copies and was translated into some forty languages. Generations of students, who went on to become teachers, officials and central bankers, learned their first economics from it, and it reshaped the textbooks of its competitors too. It also drew fire: in God and Man at Yale (1951), William F. Buckley Jr. devoted a chapter to attacking it and a rival text as too friendly to government intervention.
Adviser, columnist and public voice
Samuelson never held a major government post, but he advised Presidents John F. Kennedy and Lyndon B. Johnson, arguing for tax cuts to stimulate the economy and supporting the war on poverty. He also consulted for the Treasury, the Bureau of the Budget and the Council of Economic Advisers.
For many years he wrote a column for Newsweek, alternating with his old Chicago classmate Milton Friedman. Friedman made the case for free markets and limited government; Samuelson, who called himself a “cafeteria Keynesian” defended a mixed economy in which markets are steadied by sensible regulation. The two remained friends despite their disagreements, and their jousting framed much of America’s public debate over economic policy. One Newsweek column produced his most quoted quip: that Wall Street indexes had predicted “nine out of the last five recessions.”
The first American Nobel laureate in economics
In 1970, only the second year it was awarded, Samuelson received the Nobel Memorial Prize in Economic Sciences, the first American to do so. The Swedish academy said he had done more than any other contemporary economist to raise the level of scientific analysis in economic theory. In 1996 President Bill Clinton presented him with the National Medal of Science; when the ribbon proved too short to slip over his head, Clinton told the audience that there was “a lot of brains in there.”
Samuelson’s family became an economic dynasty of its own. His brother, the economist Robert Summers, had changed his surname; Robert and his wife Anita, also an economist and the sister of Nobel laureate Kenneth Arrow, were the parents of Lawrence Summers, later U.S. Treasury Secretary and president of Harvard, the university that had once let Samuelson go.
A generous teacher and a family man
In 1938 Samuelson married Marion Crawford, a Radcliffe graduate who had earned top honours in economics and published her own research before giving up her career when their first child was born. They had six children. Marion died in 1978, and in 1981 he married Risha Clay. Colleagues remembered a man who wore his fame lightly, who made students feel welcome in the classroom and cared more about his department working well than about winning arguments. One colleague recalled sitting beside him in the Fenway Park bleachers while Samuelson watched the Red Sox and worked through equations in the margins of a thermodynamics book.
He kept working long after his formal retirement, keeping an office at MIT and publishing into his late eighties. The financial crisis of 2008 angered him; he told PBS that “fiendish Frankenstein monsters of financial engineering” had been created, some at MIT, and argued that markets without regulation would lead “into inequality and into their own destruction.” He died at his home in Belmont, Massachusetts, on December 13, 2009, at the age of ninety-four.
Legacy
Samuelson is regarded as one of the principal architects of modern economics and a founder of the “neoclassical synthesis” that combined Keynesian ideas about the whole economy with traditional theories of markets, an approach that still underlies much of mainstream economics. Former students such as Federal Reserve chairman Ben Bernanke, who called him “one of the greatest teachers that economics has ever known” carried his methods into policy.
His mathematical approach became the standard way economists work, and the MIT department he built has trained many of the world’s leading economists. Above all, through his textbook, the son of Jewish immigrants from a raw Indiana steel town taught millions of people across the world how to think about prices, jobs and the role of government in a market economy.
Sources & further reading
Paul Samuelson, Wikipedia · Nobel-winning economist Paul A. Samuelson dies at age 94, MIT News · Paul Samuelson, Nobel Prize-winning economist, 1915–2009, UChicago News · In Memoriam: Paul Samuelson, by Peter Diamond, Econometric Society · Paul Samuelson, Wikiquote · Researched from the sources above and checked against them. Spotted an error? Tell us.
A life 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.