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Good post, Pete. What I find very disturbing is how the generations after Samuelson are even more formalistic and narrow than Sameulson. Consider the statements of Lucas quoted at Marginal Revolution:

“Samuelson was the Julia Child of economics, somehow teaching you the basics and giving you the feeling of becoming an insider in a complex culture all at the same time. I loved the Foundations. Like so many others in my cohort, I internalized its view that if I couldn’t formulate a problem in economic theory mathematically, I didn’t know what I was doing. I came to the position that mathematical analysis is not one of many ways of doing economic theory: It is the only way. Economic theory is mathematical analysis. Everything else is just pictures and talk.”

http://www.marginalrevolution.com/marginalrevolution/2009/12/quotations-by-and-about-paul-samuelson.html

Yikes!

Mario,

I am biased since Boulding was one of my teachers. But when he was a young superstar in the economic profession, he wrote a review essay of Samuelson's Foundations in the JPE, and in that essay he 'predicted' that the flawless precision of mathematical economics may prove to be a hindrance rather than aid in our understanding of the messy world which human beings occupy. Boulding went on to argue that perhaps the vague and imprecise world of literary economics that exists on the borderline between economics and sociology may prove to be more fruitful in that task. Sadly, Boulding's warning were not heeded.

Here is the J-Stor link to Boulding's piece --- http://www.jstor.org/pss/1825768

It is brilliant I think.

While Samuelson never abandoned his Operationalist / Machian picture of 'economic science', econometrics played a pivotal role in that picture, and Samuelson at least should be give credit for acknowledging that this centerpiece of his picture of "econ science" was a complete failure when it came to the role Samuelson depended on it to play.

It's well known that Samuelson could be a nasty guy and a very ugly person as a cut throat ideological partisan (e.g. Samuelson's attack on Laffer) but if we really want to go to where Samuelson was a failure as a "scientist" it is in his failure to acknowledge and address the implications of deep failures exposed in his scientific research program, e.g. the failure of his "Revealed Preference" construct, the implications of the outcome of the Cambridge capital controversy, the collapse of his "Neo-classical synthesis" etc.

Scientists don't have to be hero's, but they do need to keep their heads out of the sand.

For those like Bryan Caplan, who recently took a swipe at Hayek for seeming to spend his entire life tilting at a variety of long out-of-date windmills such as Scientism and Positivism, reading Robert Lucus' quote about Samuelson and mathematics as the one and only true language of economics (with everything else merely "pictures and talk"), we can see just how relevant and "up-to-date" much of Hayek's and Mises' writings on methodology and the structure of economic theorizing remains today.

An "oldie, but goody" that properly satirizes all of this, and remains a great read, is Axel Leijonhuvhud’s “Life Among the Econ,” especially his pokes at “the math econ tribe” and their arrogant presence of superiority to all others.

The fact is that Samuelson helped do with Keynesian macroeconomics and mathematical formalism what Jevons said Ricardo had helped to do with the labor theory of value: he "shunted economics on to the wrong track." And in this case, one that has turned out to be a dead end in terms of any realistic understanding of market processes.

Unfortunately, the evolution of economics has a form of "path-dependency" in its avenues for development, too, and it will take a long time to return to and move on a better road to economic enlightenment.

Richard Ebeling


Richard,

The startling thing is that Lucas says, "[M]athematical analysis is not one of many ways of doing economic theory: It is the only way." Such a position might be considered a straw-man if it were not for the fact that Lucas and many others believe it.

@Rizo:
How can that be considered a straw man? It is a serious question, if you can help with a good answer, it would be greatly appreciated.

Very well said.

Schumpeter referred to abstract model-building and mathematical formulas with unrealistic assumptions as a "Ricardian Vice". Given the Lucas comments, perhaps "Ricardian Vice-Grip" would be a better description of the hold mathematical economics has over the profession.

It is a long time, Mario, since there were economists willing to say the following in their own economics textbooks (this is an actual quote from the book).

In 1932, Dr. Broadus Mitchell, a professor of political economy at Johns Hopkins University said in his, "Preface to Economics" (New York: Henry Holt & Co., 1932) p. 96:

"I hate graphs, anyhow. They are the only pictures economics books have in them, and they are mighty poor substitutes for comic strips. And the letters and symbols with which they are generally encumbered get me all mixed up. You see things like this: 'Drawing a straight line from the point K on the vertical axis OY, to the point of intersection P, and dropping a line from P to the horizontal axis OX, we clearly preceive that the quantity demanded, etc., etc.'. . .

"I clearly preceive nothing except that the author has failed to realize that I have something better to do than to look up his old big letters and little letters and big italics and little italics. As though this were not enough, he often uses not only the 'line DD', but 'the line D'D',' and 'D"D".' The last is beyond human endurance."

Not only did people like Samuelson and, still, Lucus consider mathematics to be the only appropriate language of economics. During the time when Samuelson was a student, the tone was being set by others.

In a lecture delivered in Japan in 1931, Joseph Schumpeter argued for not only the logical superiority of mathematical forms of reasoning in economics, but that economics would have become a real science when the ordinary, informed and interested reader could no longer understand what the economist was saying.

"The severance from every day forms of thought is perfect [with the full mathematization of economics], and the general reader is made to realize that the thing is beyond his reach," Schumpeter said.

Think of how different this was from the thinking of the classical economists and even many of the early marginalist thinkers (and especially the Austrians). They insisted that economics was a serious and difficult discipline. But they assured the informed and attentive reader that if he was disciplined enough to follow the logic of the argument, chapter-by-chapter, he could both master the subject and have a fairly good working understanding of how the market process actually worked. They would understand the "laws of economics" and their real world applications and implications.

(As Frank Knight pointed out in his 1931 article on 'Marginal Utility' for the "Encyclopedia of the Social Sciences": "In fact, the theory is much more convincing in the loose, common-sense formulation of Menger than it is in the more refined mathematical version of Jevons and Walras." It was looser and more common-sensical in Menger because his logical exposition developed the theory of marginal utility in a manner for grounded in the reality of how actual individuals weigh scarce means at "the margin.")

It may be awhile until we return to those happier days.

Richard Ebeling

Pete,

I would disagree that in his textbook one would "find Keynesianism at the turn of each page." Actually, his textbook emobodied what was ultimately a self-contradictory system, the so-called "neoclassical synthesis," which amounted to saying "let us be strictly neoclassical when doing micro" (and his Foundations was the indeed teh foundation of how this would be done ever since at the grad level, with some Arrow-Debreu-MacKenzie general equilibrium theory and later a bunch of game theory tossed on top to make what up what one finds in most grad micro theory textbooks today), but then let us be Keynesian in some way when we do macro. However, let us now worry about how or whether the two fit together, and although both Keynes and Samuelson ultimately drew on Marshall (as did Friedman), there never was any integration, with a lot of handwaving done to fuzz this up, such as regarding the "fallacy of composition," which is a real fallacy btw, even if many here do not think so.

Now, this contradiction would play itself out. Part of the problem was, as Leijonhufvud argued, the "Keynesianism" one finds in Samuelson and many after him is not what one finds in Keynes, although it is not too far from what one finds in Hicks and Hansen (Samuelson's mentor on Keynes). Indeed, the key apparatus for textbooks of the "Keynesian cross" (although not ISLM) was invented by Samuelson for his textbook from which it went into all the others later.

As time went on, and Friedman gained ground in the debates in the 1970s over macro policy (sorry, but Austrians were not serious players in this at that time), this would lead eventually to Lucas and the resolution of this problem by assuming that the macro simply reflected the micro of a fully-informed and rational representative agent. While this myth has since been exploded in the eyes of many, it continues to predominate what is done in the "New Keynesian" DSGE models one finds in the central bank basements, although Keynes would probably fall over in a swoon if he realized his name was being attached to such stuff.

It is my own opinion that Samuelson was at least eventually aware of some of these problems, but he certainly never resolved them.

Regarding Samuelson and econometrics, it should be kept in mind that, as I was once told, "Samuelson never ran a regresion in his life," although he certainly defended the use of econometrics as part of economic science.

Regarding the capital theory controversy, he tended not to say much about it, but when pressed admitted that he had been wrong on that one, declaring in the famous "Summing Up," in the 1966 QJE, that "economic theory is build upon foundations of sand." I was told at the time by the dean at MIT that this was simply evidence that while math is superior to physics, both are superior to economics, because even the most brilliant of mathematical economists could make mathematical errors.

It ia also true that while Samuelson was often very benign and open-minded, he could also hold grudges and engage in partisan in-fighting. His final testament in JEBO that I published at the beginning of this year on Hayek contained some harsher statements than I really liked, although he also said some favorable things about Hayek, and in any case, I figured he should have his own way in making his final testament on their relations. But it was rough.

Oh, there is a certain irony in the timing of this death in that it may also coincide with the final end of Samuelson's textbook in its old form, with the 19th edition due to Nordhaus just out and by all accounts much shortened and following the new streamlined model established some years ago by Mankiw. Frankly, I do not find this particular outcome all that desirable as it seems to me to be a watering down of economics at the Principles level to match a slackening of intellectual seriousness and depth by current college students. But then, I am an old fart (note: this has nothing to do with specific content, only how much gets covered, with many topics now gone).

Barkley,

I appreciate what you wrote. But let me just say that in Samuelson's Economics, he does not get to microeconomics until very late in the book (~p. 600) and the reason is that we cannot talk about microeconomics until we have the macroeconomic system in balance.

I agree micro and macro were in tension and I agree that the neoclassical synthesis didn't work, but I disagree that Samuelson's microeconomics was "neoclassical" in the same sense that his Chicago teachers economics was microeconomics.

BTW, I am an old fart like you -- and one of the things that struck me when I first read Samuelson's first edition of Economics was how much more demanding it was on the students than subsequent editions. But it also tipped its ideological hat a bit more and did reflect the zietgeist of postWWII US intellectual scene.

An appreciation of Samuelson from Ed Glaeser.

http://economix.blogs.nytimes.com/2009/12/14/remembering-samuelson-who-fused-economics-with-math/?src=twt&twt=nytimeseconomix

He points out some very interesting facts about Samuelson's education and early career.

Pete,

Just pulled out a copy of that first edition. The opening material is all very general and mostly factual stuff, although just like all modern textbooks opened with stuff like the ppf, which is not Keynesian. Around p. 150 he starts to get into how to measure incomes and taxation, and Keynesian ideas begin to appear. Part 2, starting at p. 253, is where he really does the standard Keynesian model a la Samuelson, and it is in Part 3 that he does regular micro, starting at p. 447. The text is 608 pages long.

I would agree that the first edition was more clearly ideological, with the opening macro material going on about the New Deal and so on, and I am aware that there were major changes in the second editon.

Without wanting to get too much in this context into a discussion of "What Keynes Really Meant," I have always found when I reread through the "The General Theory" that the basic textbook model is really the essence of Keynes' own ideas.

When you get through the sarcasm and "witty" commentaries, and the reasonable comments about the limits of mathematics in economics, the fact remains the theory is what some called the "hydraulic" model.

And it set the stage for the idea for paternalistic government managing and manipulating people for their own good.

One of the most clearly written of these expositions for wise and good macro-management was "The Keynesian Revolution" by Lawrence R. Klein (who was awarded the Nobel Prize in Economics in 1980). Published in 1947, it represented the growing consensus of the time among economists and government policy advocates. The final chapter outlined what should be expected from government if the Keynesian “insights” were to be fully applied for the “social good.”

In the brave new world guided by the ideas of Keynes, Americans would have to accept a greater degree of government regimentation than they had in the past. Should they be afraid of this? No, Dr. Klein assured his readers: “The regimentation of unemployment and poverty is infinitely more severe than the regimentation of economic planning.” He was sure that the American people would “quickly come forth with support” for the regimentation of economic planning.

The government “economic planners” would have to have “complete control over government fiscal policy so that they can spend when and where spending is needed to stimulate employment and tax when and where taxation is needed to halt upward price movements.” The slow, cumbersome congressional budgetary process would have to be put aside. In its place:

"We must have a planning agency always ready with a backlog of socially useful public works to fill any deflationary gap that may arise [through discretionary government deficit spending powers]; similarly, we must have a price-control board always ready with directives and enforcement officers to wipe out any inflationary gap that may arise. . . . Government spending should be very flexible and subject to immediate release or curtailment, in just the precise amount which will maintain full employment, no more and no less. . . This is the road to the kind of full employment that we need."

At the same time, government would have to see to it that the members of society were kept from saving too much and spending too little, since excessive savings would diminish the “aggregate demand” upon which “full employment” was dependent. This would require, Dr. Klein argued, an active and conscious policy of redistribution of income:

"If we redistribute income from the rich, who have a relatively high marginal propensity to save, to the poor [whose marginal propensity to save is generally lower], we will decrease the community’s marginal propensity to save. Such policies of income redistribution can be carried out by taxing the rich and paying a dole or other types of contributions to the poor."

Also, the motives for people privately desiring to save would have to be undermined by the government taking greater responsibility for such things as retirement planning. Dr. Klein argued:

"Most children are raised on the virtues of thrift, and high spenders are usually considered to be unworthy citizens. It is difficult to change these fundamental habits . . . .The people acting on individualistic principles do not know their own best interests. They must be taught to look at the system as a whole [in which consumption rather than savings is the 'socially' desirable conduct] . . . We must resort to indirect methods such as social-security programs which wipe out the need for savings."

Here was Keynes’s ideal formulated for a new American future. The constitutional procedure for legislative approval of taxation and expenditures would be thrown away; economic planners would have discretionary control over taxing and spending. Taxation would be a redistributive tool for macroeconomic policy manipulation. And since individuals “do not know their own best interests,” the Keynesian planners would have to teach people to give up their old bad habits of self-reliance and savings, with the state becoming the paternalistic provider.

People like Klein and Samuelson were the propagandists for the macro-thinking that has dominated so much of the post-World War II economic policy landscape.

Richard Ebeling

I don't agree with Richard that the standard textbook model of Keynes gets to what he was saying. I'm too much of a Leijonhufvud student to agree with that assessment.

I would repeat something I have said before, however, namely the General Theory is a Rorschach test for the reader. And clearly the work was adapted to suit the ideological purposes of some interpreters.

Mario has done a great service over the last year for reminding us how much Keynes backed off from his own positions. And rejected some interpretations of his work.

I'll simply say: very perceptive post, Pete. May Samuelson come to be regarded as a Petty instead of a Smith -- and may it happen soon.

Here's Samuelson on his one-time picture of the role of econometrics in
"economic science":

"When I was 20 . . . I expected that the new econometrics would enable us to narrow down the uncertainties of our economic theories. We would be able to test and reject false theories. We would be able to infer new good theories. . . [I]t has turned out not to be possible to arrive at a close approximation to indisputable truth [and] it seems objectively to be the case that there does not accumulate a convergent body of econometric findings, convergent on a testable truth.”

Greg: that Samuelson's statement is interesting. What is the source? This reminds me of Hughes's joke on economists' interpretations in "Money in crisis", which sounded more or less like "If you get so many divergent interpretations from your physician, call a priest and a lawyer".

Great posting, Peter! As a progressive tool maker for social engineers he was on the wrong track. His main weakness was his disrespectful thinking about austrian economics.

"His substantive contributions (as oppopsed to form in which he stated arguments) are not immediately obvious to pinpoint."

Well, there is the introduction of comparative statics in economic analysis, revealed preference in consumer theory, the Stolper-Samuelson theorum and the Harrod–Balassa–Samuelson effect in international economics, Lindahl-Bowen-Samuelson conditions in welfare economics. I'm sure I could go on.

I am a little surprised at the small-mindedness of this post, and a good bit of the related commentary. Disagreeing with the man is no reason to be dishonest about the range of his accomplishments. Certainly the debate between Samuelson and the personal heroes at this blog continues, but since Samuelson arrived on the scene, he has largely been winning the debate. In the contest of ideas, Samuelson has been winning. One ought not stoop to the level of belittling his accomplishments at a time like this.

Pete once stated it nicely: the former models should be treated as the footnote, and the analysis of processes and institutions should be treated as the body of economic theory.

kharris,

I acknowledge that Samuelson shaped the mainstream. But in the examples you give, Samuelson gave formal statement to propositions which economists already had stated, and the introduction of comparative statics is a form of an argument not the substance of a position. I acknowledge that Samuelson was brilliant, but judgment on accomplishment ultimately is a judgement about which direction one thinks economics as a science should go. Note, I am clear that I think in the 1940s it would have been wiser if economics had gone in the Mises/Hayek direction, rather than in the Samuelsonian direction. I think the ultimately judgement on the failure of market socialism as a model, the failure of Keynesianism as a model and as a practice, the New Institutional revolution (including public choice) and the New Classical revolution, and the development of organizational theory as well as entrepreneurial studies point to the strong possibility I might be right in that judgement. But I am sure we will disagree. What I don't believe is that I am being "small-minded", but instead trying to make a considered judgement.

BTW, I suggest that readers look at Robert Nelson's Economics as a Religion as a good introduction to the Samuelsonian transformation of economics in the mid-20th century. Also, I'd like suggest a comparison between Boulding and Samuelson on the one hand, and Buchanan and Samuelson on the other.

Bruce Caldwell has a fine post on Hayek's work:

www.cato-unbound.org/2009/12/14/bruce-caldwell/making-sense-of-hayek-on-spontaneous-order/

One can read it in light of our discussions of Samuelson's success at formalizing economic theory. Boulding's "After Samuelson, Who Needs Adam Smith?"

www.webshells.com/cemetery/keb/samkb2.htm

Samuelson (and so many others) simply had little interest in the project. Again, as Pete has said, formal economics ought to be considered a footnote (and a well-developed one at that, I should add) but, unfortunately, it has crowded out more difficult and important questions. Smith's (and Hume's, and Mises's, and Hayek's) ideas still have something to say to us. They still can, and should, remain part of the extended present, as Boulding put it. They still retain an evolutionary potential within the discipline.

That has become more clear over the past couple decades. Samuelson's Foundations, and the work of so many others (including Hick's great Value and Capital, which should not be slighted), have retained a remarkable resilience over the decades, but their approach has begun to show signs of becoming The Great Footnote to economic analysis in light of (as Pete pointed out) property rights economics, new institutional economics, behavioral economics and the like.

...judgment on accomplishment ultimately is a judgement about which direction one thinks economics as a science should go."

And here is the core of the problem. This is essentially a declaration that your own preference are all that matter. I'm sure that's a very good standard for use when making consumption decisions, but it is small-minded in judging intellectual accomplishment, or just about anything else.

Samuelson picked up notions that had already been considered and made them into specific statements? For shame. Nobody else with an intellectual reputation ever did such a thing. Except Newton. I suppose since he admitted to standing on the shoulders of giants that we need to toss him in with Samuelson. Oh, and Darwin. And Friedman, I guess, since monetary theory didn't actually start with him.

No, sir. You have managed to find a way to cast your small-mindedness in lovely rhetoric, but underneath the thicket of words, you have elevated your own normative view to a status that nobody's normative view deserves. You have made your own preference the standard by which the achievement of others must be judged. I realize that is what passes for analysis on barstools and talk radio, but it is a shoddy standard.

kharris, among the substantive achievements of Samuelson you listed his revealed preference theory. Do you consider that this survived the critique by Stanley Wong? http://www.nd.edu/~pmirowsk/pdf/Wong_Introduction.pdf

You are way off base, kharris. Pete is expressing a professional *judgment* and offering reasons for it. That is not similar to expressing an arbitrary personal preference for, say, vanilla over chocolate ice cream. As he noted, he acknowledged Samuelson's achievements and so on. You have no cause to be huffy with Pete.

Perhaps you are reacting to others with whom you have mistakenly lumped Pete? I have not personally encountered any inappropriate blog posts on Samuelson's passing although they must be out there. I have encountered, however, some comments on other blogs that, well, let's say lacked proper decorum. Are these, perhaps, the true objects of your ire?

What makes people call someone brilliant who they consider to be consistently wrong?

"...among the substantive achievements of Samuelson you listed his revealed preference theory. Do you consider that this survived the critique by Stanley Wong? http://www.nd.edu/~pmirowsk/pdf/Wong_Introduction.pdf"

What is this supposed to prove. The last time I checked, some philosophers like Hausman had some really critical things to say about the utility functions, welfare analysis, etc. And?

@ scineram:

Brilliance. I think brilliance might make people call someone brilliant whom they consider to be consistently wrong.

Anyway, who said I think he is "consistently wrong"? I don't agree with the general thrust of his policy preferences. I rank the Mises-Hayek trade cycle higher than he seems to have. I don't agree with his early methodological writings, although he never practiced what he preached as Machlup showed. (Which suggests *error* not any moral failing, BTW.) And so on, But the guy sure knew his stuff. He sure knew how to construct a solid argument. The puzzle in my mind is why anyone would question that obvious point.

Let's take an example, shall we? Where, scineram, do you think Samuelson goes wrong in his 1965 proof that properly anticipated prices fluctuate randomly? Here's the link:
http://www.ifa.com/Media/Images/PDF%20files/Samuelson-Proof.pdf

Montg, if Wong's critique is robust you have to delete one of the substantive achievements that have been claimed for Samuelson. Mirowski noted that the profession took next to no interest in Wong's critique. Do you think that is appropriate or does it suggest a serious problem of some kind?
What if some of his other "substantive" achievements are equally flimsy? Would that make a difference to his stature?
At least it would call for discussion of the criteria that are used to evaluate substantive achievements.

Look, the presence of a strong or robust critique is not the knock-out punch that some of you think it is. Take the case of Pearl's criticism of the causal framework developed by Rubin. Any statistician worth his salt would agree that Pearl's criticisms are solid, but that in no makes Rubin's contributions in this area "flimsy". I'm sure one can find similar situations in other fields as well. The impression I tend to get from some here is that, if some position or figure in the mainstream economics profession is attacked by some Austrian or heterodox figure, that in and of itself is enough evidence that the former must be wrong or flawed.

Pete,

Normally we air our disagreement on one particular point (which I'll get to in a second, just wait for it...) when discussing the fortunes and career paths of Austrian economists. So I'd be curious to hear your views in the context of Samuelson.

I think it's fair to say that you are not here writing a complimentary eulogy of Samuelson, right? And yet, he is the epitome of a successful economist, on any objective measurement you could want.

And yet you aren't holding him up as a model for us to emulate. Why not? Because you think his economics was (were?) inferior to the economics he displaced and rendered unfashionable, and difficult to get published in top-ranked journals.

I'm not accusing you of a contradiction here, but I really am curious to hear your reconciliation of your often-stated views on how to be a "successful professional economist" with this obituary of Samuelson.

Bob,

My argument is not that subtle. 1. There is good economics and bad economics. We should practice good economics, but that doesn't mean that you practice conventional economics. 2. You should try to do your best to get your work across to our peers at the highest level possible in the scientific journals. If we could publish every paper in the AER, then we should. But the point isn't just to publish, but to publish "our" work in the AER.

I just deny that the reason we cannot get in there consistently is due to some barrier to entry that is unjustified, but instead that this is a very competitive business that requires arguements and evidence to be presented in a way that the vast majority of economists cannot satisfy the standard (not just Austrian types, but of all stripes). But if you present your argument to those standards, it gets published in the AER, JPE, etc. And we see that even among contemporary Austrians types.

Pete

Thanks Montg, I appreciate that there are very few knock-out punches and merely being subjected to criticism proves nothing.
The question is, was Wong's critique robust or not, and if it was, how come the profession by and large took no notice?
Do you have a view on the details of the case?

What Samuelson (and Nordhaus) thought about the economic "success" of the Soviet Union has to be one of the top whoppers, if not the top one, of all time. At least Arthur Schlesinger Jr. had the excuse of being an economic illiterate.

As for why Wong's critique of revealed preference was ignored, maybe it was because everyone was so much in awe of PAS and/or so much in fear of criticizing the Great Man to the point that they thought it would have been bad for their career advancement. Mirowski doesn't speculate why "a deafening silence greeted the appearance of Wong's book."
Are there any more corrupt precincts than acadamia? I mean at least brothels and gambling dens have the profit motive working; the workers don't have tenure; and they can't get NSF grants.

After reading Krugman and some others on Samuelson I have to wonder, don't economist know about Stanley Wong's _The Foundations of Paul Samuelson's Revealed Preference Theory_?

In psychology / cognitive science this would be like a behaviorist who didn't know about Chomsky's dismemberment of Skinner.

Pete,

You score a serious point when you argue that many things that Samuelson wrote amounted to formalizing an idea that was already around. I would agree that much of that will recede (and most of it already has, aside from becoming part of the general backdrop to conventional economics). However, he did have some original ideas that were not total crap and that continue to be influential, although clearly his significance to the profession as a whole goes far beyond those particular ideas and has more to do with how he redid everything, about which both you and I have many problems, if not all of them being the same.

Among those very influential still that he really formulated I would include his clear definition of a pure public good in the early 1950s (important, even if one does not believe that such a thing really exists) as well as his development of the overlapping generations model (although Allais beat him to the punch in French in 1947, but nobody knew or reads that paper), with his 1958 paper on this possibly his currently most frequently cited paper.

Wong may be right about revealed preference, but I for one never thought much of that idea. Samuelson was wrong on technical ground about many things (quite aside from arguments about ideology or policy). One of those was the reswitching argument, noted above, and he agreed on that one that he was wrong. It should be kept in mind that Samuelson published papers from 1937 through at least 2009, with some still possibly in the pipeline on the way to future publication. His collected works fill numerous fat volumes that fill most of a shelf, and he may well have known more economics than anybody else on the planet when he died, with the line that he had probably forgotten more than most people ever knew quite likely true, although he seemed to be pretty alert and on top of things right up at least awfully close to the end.

Roger,

I have alread noted this on Econospeak and will on MR in a bit after I check on MacKinlay et at Chap 2, but it should be kept in mind that Samuelson's proof did not prove ratex. Samuelson did allow for all kinds of weirdo distributions, and in the paper itself he noted that it was so general that it was not amenable to empirical testing (some anon on MR claims it was tested 15 years ago, but I think that involved some extra limiting assumption, need to check though), and that it was so general that it was borderline "vacuous," Samuelson's own word. Although one can blame people inspired partly by him for putting ratex over on us, he always sneered at it and did not accept it.

Bill S.,

This claim about Samuelson and the Soviet Union is one of the more ignorant and off-the-wall arguments that regularly gets made by people in locations such as this. Sure, Mises and Hayek were calling its impossibility regularly for 71 years prior to its actually coming to an end, whoop-de-doo. But, in fact it worked pretty well for an awfully long time, industrializing sufficiently to produce enough steel for tanks to defeat Hitler in the world's largest tank battle ever, and after the war avoiding starvation or general homelessness or lack of clothing, even if what people had was of poor quality, and there was a stagnation of technological progressiveness for reasons Mises and Hayek did good jobs of explaining. But Samuelson also never denied any of that, and indeed gave at least Hayek credit on most of this, as for example in the paper I published by him in JEBO at the beginning of this year.

In knocking him for his remarks about the USSR economy, one should realize that he was simply reflecting what was accepted opinion in places like the CIA and other analytical outfits, indeed very widely. Even the most deeply dyed Austrians did not call the timing of the Soviet collapse. Did you, Pete? (I am talking timing, not "someday our prince will come and it will collapse!" stuff).

For those who say he should have known better than the CIA, they should understand that the Soviet planners themselves were using CIA numbers in their planning. They did not know, or at least not fully, which indeed reflected profoundly serious information problems of a Hayekian plus rent seeking sort. In a very crude sense, the Soviet system did "work," up until its collapse, even if it was falling further and further behind its leading western capitalist competitors.

The bottom line, which must be kept in mind here, is that the actual economic collapse of the Soviet bloc came after its political collapse, not before, and the political collapse had more to do with nationalist uprisings against Russian domination, combining with a reform-minded leader in the USSR who was unwilling to crack the whip and put it all down. If Andrei Gromyko had voted for hardliner Victor Grishin to replace Chernenko as party chief in early 1985 rather than Gorbachev, we might well have seen a very different outcome 20 years ago. After all, some of the successor states have barely changed their policies and continue to stumble along, such as Belarus.

Oh, and anyone who has a mind to, please do not bore us with accounts of the millions Stalin killed or who died in the pre-WW II famines. Yes, we and Samuelson all know or knew about that stuff, and, yes, it certainly can be held against the system. We are talking about Samuelson's evaluations in his (and Nordhaus's) textbook of post-WW II Soviet economic performance up until just prior to its collapse.

Oh, and regarding ideology and the first edition of Samuelson's textbook, it should be kept in mind that it was watered down considerably compared to the attempted intro text by Lorie Tarshis that appeared in 1947, which was the first to attempt to introduce Keynesian ideas into such a venue. It was harshly suppressed and Tarshis was condemned by various hardline critics for his alleged Marxism and socialism, a very ugly episode actually.

Barkley,

Why are those comments addressed to me? I did not impute ratex to Samuelson's '65 paper. Harumph!

"maybe it was because everyone was so much in awe of PAS"

It could be an emporer-has-no-clothes scenario. Who wants to be the first to say it? What if nobody else agrees? What if *you're wrong*?

I know at times I have been too intimidated to pipe up and say "I think you have that backwards" or something equally devastating if the person I would be contradicting was a really big name and really very good at what he does--and Samuelson was a brilliant mathematician! He was just a lousy economist.

Well Barkley, so sorry if reminders of the millions killed by the system (what you derisively refer to as "that stuff") bores you. For some of us, it's a pretty important part of the story, and said reminders are just another way of making sure that we apply "lo nishkach" all of the victims of violence by the state in the 20th century.

And then to say "it certainly can be held against the system" is to engage in some moral bookkeeping that seems way out of whack. What could possibly count on the positive side of the balance sheet that would even come within a lightyear of turning the deaths of millions of innocents into nothing more than a mere shortcoming of the system?

"It can certainly be held against the system"?

Aside from THAT Mrs. Lincoln, how was the play?

Barkley,

No. You cannot defend Samuelson's position and textbook entries on the Soviet Union by saying that everyone thought the same thing, except a few nutty Austrians who went way overboard about its problems. That is widely off the mark.

I have dozens of books written between 1920 and 1980 (and hundreds more papers!) that document all the inefficiencies in the Soviet economy that Samuelson ignored, that discuss the problems with the official statistics that Samuelson reprinted in his textbooks, and that describe the problems of reform and why ultimately the Soviet economy would have to move completely over to markets if it was to surmount these problems and have hope of surpassing the West. Samuelson did not believe these things.

For example Samuelson reprinted official Soviet statistics and wrote in 1989 (!) that "the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive."

However, the next edition admitted that "the Soviet data are questioned by many experts." -- It took him until 1990 to realize and report that the official statistics were questioned by experts--experts who had been questioning this data for several decades at least!

The following edition, published after the collapse, explained: "In the 1980s and 1990s, country after country threw off the shackles of communism and stifling central planning—not because the textbooks convinced them to do so but because they used their own eyes and saw how the market-oriented countries of the West prospered while the command economies of the East collapsed."

So, somehow between 1989 Samuelson went from "thrive" to "collapse" -- went from reprinting Soviet statistics and drawing graphs that showed the Soviet Union passing the West because of its "greater investment and growth" for many decades despite side-by-side showing the Soviet economy still at half the US size (!) -- to talking about the "shackles of communism and stifling central planning"...

And you think that Samuelson was simply representing the common wisdom? Well, maybe the common wisdom of the obviously seriously flawed discipline of economics (which Samuelson helped to create) but it was certainly not the common wisdom of Sovietologists who knew very well about the "shackles of communism and stifling central planning" since at least the 1930s!

This indicates yet another problem with economics--how many economists bothered to read what Sovietologists wrote?

However, the little niche economists that did not bother with highly simplified, static or aggregated models that Samuelson promoted as the only "real" economics because it was tractable, and focused instead on institutions - Austrians and Sovietologists of an economic-history bent - could see plain as day what was going on.

So, don't give Samuelson a break via ridiculous excuses. He does not deserve it: he propagated the trend that blinded all the mainstream, because he pushed the use of those models and he wrote the textbooks that all the rest of the profession read before they told the media that the Soviet economy was great (and they were the ones working for the CIA too!)

Oh, btw, I got the info on the Samuelson textbooks here: Mark Skousen, “The Perseverance of Paul Samuelson’s Economics,” Forecasts & Strategies, February 1, 2002, at http://www.markskousen.com/article.php?id=1124

Roger,

I apologize, although I realize that you did not make such a claim.

Steve,

Let us be clear. I most fully do think that the broader judgment of Soviet-style socialism most certainly must take account of all that "stuff." The issue is Samuelson's analysis in his textbook, along with his broader views, such as those expressed in his paper in JEBO, "A few remembrances of Friedrich von Hayek," Jan. 2009, 69(1), 1-4, which Greg Ransom and others did not like very much for certain things he said, but which did include him declaring Hayek to be essentially right about the socialist calculation debate and his analysis of the Soviet socialist system in particular.

In any case, once one gets past the death of Staliln in 1953, and especially after most of the gulags were emptied following Khrushchev's 1956 de-Stalinization speech, one is dealing with the system that Samuelson was evaluating. I have not dug through every edition of Samuelson (and only have a copy of the first one available in my office), and also note that after the eleventh edition in the late 1970s, it was Nordhaus who was in charge of the revisions rather than Samuelson, so I do not know exactly what is said about all this in all of them. But, I do know that from pretty much the first edition, Samuelson always noted the repressive and undemocratic and dictatorial aspect of the system. He was most certainly not covering up its unhumanitarian awfulness, although this would recede in intensity substantially after 1956, while still being a repressive dictatorship. But the mass arrests, slaughter, and famine ceased of those earlier years ceased.

liberty,

Um, well, I am someone who was aware of this literature right along, read G. Warren Nutter way back, and was aware that there were problems with the stats. I suspect that Samuelson knew this as well, but keep in mind, the system did not economically collapse prior to its political collapse, and the Chinese system has not collapsed, and has not fully moved to a market capitalist system, much less a democracy, while becoming the world's fastest growing economy.

No, one can play Skousen games and pull this quote that looks pretty silly in retrospect, but again, an intro textbook writer is simply not going to go around putting in long footnotes about the debates over the official stats that had been ongoing for decades among Sovietologists. They pretty much have to repeat official lines, however silly.

For that matter, do keep some other things in mind. While "thrive" looks ridiculous, the hard fact is that living standards were higher in 1989 (if not in 1986 when oil prices peaked and was the last year of recorded positive GDP growth in the USSR) than in 1953 when Stalin died. They indeed fell behind the US, and I think one can pick on Samuelson for not pointing that out more strongly, but can you name any other textbook writer who was predicting the imminent collapse of the Soviet economy in the late 1980s? I know of none, including the one written by top Sovietologist Paul Gregory (with Roy Ruffin), also coauthor with Robert Stuart of the most widely used textbook on the Soviet economy itself.

Pete, you can substantiate this. Were Gregory and Stuart or Ruffin and Gregory predicting in the late 1980s the imminent demise of the Soviet economy? No. If they were not, then one most certainly cannot pick on Samuelson (or Nordhaus) in the seriously unprofessional way that Skousen did in his book. Yes, there were some people forecasting doom, but, again, none of them were calling the timing.

Oh, and in the end, those who were "right," were so for the wrong reasons. The real source of the difference was the quality gap. Most of those people were claiming that incorrect price indices were leading to an overstatement of the quantity reports. On that, those people were mostly wrong. The quantities were mostly there (not totally). It was the serious lack of quality, as I have said, that put them so far behind, and that is so very hard to measure.

The evidence on this is that the same mistakes were made about the East German economy, which the CIA had officially estimated to have about the same real per capita GDP as West Germany in 1989. Turned out to be about 1/3, after the Wall fell and the (re)unification happened. It was not the quantity numbers that were off, it was that the Trabant and its similar products were just so much worse than their new competitiors that their "value" collapsed. Same with the Soviets, where the world's largest steel mill, the "Hero" Lenin Steel Works in Magnitogorsk, main source of the steel for those tanks at Stalingrad and Kursk, was produced, could only be sold as scrap metal on world markets. Quality so low it could only be measured once the system was opened to world markets.

Peart and Levy look at the issue of Samuelson and the Soviet system in an article appearing in RAE:

http://www.gmu.edu/rae/archives/VOL19_2-3_2006/3-Levy_Peart.pdf

I thought they had something later than this too, but a quick google comes up empty.

I'm afraid it's true that Steve and liberty were mistaken to criticize Barkley in the way they did as was going to say when his comment appeared.

Barkley,

First of all although Steve may have, I have said absolutely nothing bad about Samuelson not predicting the collapse - nor do I give many who did predict it much credit. For me it is not about that at all - as you point out, there are many ways for a regime to stay in power. In China, as far as I can tell, growth is due to the introduction of markets -- it is not due to better planning or something, the growth generally comes from areas in which markets function.

But any socialist country can introduce markets in some limited fashion - and it has tended to work that way: the more that markets are allowed to thrive in certain areas, the more growth there is in those areas, while the more a regime enforces pure common ownership, the more shortage (and sometimes famine) there is. Western economists and Sovietologists could only know so much about black markets, pink grey, brown etc markets, and they also could not know about all the political factors, etc - so they could not accurately predict demise.

That is neither here nor there.

What I criticize Samuelson for is serving up official Soviet statistics without revealing the fact that experts had for many decades seriously questioned them--in fact most experts largely disregarded the official statistics, and made their own or modified the official ones based on outside evidence.

But Samuelson simply presented them as fact, and below them stated that its clear that socialism of the Soviet sort can "thrive." Be intellectually honest: he did not have to do this (and not all textbooks did).

You say:

"No, one can play Skousen games and pull this quote that looks pretty silly in retrospect, but again, an intro textbook writer is simply not going to go around putting in long footnotes about the debates over the official stats that had been ongoing for decades among Sovietologists. They pretty much have to repeat official lines, however silly."

I fully disagree. Many textbooks have footnotes saying something like "There is disagreement about whether these statistics can be trusted." And I believe a few introductory economics textbooks did say something of this sort, especially more and more into the 1980s. But in other fields, or regarding other countries, I think this commonplace!

You say:
"They indeed fell behind the US, and I think one can pick on Samuelson for not pointing that out more strongly, but can you name any other textbook writer who was predicting the imminent collapse of the Soviet economy in the late 1980s? I know of none, including the one written by top Sovietologist Paul Gregory (with Roy Ruffin), also coauthor with Robert Stuart of the most widely used textbook on the Soviet economy itself."

Yes, I love that textbook-- I am not familiar with Gregory's intro textbook. As I say though, it isn't about predicting collapse - it is about addressing the issues of inefficiency - and addressing the institutional questions.

Samuelson's presentation of economic theory is pretty much devoid of the topic. When he cites aggregate statistics, he is presenting GDP growth of (for example) 10% as superior to GDP growth of 5% or 2.5% -- without qualification. He speaks of their "superior" levels of savings and growth as if they prove that such an economic system is superior. The Keynesian macro models in his textbook depend upon savings as a factor in producing growth, and GDP is the primary output of the models indicating success: hence the student reading the textbook would naturally assume that the Soviet system was superior--just as Samuelson appears to encourage the student to do when he says it "can thrive." This all the way until 1989 - only to, within the very next year or two as the system crumbled, take it all back suddenly.

The G&S Soviet Economic System textbook goes into much more detail (obviously, as the Soviet system is its subject) and does not make such assumptions. The reader of their book is given a much more realistic picture of the difference between the system, the importance of the statistics as well as their likely authenticity, is given other points of view, and inefficiencies noted by planners themselves are cited.

That the Soviet Union did not collapse for many decades, even that there were higher living standards after the 1950s, cannot justify this presentation. Even a cursory look at the actual difference between the Soviet economic system and market economic systems would tell an economist that such aggregate statistics (even if they were not manipulated) do not allow a good comparison of actual outcomes--of efficiency, of production that fills need, of quality, etc.

I do not think Samuelson should be let off the hook on this, if we are honest. And the fact that many other textbooks were equally or nearly as bad does not change that--especially as Samuelson led the profession toward greater use of aggregated models and generally influenced economics textbooks during the period.

One more quick thing:
"Oh, and in the end, those who were "right," were so for the wrong reasons. The real source of the difference was the quality gap. Most of those people were claiming that incorrect price indices were leading to an overstatement of the quantity reports. "

Again, not sure who these "most" are that you are taking about, but Sovietologists presented plenty of evidence about quality, about production in the wrong areas (huge stockpiles of unsaleable goods, not only due to low quality but also due to simply not being needed) and shortages across many other areas. By 1989 when Samuelson was still presenting the statistics as fact and arguing that the Soviet economy was thriving, you already had Kornai's shortage model, Nove's incredible 1986 book on the vast inefficiencies and problems of reform (and dozens of other Sovietologists and earlier works by the big-names) and hundreds of articles on the failures before, discussions during, and failures after the 1965 reform - just to name a few sources.

Low quality was most certainly not the only problem, though it was a big one! You had all the problems of assortment (such as the "one big nail") which were not about quality (like a rusty nail) but about need - few people needed the sizes, dimensions, types (e.g. types of converter, types of transistor), that were being produced. Sovietologists also spoke about the problem of costing inputs--something Mises argued would happen--for example, during the 1965 reforms they debated how to price inputs so that e.g., a railroad track won't be laid with platinum instead of steel. Many many inefficiencies occurred because of this. And on and on.

Barkley,

You're attacking me for things I didn't say. I don't have a dog in the fight over Samuelson. I wasn't accusing him of soft-selling the deaths. My problem was with how you chose to phrase what certainly appeared to be your own views. I'm sorry if I don't have any patience for what I saw as an offhand dismissal of millions of dead innocents. Perhaps it was just poorly chosen language on your part, which is certainly common enough in a blog comment, but whatever the explanation, I wasn't in the mood to let it go unnoted.

This hole discussion is rather boring. Samuelson was the worst kind of person. You people may not call him evil, but then again, you don't know what evil really is.

If the devil ever could have a face, Samuelson would be one of them.

Steve,

OK. I am bad. I will always provide a laundry list of the horrors of Soviet socialism whenever I mention it without using words like "stuff."

liberty,

Clearly the "thrive" word is off, and it is quite possible that some texts have footnotes noting that the stats may be problematic, even if even ones like Ekelund and Tollison and Gwartney and Stroup were not predicting imminent collapse of the system even up to about the last minute. G&S of course go through the problems, but with the most serious analysis being of the problems with measuring what happened in the 30s, when the index number problems were far worse than later.

Note that for the CIA and most US poliymakers, they did not care that much about how good the shoes were. They were more interested in how many tankd and bombs and missiles they had, and the numbers on those were pretty accurate, and they had a lot, not to mention how much oil they could sell, for which the data was also pretty good.

Also, it is very misleading to focus on this one quote. Samuelson from First Edition on always pointed out the efficiency problems of central planning compared to market economies. I shall close by quoting the very last sentence of his First Edition, 1948, which is the Misesian point par excellence.

"And it is too easy to gloss over the tremendous vitality of our mixed free-enterprise system, which, with all its faults, has given the world a century of progres such as an actual socialized order might find impossible to equal."

"And it is too easy to gloss over the tremendous vitality of our mixed free-enterprise system, which, with all its faults, has given the world a century of progres such as an actual socialized order might find impossible to equal."

Might--might?--find impossible to equal? Barkley, are you kidding? This is not Misesian, not by a long shot. I would also point out that a libertarian economic system would leave our mixed free-enterprise system in the dust. That would be Misesian.
And your previous question whether any Austrians "called" the collapse of the Soviet Union (whatever that means) can be answered by another question: did Samuelson?
Two other points: citing Soviet tank building and the fact that they defeated Germany as even a qualified defense of the Soviet economy is bizarre. Germany made many military mistakes in that conflict, including the ultimate Napoleonic miscue of invading Mother Russia in the first place, against the sage advice of Hitler's better strategists.
More to the point, military output in wartime is hardly a good indicator of an economy's potential. It's like saying the winner of a fist fight by two out of shape drunks is a good fighter. Maybe he is compared to the loser, but when a real in shape boxer comes along, it's lights out. The fact is (and you seem to be in at least a bit of denial about this) that the Soviet economy was always weak, a fact confirmed to me by a Soviet emigree and former senior managing director at my old firm. A trained economist, he forgot more about the Soviet economy than you ever knew.

I think he would also disagree about your statement that the collapse of the USSR was caused more by politics than by its dodgy economy.

Bill,

I grant that calling the quote "Misesian" way overdoes it, but it does draw on the Misesian argument about incentives and tech dynamism, which I certainly think was a foundational matter, even if you and Mises think a purely libertarian economy would be more dynamic than a mixed one.

Regarding an economy and warmaking capability, certainly a society with a weak economy cannot build the means to war. Of course, one of the problems in the long run for the USSR was that it remained so oriented to military production, a major drain on the domestic economy.

A little known fact about the history of the Soviet economy (your emigre pal might even not know this one as info about it was suppressed there, although I bet Pete does) is that right after WW II there was a push within the leadership to drastically cut back military production, led by Vosnezensky. He lost and ended up being purged and executed. In retrospect, it is clear that Stalin recognized how maintaining a strong military orientation allowed him to retain a tight political command control of the whole economy and society.

Hey, I have not been making claims that Samuelson was way ahead of everybody else in either his analysis or predictions about the Soviet economy, merely defending him against the charge that he was abysmally way behind everybody else, with this somehow being evidence of some combination of incompetence and moral depravity, as the incompetent Skousen argued so ridiculously in his overrated book.

If Gorbachev had supported Honecker in sending in troops to prevent the collapse of the Berlin Wall and to prevent the overthrow of the Communist governments in Eastern Europe, and then had sent in troops to put down the anti-Soviet demonstrations in Lithuania in 1991 as the hardliners wanted, would the Soviet Union have fallen apart and would there have been the full-scale and sharp economic collapse of the early 1990s throughout the whole zone? Go check the timing on all this. Could the Soviet Union have pulled off what China did after suppressing the demonstraters in Tiananmen Square if they had followed a similar appproach?

Thanks for spelling emigre correctly Barkley.
I never make spelling mistakez :-). Honest.

Here's a quote from Yuri N. Maltsev, "The Lesson of Soviet Medicine," Free Market 27 (Oct. 2009), p. 5:

After seventy years of socialism, 57 percent of all Russian hospitals did not have running hot water, and 36 percent of hpspitals located in rural areas of Russia did not have water or sewage at all. Isn't it amazing that socialist government, while developing space exploration and sophisticated weapons [and tanks in WW II], would completely ignore the basic human needs of its citizens?

The appalling quality of service is not simply characteristic of "barbarous" Russia and other Easter European nations: it is a direct result of the government monopoly on healthcare and it can happen in any country. In "civilized" England, for example, the waiting list for surgeries is nearly 800,000 out of a population of 55 million. State-of-the-art equipment is nonexistent in most British hospitals. In England, only 10 percent of the healthcare spending is dervied from private sources.

(Available from the Mises Institute)
--

But onward Comrades to the Public Option!
If you like the Post Office, you'll love government ocntrol of healthcare!

Oy! Bill Stepp could hardly be more zany. If a "public option" is such certain hell leading inevitably to the loss of running hot water in our hospitals, why do people live longer in the UK?
http://en.wikipedia.org/wiki/List_of_countries_by_life_expectancy
Oh sure, if you adjust the figures for stuff like car wrecks, then the US probably comes out ahead of UK and, I bet, everyone but a few rich Pacific rim places such as Japan. But the uncorrected numbers would seem to make it pretty hard to say that a public option will doom us to all to die of minor ailments waiting for "rationed" services. I'm sadly confident we'll get "healthcare" passed and it'll be worse than the current system, which is very far indeed from any "free market" wonder. But the notion that the coming inferior system will be a bad as Stepp-the-Zany suggests is, well, zany, kooky, nutty.

Barkley asks me to confirm the state of comparative economic thinking in the 1980s, and I think he is 100% correct. Just look at the JEL survey by Gur Offer on Soviet economic growth.

Were there dissident voices? Of course. Nutter and Pejovich are two who dug into the numbers and questioned them. But they were minority voices. As the debate over Soviet growth figures inside the Soviet Union with the publication of Selyunin-Khanin's revisionist account of the statistics. In my _Why Perestroika Failed_, Chapter 1 is titled The Road to Nowhere, and has subheadings as the Poor Preparation for Understanding, and The Malpractice of Economic Measurement.

The bottom line is that, as Barkley points out, nearly everyone got this wrong -- and everyone who was a significant thinker on these issues. There was an intellectual error associated with the framework of analysis. The problem was the way we approached the subject. It required a change in perspective.

I do think Nutter came the closest to tearing apart the practice of Soviet measurement, and Western estimates of Soviet growth. It was an NBER study, and he was not an unknown figure (more along the lines of a Buchanan type figure). To Samuelson types, the challenges from property rights economics and public choice economics didn't really resonate and that was the problem.

Pete,

Thanks. I would agree that Samuelson was way too slow to pick up on the insights of public choice, and maybe never really did get it. In the old days of Musgrave-public finance versus Buchanan-public choice, Samuelson was definitely strongly in the Musgrave camp, although that has all gotten somewhat smudged over in the currently generic "public economics."

Bill,

Your quotation pinpoints the real problem for medical care in the USSR, which I already mentioned, that so many resources were being shoved into the military.

I can tell a personal story on this one. My mother-in-law is a retired physician in Russia who actually invented a skin cream that was used all over Eastern Europe, and when I gave some to my then teenaged older daughters, they reported it cured acne. Rather than being a wealthy multi-millionaire as she would be here in the US, this woman lives simply on an inadequate pension that my wife and I must supplement (she was paid a flat, nominal fee for her invention, and her salary was abysmal during her working career). My wife's brother is a neurosurgeon in Moscow now who has invented certain important neurosurgical techniques. He is doing much better than his mother (and gets to travel abroad and so on), but is far far behind where he would be financially in any western country, even the UK.

As for medical systems, well it looks to me that there are about six.

1) something approaching pure laissez faire (not sure of anyplace that does that anymore)
2) a mixed system with uninsured people (the US)
3) a system with no public option, but everyone required to be covered, with non-profit insurance companies providing the coverage (the Netherlands, Switzerland)
4) a mixed system with a public option (France, Germany, with the WHO rating the French system the best in the world)
5) a single payer system, govenment paying, but with health workers self-employed or otherwise privately employed (Canada)
6) a full-blown socialized system with health workers state employees (UK, old USSR).

Of this lot, probably the worst functioning have been the US and the USSR systems, and what appears likely to come out of Congress will not move us out of our category, although it might reduce the percentage of the population not insured, even though we will see all kinds of people moaning and wailing and gnashing their teeth about how it is putting us on the road to serfdom, blah blah blah, even though Hayek himself supported national health insurance in his famous book of that title.

two quick things:

1. Pete says that nobody could see the truth about the Soviet system: not at all true, only most economists could not see it, and only most economists by the 1980s--because many economists could see it from the turn of the century through about the 1960s. Those who could see it after that studied it and called themselves Sovietologists, because the discipline of economics rejected their methodology--which was to actually study economic systems, rather than fictionalizing the economy in some abstract model. Thank you again Samuelson.

2. The WHO gives ratings based on things like life-expectancy (driven more by cultural factors and immigration than most anything else) and also things like big-bonus-points-for-having-government-pay. So the fact that culturally homogeneous and/or government run systems come out best is, well, redundant.

However, the list of types of health care system is valid - I would not agree that the US should be lumped in with the worst (not to say its great how it is!) unless you (a) completely ignore the innovation coming out of the US which is largely due to the fact that our inventors can make money etc as you point out (and other countries have to borrow from us there), (b) ignore the waiting lists in many other countries that do not exist here and the deaths caused by them, (c) ignore the statistics that show that even the poor and uninsured in the US have higher cancer survival rates and life expectancy with cancer than the UK population, etc.

There is a lot of propaganda and a lot of bad statistics out there - but I doubt that health care is the one exception to the rule that a socialized industry will tend to underperform a free market one (not that the US system is free market, of course).

liberty,

Pete clearly spoke about the state of comparative economics, but talking about people who could "see the truth" prior to 1960s is a joke. Are you talking about people who were forecasting the "impossibility" of some sort of planned socialist economy a la Mises 1920 or somebody who was forecasting the imminent collapse of the Soviet system? Anybody in either of those categories was simply off-base or talking about an abstract model that did not correspond to the "actually existing socialism" of the Soviet bloc model. Of course, by 1960 many observers were aware of the horrors of how many people were either killed outright or died in the Lenin and Stalin periods, which is not what is at issue here, given that those mass slaughters and deaths pretty much ceased in the USSR after 1956.

Again, as Pete noted, the first really clear study of the problems of Soviet economic measurement (is this what you are referring to?) did not appear until after 1960 in the form of the work of G. Warren Nutter. So, I do not know exactly who you are referring to, and I can also note that quite a few of those economists who studied the Soviet economy called themselves "Sovietologists." Many of them came into conflict with people like Jeffrey Sachs who came rushing into the field to advise the new governments on policy after 1989-91, because these newbies did not know dingleberries about the politics or culture of the societies that they were making their often ill-considered recommendations to.

I agree that innovation is a plus of the US health care system, and that in some sense the high costs we pay in the US (and I was implicitly making a "quality per cost" statement in my comment about the US system) are us paying for the overhead R&D costs of much of that innovation, although there is quite a bit coming out of some other countries, especially Germany, and even occasionally Russia, of all places (think Lasik surgery). I also note that the systems that get the best ratings (France in particular) are not "homogeneous" nor "government run," but mixed systems with most people covered privately through their work, but with a public option backup. In any case, that is no longer on the table here, for better or worse.

Oh, and the waiting lists abroad are mostly for elective surgery (I know, there is the occasional exception that gets trumpeted in certain outlets), while we have people dying from not getting approval for payment for surgery by our wonderful insurance companies for lethal diseases. Aside from our innovativeness, and the high quality of care for certain obscure, mostly non-fatal illnesses, or for the very top level of high quality surgery, our system is pathetic.

Liberty and Barkley,

We are talking past each other here. My favorite essay making Libert's point is by Alain Beasoncon's The Anatomy of a Spectre, Survey 1980. But Liberty Barkley can tell you, Beasoncon's critique was dismissed because where he published was an anti-Soviet outlet. Similarly, Marxist critics of the system such as Tickten, made brilliant diagnosis of the system, but were dismissed by more Soviet watchers because of the supposed bias of the analysis. Even H. L. Mencken dismissed Emma Goldman's My Disillusionment in Russia with the claim that she was a biased observer.

There were literary critics of the system, there were journalistic critics (e.g., H. Smith's The Russians is a great book about how the system really operated).

In the field of economics, I would say the dissertations written after Khruschev's speech and before the crackdown proved to be very insightful on how the system really worked. Berliner, Granick (one of Barkley's teachers I believe), Hough, and of course emigre economists such as Grossman or Treml were extremely important. But as access to the country was curtailed, estimations of growth rates substituted for the sort of dwelling within analysis that was possible during the "thaw" period.

Only with Gorbachev did "we" reclaim the possibility of dwelling within the system to learn how it really worked. Ed Hewett's wonderful book on Reforming the Soviet Economy has two chapters -- how the system is supposed to work, and then how the system really worked.

We can gain access to the system through literature, memoirs, travel, and jokes (don't forget the jokes). And these told of a different world than the one the official books told.

So the story is complicated about why we got it so wrong as economists. Stuff people write books about actually.

On travel, in the 1950s a young journalist named Bryan Magee gained a fairly realistic picture of the Soviet regime by looking at parts of it.

"Magee read history and philosophy at Oxford and Yale (a breath of fresh air), then in 1956 he moved to London and found his way into radio and TV. Blessed with a flair for research and presentation he rose to anchor the leading British weekly current affairs program on TV. This advanced his political education in a very interesting way because he travelled all over the world and discovered the reality of life under communist and socialist regimes. To his dismay, back home even his conservative friends could not credit the full extent of the brutality and squalor that he encountered under the Marxist regimes of the world. The tough-minded side of Magee clearly had a firm grip on reality even though he started on the left of politics."

A very interesting journalist indeed, he did several series of TV interviews that brought the ides of the greatest philosophers, past and present, to mass audiences.

http://www.the-rathouse.com/2007/MageeConfessions.html

I agree with Pete (and Rafe) that there were many people who were not primarily economists who were making all kinds of insightful observations about how the system worked, and that the acuity of economists on the matter also varied over time in a complicated way (and Granick was insightful). Again, most of these people were not forecasting imminent demise at any point, despite the many problems they reported, not always picked up on by readers or others.

I would note an irony of the system as of about 1960. Khrushchev made a famous speech in which he declared that "we will bury you(!)" Most thought he was referring to nuclear war, but in fact he was making a forecast about the respective economic futures of the US and the USSR. The specific basis of his remark was a forecast that the USSR would move ahead of the US in the production of oil, steel, cement, and wheat. Guess what? He was right; they did. However, for reasons everybody here knows large amounts of production of these intermediate goods (not counting oil exported abroad) did not lead to a high living standard with high quality goods strongly demanded by consumers in the USSR, certainly not one comparable to that in the US.

"Pete clearly spoke about the state of comparative economics, but talking about people who could "see the truth" prior to 1960s is a joke. Are you talking about people who were forecasting the "impossibility" of some sort of planned socialist economy a la Mises 1920 or somebody who was forecasting the imminent collapse of the Soviet system? Anybody in either of those categories was simply off-base or talking about an abstract model that did not correspond to the "actually existing socialism" of the Soviet bloc model."

1. No, I am not talking just about Mises etc - although it was not only an abstract system (what do you think Samuelson usually talks about??) because there were many articles prior to 1960 and a few books that talked about the actual system in the Soviet Union--and shockingly a few of them were written by economists. Check out Soviet Studies for example, a journal published starting in 1949.

A few titles from 1950 to show you that the economic system was already being seriously studied (even possibly by economists!)

Budgetary Control in Soviet Factories

On Strumilin's Model (e.g., can planning allocate investment efficiently, lets consider the Soviet economists' theories and the reality in the Soviet Union)

Contract and Arbitration in Soviet State Economy

The Collective Farm Labour-Day

Yes, Berliner, Treml, so many people understood so much about the system--and NONE of the major insights were discredited by the opening of the archives--NONE OF THEM.

We had all the information we needed certainly the debates prior to the 1965 reforms, but even before that. Again, I point you to Soviet Studies. I also point you to Berliner who wrote the amazing Factory and Manager in the USSR in 1957. And there is plenty more.

Jeff Sachs was clueless about the true problems of planning and privatization - he lived in a world of aggregates. His book on the Polish economy was actually good, but it was not insightful like Alec Nove--who, by the way, offered his brilliance starting in the 1960s.

No, economists screwed the pooch on this one because they did not study the institutions either in their models (except the Austrians) nor in their analysis of the actual system (Sovietologists did, and offered this insight, but economists ignored it).

Sorry if my last posts were not that coherent: my main point is that there was plenty of good information about the internal workings of the Soviet Union by the late 1950s and especially by the mid 1960s, and yet folks like Samuelson did not acknowledge that information even as late as 1989 -- it just did not make it into their models or their estimates. I don't care about predicting demise, I care solely about whether this information (as well as theory that considered institutions and not just static or aggregated numbers) was reflected in the models and presentation of the system to readers.

On a separate point: I ask Pete especially, but others here as well--and maybe someone could post on this--why do Austrians tend to cite Mises' 1920 essay as the earliest critique of socialism that focused on the calculation problem? (Or do they not?) because there were so many before. I have in front of me an excellent book called "A Plea For Liberty" full of essays critiquing socialism, one of them titled "The Impracticability of Socialism," written by Edward Stanley Robertson, this book was written in 1891. Robertson had also written other works by then on the subject.

The book can actually be found online at Econlib:
http://www.econlib.org/library/LFBooks/MckyT/mckyPL.html

Liberty,

That is interesting. I have seen hints of the pinpointing of the calculation problem (sometimes referred to as an "accounting problem" -- see Brutzkus for example), and you can see even the beginnings of the critique based on the knowledge problem (Smith all the way to Wieser), but I didn't think anyone else identified the problem as clearly as Mises. But I admit that despite the fact that I studied the debates very closely (see my 9 volume reference work Socialism and the Market), I am biased in that I focused on the 20th century English language debate.

I am very intrigued by your suggestions of these 19th century works. Please write up more on this. There might be a good HOPE article in this if done right.

Pete

Henry George is another 19th century figure who got at least something of the Mises critique. Here is a relevant passage from my introduction to the Yeager festschrift.

http://www.amazon.com/Money-Markets-Essays-Foundations-Economy/dp/0415701627/ref=sr_1_1?ie=UTF8&s=books&qid=1261147063&sr=8-1


George’s critique of socialism bears close similarity to Austrian arguments on the topic. Building on his distinction between “directed or conscious co-operation” and “spontaneous or unconscious co-operation,” George argues for the “Impossibility of socialism” (p. 301). George invites us to ignore the “inevitable tendency to tyranny and oppression” created by power. Imagine economic control is handed
over to “the very wisest and best of men.” Consider
----
the task that would be put upon them in the ordering of the when, where, how and by whom that would be involved in the intelligent direction and supervision
of the almost infinitely complex and constantly changing relations and adjustments involved in such division of labour as goes on in a civilized community. The task transcends the power of human intelligence at its very highest.
-----
(George 1898: 311–12)

Some parts of George’s critique of socialism, Yeager says, “remind us of the emphasis of present-day Austrians on the creative role of entrepreneurship” (p. 15). Yeager thinks George’s critique of socialism is better in The Science of Political Economy (1898) than the “earlier and less insightful” (p. 22) comments in Protection or Free Trade? (1886).


Reference
George, Henry (1898) [1932]. The Science of Political Economy, new edition. London: The Henry George Foundation of Great Britain.

P.S. Pete is clearly right to encourage liberty to work up a paper on this stuff. Her posts and link were really interesting. They also raise the question of why Mises was able to drive the point home when others were not.

Pete and Roger: Thanks for the encouragement! Maybe I will see if I can put together a paper for STOREP. :)

Sarrebe un buon idea!

This will be my last contribution to this thread.

liberty,

I shall simply note the complicatedness of the literature. Some of those you cite favorably were economists and were not Austrians. Dave Granick, whom Pete associates with me accurately, was close in many ways in views and approach to Berliner, and Treml was an economist. Soviet Studies was indeed the premier outlet for multidisciplinary "area studies" Sovietology, and many good things appeared there from many different people. Some of the debates here have involved distinguishing broader critiques of the system to those focused on more specific number crunching, with that seriously going on in the US from 1945 on, if not earlier.

As this thread is ostensibly about Paul Samuelson, I shall close by replying to a remark about him. Yes, he was a strong theoretician of mathematical orientation, but he was also very grounded in the real world, as his long authorship of his successful Principles text, plus his several decades long column in Newsweek (where he went up against Milton Friedman and the less well known Henry Wallich of Yale, who served two full terms on the Fed Bd of Govs). What apparently was true of PAS was that, like many readers of this list, :-), he "never ran a regression in his life."

Whether he was grounded in truth or not, his models and textbooks appear not to have been. You admit that many economists and Sovietologists had already found theoretical and real problems with the Soviet approach--the institutions of the socialist economy--and yet Samuelson's textbooks and models left them out. Instead he praised the system for its high level of savings and "rapid growth." Here and there he would let slip the fact that it was inefficient but he was the last man cheering them when the thing finally collapsed.

And his economic models have never been able to explain why the Soviet approach was not better than the market approach--according to his models the Soviet promise to overtake the West should have come to pass: in Samelson textbooks it is prediction edition after edition just like in the Soviet speeches. That is my problem with him--his economics was terrible, although his math was superb.

Paul Anthony Samuelson (May 15, 1915 – December 13, 2009) was an American economist. He was the first American to win the Nobel Prize in Economics. The Swedish Royal Academies stated, when awarding the prize, that he "has done more than any other contemporary economist to raise the level of scientific analysis in economic theory." Economic historian Randall E. Parker calls him the "Father of Modern Economics", and The New York Times considered him to be the "foremost academic economist of the 20th century."

He was author of the largest-selling economics textbook of all time: Economics: An Introductory Analysis, first published in 1948. It was the first such book to explain the principles of Keynesian economics and how to think about economics, and is now in its 19th edition, having sold nearly 4 million copies in 40 languages. James Poterba, former head of MIT's Department of Economics, noted that by his book, Samuelson "leaves an immense legacy, as a researcher and a teacher, as one of the giants on whose shoulders every contemporary economist stands." In 1996 he was awarded the National Medal of Science, considered America's top science honor, where President Bill Clinton commended Samuelson for his "fundamental contributions to economic science" for over 60 years.

He entered the University of Chicago at age 16, during the depths of the Great Depression, and received his PhD in economics from Harvard. After graduating, he became an assistant professor of economics at Massachusetts Institute of Technology (MIT) when he was 25 years of age and a full professor at age 32. In 1966, he was named Institute Professor, MIT's highest faculty honor. He spent his career at MIT where he was instrumental in turning its Department of Economics into a world-renowned institution by attracting other noted economists to join the faculty, including Robert M. Solow, Paul Krugman, Franco Modigliani, Robert C. Merton and Joseph E. Stiglitz, all of whom went on to win Nobel Prizes.

He served as an advisor to Presidents John F. Kennedy and Lyndon B. Johnson, and was a consultant to the United States Treasury, the Bureau of the Budget and the President's Council of Economic Advisers. Samuelson wrote a weekly column for Newsweek magazine along with fellow Chicago School economist Milton Friedman, where they represented opposing sides: Samuelson took the liberal, Keynesian perspective, and Friedman represented the conservative, monetarist perspective. Samuelson died on December 13, 2009, at the age of 94.

I appreciate the work of all people who share information with others.

Nice piece of text I must say. Is it oke for me to make a translation in Dutch with a obvious link to this article?

I can tell a personal story on this one. My mother-in-law is a retired physician in Russia who actually invented a skin cream that was used all over Eastern Europe, and when I gave some to my then teenaged older daughters, they reported it cured acne. Rather than being a wealthy multi-millionaire as she would be here in the US, this woman lives simply on an inadequate pension that my wife and I must supplement (she was paid a flat, nominal fee for her invention, and her salary was abysmal during her working career). My wife's brother is a neurosurgeon in Moscow now who has invented certain important neurosurgical techniques. He is doing much better than his mother (and gets to travel abroad and so on), but is far far behind where he would be financially in any western country, even the UK.

Very good blog! Thanks!

Good like Paul Samuelson!

"I'm happy to let the nation's leaders write the laws as long as I can write the textbooks." <<< I like that.

Interesting blog, the author thanks so much for the interesting explanation!
Keep it up, great success! Bloggy wish a lot of good posts!

I completely agree with that: Oh, there is a certain irony in the timing of this death in that it may also coincide with the final end of Samuelson's textbook in its old form, with the 19th edition due to Nordhaus just out and by all accounts much shortened and following the new streamlined model established some years ago by Mankiw. Frankly, I do not find this particular outcome all that desirable as it seems to me to be a watering down of economics at the Principles level to match a slackening of intellectual seriousness and depth by current college students.

Interesting blog, the author thanks so much for the interesting explanation

Mr.Samuelson this is an excellent post.

The author thanks a lot! Many well written blog!

A lot of interesting things found on your blogs, like the topic! The author thanks and success in the blog!

Thanks Montg, I appreciate that there are very few knock-out punches and merely being subjected to criticism proves nothing.
The question is, was Wong's critique robust or not, and if it was, how come the profession by and large took no notice?

He is doing much better than his mother (and gets to travel abroad and so on), but is far far behind where he would be financially in any western country, even the UK.

Poor guy, I'm sorry that he's gone. Maybe he should have gotten a Reverse Mortgage. Maybe.

Think of how different this was from the thinking of the classical economists and even many of the early marginalist thinkers (and especially the Austrians). They insisted that economics was a serious and difficult discipline. But they assured the informed and attentive reader that if he was disciplined enough to follow the logic of the argument, chapter-by-chapter, he could both master the subject and have a fairly good working understanding of how the market process actually worked. They would understand the "laws of economics" and their real world applications and implications.

It's very nice post.

Interesting blog, the author thanks so much for the interesting explanation

Poor guy, I'm sorry that he's gone. Maybe he should have gotten a Reverse Mortgage. Maybe.

We needed to stimulate employment and tax when and where taxation is needed to halt upward price movements.

Paul Samuelson was an admirable professional, I like the way you wrote about him.

Thanks for this post! It was extremely informative and helpful! I just learned everything I need to know today.

Thanks Montg, I appreciate that there are very few knock-out punches and merely being subjected to criticism proves nothing.

He is doing much better than his mother (and gets to travel abroad and so on), but is far far behind where he would be financially in any western country, even the UK.
http://www.coloncleansebenefit.com/

Poor guy, I'm sorry that he's gone. Maybe he should have gotten a Reverse Mortgage. Maybe.
http://www.articlesmoz.com/my-quik-weight-loss-experience-with-acai-berry

It is very unfortunate that Paul Samuelson has passed away yesterday. We will always miss him.

Indeed we will :(

thank you for great post about great man!

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