Economists From The United States

"It is from the scope and wisdom of the economists of the past that we must reap the knowledge with which to face the future."

"The change began with John Stuart Mill and the Utopians. When Mill pointed out that economics had no ultimate solution to the problem of distribution, that society might do with the fruits of its toil as it saw fit, he introduced into the mechanical calculus of the market a conflicting calculus of moral judgment."

"To one American family out of four, the idea of capitalism as a benign system of comfort, dignity, and personal advance is only a myth, or worse, a bitter mockery."

"The secret to economic growth lay in the fact that that each generation attacked Nature not only with its own energies and resources, but with the heritage of equipment accumulated by its forebears."

"If an economy in the doldrums could drift indefinitely, the price of government inaction might be graver by far than the consequences of bold unorthodoxy."

"Economic freedom is a highly desirable state — but in bust and boom we must be prepared to face the its consequences."

"Keynes disdained inside information — in fact, he once declared that Wall Street traders could make huge fortunes if only they would disregard their "inside" information — and his own oracles were nothing but his minute scrutiny of balance sheets, his encyclopedic knowledge of finance, his intuition into personalities, and a certain flair for trading."

"It was the unemployment that was the hardest to bear. The jobless millions were like an embolism in the nation's vital circulation; and while their indisputable existence argued more forcibly than any text that something was wrong with the system, the economists wrung their hands and racked their brains and called upon the spirit of Adam Smith, but could offer neither diagnosis or remedy."

"But like Marx, Veblen badly underestimated the capacity of a democratic system to correct its own excesses."

"Very few of the heroes of the Golden Age of American finance had much interest in the solid realities of what underlay their structure of stocks and bonds and credits."

"The book was called Imperialism; it was a devastating volume. For here was the most important and searing criticism which had ever been levied against the profit system. The worst that Marx had claimed was that the system would destroy itself; what Hobson suggested was that it might destroy the world. He saw the process of imperialism as a relentless and restless tendency of capitalism to rescue itself from a self-imposed dilemma, a tendency that necessarily involved foreign commercial conquest and that thereby inescapably involved a constant risk of war. No more profound moral indictment of capitalism had ever been posed."

"For one who has read the works of Marx it is frightening to look back at the grim determination with which so many nations steadfastly hewed to the very course which he insisted would lead to their undoing."

"In the periods of crisis, the bigger firms absorb the smaller ones, and when the industrial monsters eventually go down, the wreckage is far greater than when the little enterprises buckle."

"The worker is no longer the slave to his reproductive urge. He is a free bargaining agent who enters the market to dispose of the one commodity he commands — labor power — and if he gets a rise in wages he will not be so foolish as to squander it in a self-defeating proliferation of his numbers. The capitalist faces him in the arena. His greed and lust for wealth are caustically described in those chapters that leave the abstract world for a look into 1860 England. But it is worth noting that he is not money hungry from mere motives of rapacity; he is an owner-entrepreneur engaged in an endless race against his fellow owner-entrepreneurs; he must strive for accumulation, for in the competitive environment in which he operates, one accumulates or one gets accumulated. The stage is set and the characters take their places. But now the first difficulty appears. How, asks Marx, can profits exist in such a situation? If everything sells for its exact value, then who gets an unearned increment?"

"But the process of social change was not merely a matter of new inventions pressing on old institutions: it was a matter of new classes displacing old ones."

"But despite the clarion words of the Manifesto, the demonic note was not a call for a revolution of communism; it was a cry born only of frustration and despair."

"The distribution of wealth, therefore, depends on the laws and customs of society."

"He who enlists a man's mind wields a power even greater than the sword or the scepter."

"Nobody wanted this commercialization of life."

"But while Ricardo, the economist, walked like a god (although he was a modest and retiring person), Malthus was relegated to a lower status."

"Even today — in blithe disregard to his actual philosophy — Smith is generally regarded as a conservative economist, whereas in fact, he is more avowedly hostile to the motives of businessman than most New Deal economists."

"David Ricardo saw that the escalator worked with different effects on different classes, that some rode triumphantly to the top, while others were carried up a few steps and then kicked back down to the bottom."

"In an age which no longer waits patiently through this life for the rewards of the next, it is a crushing spiritual blow to lose one's sense of participation in mankind's journey, and to see only a huge milling-around, a collective living-out of lives with no larger purpose than the days which each accumulates. When we estrange ourselves from history we do not enlarge, we diminish ourselves, even as individuals. We subtract from our lives one meaning which they do in fact possess, whether we recognize it or not. We cannot help living in history. We can only fail to be aware of it. If we are to meet, endure, and transcend the trials and defeats of the future — for trials and defeats there are certain to be — it can only be from a point of view which, seeing the future as part of the sweep of history, enables us to establish our place in that immense procession in which is incorporated whatever hope humankind may have."

"We may make progress only by freeing ourselves from the rut of the past, but without this rut an orderly society would hardly be possible in the first place."

"The rise of the welfare state, on the one hand, and of the military bureaucracy, on the other, are instances of the manner in which technology is enforcing a socialization of life."

"For it is certain that the future will bring realities for which our traditional optimism fails to prepare us and against which our economic momentum fails to arm us."

"In the end the question is: Who is to be master, man or his machines? As long as the control over technology rests primarily on economic calculation, the victor is not likely to be man."

"The Wealth of Nations may not be an original book, but it is unquestionably a masterpiece."

"It is one of the dangerous self-deceptions of our society to pretend that mechanisms of control do not really exist, and to maintain, without qualification, that we are an economically "free" people."

"Google will make us more informed. The smartest person in the world could well be behind a plow in China or India. Providing universal access to information will allow such people to realize their full potential, providing benefits to the entire world."

"Arrow’s Impossibility Theorem is quite surprising. It shows that three very plausible and desirable features of a social decision mechanism are inconsistent with democracy: there is no “perfect” way to make social decisions. There is no perfect way to “aggregate” individual preferences to make one social preference. If we want to find a way to aggregate individual preferences to form social preferences, we will have to give up one of the properties of a social decision mechanism described in Arrow’s theorem."

"Schumpeter emphasizes a “demand-side” explanation for such clustering of innovation. One might also consider a complemen tary “supply-side” explanation: since innovators are, in many cases, working with the same components, it is not surprising to see simultaneous innovation, with several innovators coming up with essentially the same invention at almost the same time. There are many well-known examples, including the electric light, the airplane, the automobile, and the telephone."

"Here is my advice. When in doubt, give my new efforts a hearing. Many feel a calling to break new ground; in the end, few will end upfinding their efforts chosen. But the yea-sayer does do less harm than the naysayer, in that the Darwinian process of adverse testing will in time (most likely?) separate the useful from the useless, the trivial from the profound."

"Many principles of economics were hidden in obscure verbiage of previous generations; he reformulated and extended them with crystal clarity in the language of mathematics."

"He was influential. He influenced students through his textbook, and he influenced the entire economics profession through his dissertation, published as "Foundations of Economic Analysis." Readers of this blog will tend to disapprove of his influence, in that it promoted Keynes and the use of mathematical modeling. Perhaps Milton Friedman was more influential on policy. But Samuelson was more influential on the internal dynamics of the economics profession. On that score, I would say that he was without peer in this century. […] Compared with later generations of economists, he was more nuanced in his thinking and not as capable a mathematician."

"John Maynard Keynes may have had more influence on policy makers, Milton Friedman on citizens, Kenneth Arrow on economic theory, but Samuelson had more influence on the way economics is done today, and the purposes to which it is put, than any other economist of the twentieth century."

"A few years ago, I had the good fortune of running across a first edition of Paul's textbook (not the recent reprint of the original text, but an actual 1948 edition). It was a real find. I bought the volume in an online auction for, if my recollection is correct, $35. Talk about consumer surplus! I would have gladly paid many times that. At the next Boston Fed meeting, I took the book along to get Paul to sign it. Below is the book's title page, along with Paul's gracious inscription."

"One recent history of economic thought (Jürg Niehans’s A History of Economic Theory) devotes twenty-four pages to Samuelson’s ideas. Adam Smith only gets thirteen. Samuelson’s work on stock markets and the random walk takes up less than two of those twenty-four pages. He was “the last generalist in economics,” as he liked to say, and for him financial market studies were just a side project that he at times seemed deeply ambivalent about. His intervention was, however, crucial to the triumph of the random walk. Here was one of the most important economists of all time, and he didn’t think the relationship between coin flips and the stock market was a dinner-speech triviality."

"There have been hedgehogs; there have been foxes; and then there was Paul Samuelson. (...) I’m referring, of course, to Isaiah Berlin’s famous distinction among thinkers – foxes who know many things, and hedgehogs who know one big thing. What distinguished Paul Samuelson as an economic thinker, making him like nobody else, past or present, was the fact that he knew – and taught us – many big things. No economist has ever had so many seminal ideas."

"Samuelson is an artist; he brought undergraduates pretty well up to the level of the state of knowledge in the profession."

"In contrast to the natural sciences, where Isaac Newton and Albert Einstein made their major contributions, most economics masterpieces were written when the authors were middle aged. Adam Smith, Karl Marx, John Maynard Keynes, and Milton Friedman come to mind. However, Paul started much earlier, in his 20s; and, even now, his new articles influence the fields of economics and finance."

"In the world of music, it is a rarity to find a person who is both a gifted composer and a top conductor. So it is in economics as well. Paul is that rarity. When Paul is writing, the sun is always out. His writing—ever eloquent, ever stirring—is done with the kind of verve that one seldom finds today."

"[Paul] mentioned that he had heard about a piece I had written on Irving Fisher. I have no idea how he heard about it, but I offered to send him a copy and within a few days I got back a letter. [Paul] read the paper and wanted to set down his own interpretation, but then he closes the letter with a remarkable line that I treasure: ‘Do disregard my heresies and follow your own star.’"

"He knows history. If he had a Hungarian sitting at his side at the dinner table, he would quote easily names of politicians or novelists of the Austrian–Hungarian empire of the late 19th century. He also understands the significance of the history of a country. This is a rare quality at a time when the education of economists has become excessively technical."

"Of course, one can go back to high school or, in my case, junior college and find roots; there are some indeed, but my professional beginnings were in the Berkeley that existed just before World War II and the scholarship I won to MIT. There I met the dazzling wunderkind Paul Samuelson. When I was browsing in the Berkeley library and came across early issues of Econometrica, Samuelson’s contributions caught my eye. When I got an opportunity to go to MIT, it was the possibility of working with Samuelson that confirmed all my choices. I was attached to him as a graduate assistant from the outset, and I tried to maximize my contact with him, picking up insights that he scattered on every encounter. Working with Samuelson, who was at the forefront of interpreting Keynesian theory for teaching and policy application, I was put immediately in the midst of two challenging contests—one to gain acceptance for a way of thinking about macroeconomics and another to gain acceptance for a methodology in economics, namely, the mathematical method. Later, both challenges were to be overcome, but for ten or twenty years opposition was fierce. Once Samuelson’s Economics became a widely used text in first courses in the subject, Keynesian economics was firmly embedded. There was no turning back from that achievement. The successive student generations turned more toward the mathematical approach in graduate school, and they taught or did research in this vein. That eventually established the mathematical method, first in the United States, then in Europe, Japan, India, and other centers. Much of the foundation was built in Europe, and many of the American masters at mathematical economics were immigrants, but Samuelson, Friedman, and others gave it a native-born American flavor, and the approach truly caught on in this country."

"Generally speaking, Samuelson's contribution has been that, more than any other contemporary economist, he has contributed to raising the general analytical and methodological level in economic science. He has in fact simply rewritten considerable parts of economic theory. He has also shown the fundamental unity of both the problems and analytical techniques in economics, partly by a systematic application of the methodology of maximization for a broad set of problems. This means that Samuelson's contributions range over a large number of different fields."

"Between meals I arranged a light, informal trivia competition. Had answers been counted, he would have won hands down. He even knew the third president—of Finland—a question I threw in as a joke."

"Samuelson says I was wrong and he was right, and he froths at the mouth when people talk about the lighthouse example. He says Coase is wrong; he doesn't overcome the free rider problem. Who are the free riders? The foreign ships going past the British coast which do not call at a British port. Using Samuelson's approach, what do you do? Do you ask the foreign governments to give you a subsidy? Do you tax people in Britain because the foreign ships are getting help without paying for it? What do you do? My approach is to compare the alternatives. People like Samuelson like to set up a perfect world and say that the market does not bring us to this point and imply that the government should do something. They stop their analysis at that point."

"The only way I feel I understand something is if I can write it down in a model and make it work. I felt that from the beginning. That's why I liked Samuelson's book. He'll take these incomprehensible verbal debates that go on and on and never end and just end them; formulate the issue in such a way that the question is answerable, and then get the answer."

"Another big influence was Samuelson's Foundations, which I read when I stated here at Chicago. It's a "how-to-do-it" book. a great book for first-year graduate students. It says, "Here's the way you do it." It lets you in on the secret of how you play the game, as opposed to cutting you off with big words. I think the combination of Samuelson's book plays Friedman's class was what got me going."