Nobel Laureates In Economics

"While most of the loot from the financial bleeding accrued to British company officials in Bengal, there was widespread participation by the political and business leadership in Britain: nearly a quarter of the MPs in London owned stocks in the East India Company after Plassey. (pg. 165)"

"Those who wish to be inspired by the glory of the British Empire would do well to avoid reading Adam Smith's The Wealth of Nations ... (pg. 164)"

"What has been called 'the financial bleeding of Bengal' began very soon after Plassey. (pg. 164)"

"profits made by the East India Company [...] in Bengal, financed [...] wars that the British waged across India in the period of their colonial expansion. (pg. 164)"

"The continuous cries for help - from children and women and men - ring in my ears, even today seventy-seven years later. (pg. 115)"

"I saw the first signs of famine in April 1943 - the so called "Great Bengal Famine" which would kill between 2 to 3 million people. Food prices had started rising quite sharply during 1942, the year before the famine. (pg. 114)"

"We investigated the working of a number of elementary schools from three districts of West Bengal… The problem is, in some ways, compounded by the fact that school teachers are now comparatively well paid – no longer the recipients of miserably exploitative wages... The salary of teachers in regular schools has gone up dramatically over recent years. This is an obvious cause for celebration at one level (indeed, I remember being personally involved, as a student at Presidency College fifty years ago, in agitations to raise the desperately low prevailing salaries of school teachers). But the situation is now very different. The big salary increases in recent years have not only made school education vastly more expensive (making it much harder to offer regular school education to those who are still excluded from it), but have also tended to draw school teachers as a group further away from the families of children, especially those from disadvantaged backgrounds. There is considerable evidence that the class barrier that deeply impairs the delivery of school education to the worst-off members of society is now further reinforced by the increase in economic and between the teachers and the poorer (and less privileged) children"

"Marx did do original work in analyzing patterns of circular inter-dependency among industries. Such work gains few converts and is not very helpful in promoting revolution or counterreactions. But like all pioneering effort it deserves the commendation of later craftmen, and it deserves further development. There is half-truth in Schumpeter's adaption of Clemenceau: "Marxian economics is too hard to be left to the Marxians." Only half, because the present paper is seen to involve little worse than school algebra and to be well within the frontier of modern economic theory."

"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."

"Reference to the textbook and its writer was often made with a lofty sense of intellectual and literacy superiority; that has not been true in modern times in economics. The dominant influence, now fully respected, is that of Paul Samuelson. He is celebrated for his research, for his public advocacy, his stand for socially acceptable economic policy. He has not been sufficiently celebrated for this really phenomenal achievement: the basic economic education of successive generations. There are few Americans of any public distinction who do not owe some of their knowledge and position to Samuelson, and his influence is by no means confined to the United States. In ultimate teaching effect in economics, he has no rival"

"The readers of this space know Paul Samuelson as a witty, informed and often acerbic commentator on current affairs, as a “liberal” supporter of the economic policies of the Kennedy and Johnson years, and as a critic of current Nixon economic policy. Millions of college graduates know Paul Samuelson for his economics textbook, which has been the leading elementary text in the United States for two decades, has sold nearly 3 million copies, and is almost surely the best-selling book on economics ever published in the Western world. Professional economists know Paul Samuelson as a mathematical economist who has ranged widely and deeply, who has helped to reshape and improve the theoretical foundations of our subject. This is the work for which this remarkably versatile man won the Nobel Prize. In the words of the announcement, the prize was awarded “for the scientific work through which he has developed static and dynamic economic theory and actively contributed to raising the level of analysis in economic science.”"

"For virtually my entire career in finance—now more than 61 years—two of the greatest economists of the past century have played a major role in my understanding of the financial markets. One is John Maynard Keynes, the legendary British theorist and author. The other is Paul Samuelson, the prolific generator of ideas and the first American to win (in 1970) the Nobel Memorial Prize in the Economic Sciences."

"I got to know Paul Samuelson well during 2001-02 when I was a visiting professor at MIT. I would pause every now and then at his office to chit-chat about things. He was into his grey years by then and seemed a bit lonely. His interests were voracious — from the intricacies of science to the lives of people and he liked to chat. My last proper conversation with him was on May 15, 2002. I was photocopying something at MIT, when he stopped and said that it was his birthday that day. The Harvard Club would open a special champagne for him and he asked me if my wife and I would come to the Harvard Club. For an economist, that’s the equivalent of Einstein asking a physicist to dinner. I, of course, said yes, expecting lots of people there. It turned out to be a dinner with Samuelson, his charming wife Richa and the two of us. It was one of the most memorable evenings of my life. We — truth be told, mainly he —talked about art, history and, of course, economics."

"As an intellectual and economist, there were two Samuelsons. There was the mathematical savant who had learned his trade at the feet of Viner, Leontief, Schumpeter and, above all, Wilson. This work had raised him above most of his contemporaries, enabling him to speak with the authority of one of the leading economists of his generation. However, his more popular work was not just a distillation of his abstract theories; it rested not on complex mathematical arguments but involved careful data analysis and familiarity with the way that economic institutions worked. This was the Samuelson, mentored by Hansen during the Second World War, who wrote Economics and whose views were sought by the press and government."

"Paul’s work combined breadth and intensity. On the one hand, his structures were grounded in a very wide knowledge of the nature of mathematical systems used to describe natural phenomena. On the other, he studied individual questions in economics, sometimes at a very detailed level."

"Paul Samuelson is omnipresent in American and even world economics; like Joyce's Humphrey Chimpeden Earwicker or Melville's Confidence Man,. he appears at every turn of history and in every disguise."

"Markets are not perfect, which is true even for rationally regulated markets. Nevertheless, over the last thousand years every attempt to organize sizeable societies without important dependence on markets has generated its own failure ..."

"Moral: free markets do not stabilize themselves. Zero regulating is vastly suboptimal to rational regulating. Libertarianism is its own worst enemy!"

"Moral: To understand economics you need to know not only fundamentals but also its nuances. Darwin is in the nuances. When someone preaches “Economics in one lesson,” I advise: Go back for the second lesson."

"From the beginning I could not believe that the “efficient market” hypothesis was dependent on a pure Brownian motion white noise or any truly random random walk. Place a minuscule colloidal molecule on a horizontal table that covers unlimited acres. Bombard it from every direction with thousands of minute atoms; and then if you wait long enough that original molecule can have traveled a billion miles in one direction. That’s truly a random Bachelier-Einstein walk, but not my notion of economic fluctuations."

"When I once called myself a “Sunday painter” dabbling in stochastic finance, that was not meant to belittle finance theory as a branch of serious economic theory. Such a peculiar view was expressed again and again by the late Milton Friedman, a dizzy view that I still find incomprehensible."

"Well, I'd say, and this is probably a change from what I would have said when I was younger: Have a very healthy respect for the study of economic history, because that's the raw material out of which any of your conjectures or testings will come. And I think the recent period has illustrated that. The governor of the Bank of England seems to have forgotten or not known that there was no bank insurance in England, so when Northern Rock got a run, he was surprised. Well, he shouldn't have been. But history doesn't tell its own story. You've got to bring to it all the statistical testings that are possible. And we have a lot more information now than we used to."

"Well, I will say this. And this is the main thing to remember. Macroeconomics -- even with all of our computers and with all of our information -- is not an exact science and is incapable of being an exact science. It can be better or it can be worse, but there isn't guaranteed predictability in these matters."

"Scholars still debate whether Columbus brought syphilis to the New World or vice versa. But it cannot be doubted that the 2008 world meltdown carries on its label the words Made in America."

"What then is it that, since 2007, has caused Wall Street capitalism's own suicide? At the bottom of this worst financial mess in a century is this: Milton Friedman-Friedrich Hayek libertarian laissez-faire capitalism, permitted to run wild without regulation. This is the root source of today's travails. Both of these men are dead, but their poisoned legacies live on."

"My final words are cut short by this audience’s well-fed drowsiness. I will leave as a question for later discussion: Will hedge funds make our golden years more golden, or will the new concoctions of option engineers, instead of reducing risks by spreading them optimally (in fact, by making possible about 100 to 1 over leveraging), result in microeconomic losses for pension funds and, maybe someday, even threaten the macro system with lethal financial implosions?"

"We economists love to quote Keynes’s final lines in his 1936 General Theory—for the reason that they cater so well to our vanity and self-importance. But to admit the truth, madmen in authority can self generate their own frenzies without needing help from either defunct or avant-garde economists. What establishment economists brew up is as often what the Prince and the Public are already wanting to imbibe. We guys don’t stay in the best club by proffering the views of some past academic crank or academic sage."

"I return to economics and to economists, and to the question of why the profession’s directions have evolved in the manners evident from this book. A major conservative economist once explained that a source of his antipathy to government traced back to the defeat of his southern ancestors by a larger north economy. Here is a similar factoid. Joan Robinson once wrote that her opposition to having the U.K. enter the European Market was due to the fact that she “had more friends in [Nehru’s] India than on the continent.”"

"Arrow’s general impossibility theorem does not disprove the existence of the Bergsonian social welfare function, neither does it disprove the existence of the Benthamite hedonistic function."

"I think Marshall was a great economist, but he was a potentially much greater economist than he actually was. It was not that he was lazy, but his health was not good, and he worked in miniature."

"I had a great admiration for Pigou. I thought that, in many ways, he was not only a faithful follower of Alfred Marshall, but he was also a more fertile developer of the Marshallian tradition than Marshall himself. … Whitehead said to me:“Don’t you think that Pigou was an overrated economist? Wasn’t Foxwell a better man?” Since I am an honest man, I said to Whitehead:“No, I think Pigou was a much more important economist than Foxwell.”"

"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."

"An evolving discipline–whether it be history or economics or astrophysics or immunology–is ever dynamically changing. Two steps forward and X steps back, so to speak. Periodically, the scholarly group registers more or less self-confidence, self-esteem, and complacency. We careerists are happiest when recent past achievements have seemed to be successful, but when still there are completable tasks dimly visible ahead."

"Instead of attenuating this paper’s theses, heterogeneity amplifies its importance. Contemplate a scenario where Schumpeter’s fruitful capitalist destruction harms a really sizeable fraction of the future U.S. population and, say, improves welfare of another group and does that so much as to justify a calculation that the winners could be made to transfer some of their gains and thereby leave no substantial U.S. group net losers from free trade. Should noneconomists accept this as cogent rebuttal if there is no evidence that compensating fiscal transfers have been made or will be made? Marie Antoinette said, “Let them eat cake.” But history records no transfer of sugar and flour to her peasant subjects. Even the sage Dr. Greenspan sometimes sounds Antoinette-ish. The economists’ literature of the 1930s—Hicks, Lerner, Kaldor, Scitovsky and others, to say nothing of earlier writings by J.S. Mill, Edgeworth, Pareto and Viner—perpetrates something of a shell game in ethical debates about the conflict between efficiency and greater inequality. Policy aside and ethical judgments aside, mainstream trade economists have insufficiently noticed the drastic change in mean U.S. incomes and in inequalities among different U.S. classes. As in any other society, perhaps a third of Americans are not highly educated and not energetic enough to qualify for skilled professional jobs. If mass immigration into the United States of similar workers to them had been permitted to actually take place, mainstream economists could not avoid predicting a substantial drop in wages of this native group while the new immigrants were earning a substantial rise over what their old-country real wages had been."