PAUL SAMUELSON AND THE ROLE OF TEXTBOOKS IN ECONOMICS · PAUL SAMUELSON AND THE ROLE OF TEXTBOOKS...

PAUL SAMUELSON AND THE ROLE OF TEXTBOOKS IN ECONOMICS Yann Giraud – University of Cergy-Pontoise

Robert Solow on economics textbooks

28/08/17 Y. Giraud - FEA-USP lecture II

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¨  “How did economics get that way and what way did it get?”, Daedalus, 1995. ¤  “Even a quick physical comparison of a good contemporary elementary

text with [older ones] tells us something. Leaving aside the typographical changes - color, wider margins, larger type - the modern text is sprinkled with diagrams, tables, even simple equations, whereas the older ones present page after page of unbroken prose… The older texts are simply more discursive. The underlying ideas are treated more like categories that resonate to this or that bit of history or policy; the authors ruminate more than they analyze ...The modern text treats economics as a collection of analytical tools to be applied quite directly to observable situation.”

The “old” textbook tradition ¨  More precisely, Solow evokes F.

Garver and A. Hansen’s Principles of Economics as an instance of the old texts. ¤  It has a number of diagrams but

they are used in the same way as those of Marshall’s principles.

¤  All in all, the book is mostly verbal. It does not deal with “economics as models”.

¨  So what’s new about the “modern textbook”?

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Y. Giraud - FEA-USP lecture II

The “modern” textbook ¨  Looking at diagrams, we see how

they seem to lead to something different. ¤  For instance, the “Keynesian cross” on

the right seems to be self explanatory.

¤  Not just an illustration but a device the student will have to tweak in order to yield some results.

¨  Hence the textbook as a collection of model rather than as a discourse on economic matters.

¨  But where does Samuelson stand?

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The place of Samuelson’s Economics ¨  It is easy to think about Samuelson’s Economics as the

first modern textbooks. ¤  Its first edition sold several 100 000 copies

(unprecedented). ¤  It was instantly used in 127 institutions. ¤  It provided a blueprint for dozens of followers.

¨  But as it is often the case, things are a little more complicated than it seems …

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Samuelson between old and new (1) ¨  Roger Backhouse, Founder of Modern Economics: Paul A. Samuelson

(2017) ¤  “[Between 1932 and 1948], American economics changed from being

a pluralistic discipline in which there was a divide between “institutionalists”, who sought to ground they thinking firmly in data, and “neoclassical economists,” who saw a greater role for abstract mathematical theory, to one in which “neoclassical economics” dominated. Samuelson was such an important player in these developments that to understand his intellectual development is to understand some of the most important developments in this period of dramatic changes (p. xxi).”

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Samuelson between old and new (2)


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¨  Yet by the end of his book, Backhouse gives us a more qualified argument: ¤  “[Samuelson] had much in common with the British economist Alfred

Marshall, whose attitudes he disparaged so prominently in Foundations… Neither was a simple neoclassical economist; bith were cautious in applying such theories to real-world problems and had the ability to appeal to widely differing groups of economists – even to economists who did not accept the value of their more formal theoretical work. Just as there is a strong historicist stand in Marshall’s work, it is possible to discern institutionalist traces in Samuelson’s.”

¨  Hence the role of the textbook as well in bridging these different approaches.

My interpretation of the role of the textbook


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¨  Yes, it set some of the standards of modern economics and helped the move to a model-based sort of economics.

¨  But it was also: ¤  A more policy-oriented textbook (toward interventionist economic

policies). ¤  A way for Samuelson to appear as a public intellectual (contrary

to Friedman he would never write a popular essay). ¤  It also helped cement some particular branch of postwar

neoclassical economics: MIT economics.

But what is MIT economics?


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¨  According to Philip Mirowski and Wade Hands (1998), “neoclassical economics” is not a homogeneous entity and there are at least three different styles. ¤ Chicago Economics – partial equilibrium, limited

mathematical sophistication, libertarian politics. ¤ Cowles commission – general equilibrium, most sophisticated

mathematics, mostly left-wing politics (some of them were ‘reformed’ marxists).

¤ MIT economics – something of a middle-of-the-road position.

P. Mirowski’s quote (Machine Dreams, 2002)


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¨  “Perhaps the best way to understand Samuelson’s place in the postwar neoclassical orthodoxy is as someone who has been most strident in his insistence upon the ‘scientific’ character of neoclassicism, but simultaneously someone who has been obsessed with the idea that there might be a ‘third way’ ... somehow located between the aggressive ‘Marshallianism’ of the Chicago school and the full-blown Bourbakist general equilibrium formalisms of the Cowles Commission. This putative third way was always a very delicate entity, composed of a host of seemingly self- contradictory propositions ... Yet, through a series of fortuitous events (such as his 1948 textbook), it was Samuelson’s version of neoclassicism that first captured the attention of the immediate postwar economics profession, and it was he who came to exemplify the brash self- confident face of the ‘new’ mathematical economics (p. 226).”

¨  One point where I disagree: the textbook is anything but “fortuitous”!

The official story behind the first edition


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¨  Paul Samuelson began to write it in 1945 as a text intended for MIT students. ¤  Economics was compulsory for all engineering students ¤  But they hated it! ¤  So apparently Ralph Freeman asked Samuelson to contribute.

¨  Although the story is substantiated in the archives (MIT had even ordered a preliminary report for a textbook before Samuelson’s arrival), there is much more to it. ¤  After all, why would a renowned theorists on top of his game (remember

he contributed many papers a year!) such as P.S. spend three years on a manuscript.

The less official history behind Economics ¨  Alvin Hansen (1887-1975)

¤  A former “neoclassical” economist ¤  The first American Keynesian ¤  A policy-oriented economist

¨  Hansen was Samuelson’s mentor on policy matters in the same way that Wilson was his mentor in mathematics. ¤  Samuelson developed the 45° diagram in reaction to one

of his books. ¤  Samuelson would work with him as part of the National

Planning Board.

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The National Planning Board ¨  Created in 1933 by Roosevelt as part of a number of

administrations devoted to solve the Great Depression. ¤  Headed by Charles Merriam and Frederic Delano (Roosevelt’s uncle).

¨  Roosevelt does not only want to solve the crisis, there is a wider scope to the project. ¤  The government must collect and produce a lot of information about the

economy (that was started by Hoover). ¤  A project of mass-education and mass-communication, which involves the

use of a number of visual techniques (Charles & Giraud 2013). ¤  It is a big change in the history of governmental statistics (E. Didier

2009).

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Samuelson: from micro to macro ¨  In some way, Samuelson moves from theoretical

microeconomics to applied macroeconomics ¤ He has a very subsidiary role as part of the NPB. ¤  But it has a big impact on his view of the economy.

¨  A more “political” Samuelson ¤ He begins to write columns in the New Republic. ¤ His main point: wartime planning should not be forsaken.

Demand management needs to be done by the State. 28/08/17

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Role of the textbook ¨  Samuelson clearly sees how the textbook can be used as a way to spread

the “new economics” ¤  “New economics” is the name used for what will be termed later “neoclassical

synthesis”. ¤  The idea is that when markets work well, neoclassical economics applies. ¤  But when we move away from full employment, we must revert to the Keynesian

principles. ¨  This is well expressed in Samuelson’s second manuscript where a divide is

made between: ¤  The level and fluctuations in national income (“macro”) ¤  The Economics of Full Employment (“micro”)

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What’s new in the textbook? ¨  The most obvious thing is the treatment of Keynes’

theory through the 45° diagram apparatus. ¨  But there’s more to it:

¤  The language used by Samuelson is very lively, colloquial, in comparison with existing textbooks.

¤  Its structure - fact/macro/micro - will become the model for most ensuing texts.

¤  It treats economics as a problem-solving discipline.

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Criticism of the textbook


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¨  Even before the textbook is published, it is criticized by members of the Corporation, MIT’s Board of Trustees.

¨  In 1946, there’s an inspection of the economics department by committee headed by some Walter Beadle. ¤  The latter works asan executive for DuPont. ¤  Lammot DuPont is very close to conservative circles, who are unnerved

by the continuation of Roosevelt’s policies in the postwar period. ¨  Even before McCarthyism, these people are organized and want to

“clean” the universities of potential Marxist-leaning scholars. ¤  They will use Samuelson’s Economics as an opportunity to act.

Beadle’s reaction to the manuscript


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¨  It is built on the report by another member of the committee, a certain Mr. Peterson. ¤  “Apparently, the author believes that some managed capitalism is

necessary and presents theories along these lines as established facts without presenting alternative theories or points of view.”

¨  Beadle’s first letter to Freeman is relatively amicable. ¤  “If [Samuelson] approaches the matter as objectively as a professor in

an engineering school approach[es] a problem of this kind, I am hopeful that the text which is eventually to be published will attain recognition everywhere as reflecting credit on both M.I.T. and the author.”

Samuelson’s response to Beadle


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¨  Samuelson tried to calm things down. ¤  He promised to smooth some of the most controversial sentences. ¤  But wrote: “What I do wish to avoid is a departure from a middle-of-

the-road position, as compared to my present generation of economists. And I am sure that your comments have been most helpful in this respect.”

¨  “Middle-of-the-road” is going to be used frequently as a way to deter criticism but the term is somewhat ambiguous. ¤  Can be considered as a middle-ground b/w planning and laissez-faire. ¤  Or the position of the expert: what’s acceptable for the average

economist.

Increasing threats on Samuelson


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¨  Unimpressed by Samuelson’s response, Beadle and his allies write to Karl Compton, MIT’s president. ¤  F. Chesterman (another member of the Corporation): “I am astonished to find that a

teacher of economics at M.I.T. shall enunciate some of the absurd thinking which is quoted in Walter’s letter to you. It is perfectly obvious that the young man is socially-minded if not strictly communistic. It would be a terrible reflection on M.I.T. if the book in its present condition were published. . . . I question whether Samuelson is a member of the subversive societies we hear so much about because his line of reasoning and method of expressing his thoughts are those of that group.”

¤  Walter Beadle: “[M]ore drastic correctives would be required with respect to the teaching of economics at the Institute”. The Economics department should be “subject to severe censure for having permitted the text, in the form in which the Committee reviewed it, to be passed out to the students of Ec 11 and used as a basis for classroom instruction.”

Reaction of the Institute


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¨  Samuelson to Compton: ¤  “The book is in no sense a ‘left-wing’ work; and I have never, myself, been

connected with left-wing organizations of any kind, or with organizations working with such groups, or—for that matter—with any labor organizations whatsoever. . . . The methods of analysis used are those that have been employed by 90 per cent of the active academic economists under the age of 50 over the last decade.”

¨  Compton to Beadle: ¤  “If either your committee or I were to go beyond suggestion, advice and criticism

in respect to the views or publications expressed by any member of the faculty the institution would be wrecked. There would be wholesale resignations irrespective of whether or not other members of the staff felt that the criticisms were justified.”

Samuelson at Chicago?


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¨  In the meantime, Samuelson received an offer to leave MIT for Chicago ¤  The offer comes from T. Koopmans (at that time, Cowles economists are there). ¤  The likes of Stigler and Friedman are not pleased. But economists are divided.

¨  Samuelson said he refused because he did not want to be seen as the left wing counterpart of Friedman ¤  But the truth is that a substantial raise at MIT helped him make this decision. He had been

appointed with a salary of $3000 a year in 1940 and by 1947 he was receiving $9000. ¤  Jim Killian Jr. (MIT vice President): This is “immediate evidence of our wholehearted

support of your own program and the general program here in economics and of our desire to do everything possible to insure that this program be as strong as we can make it.”

¨  This and receiving the first John Bates Clark medal reinforces Samuelson’s position at MIT.

Publication of the textbook (1948)


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¨  Economics is a smash success. ¤  PS to Compton: “The book has been adopted for use at such institutions as Yale,

Princeton, Harvard, Duke, Columbia, Purdue, etc. In terms of royalties it has been a profitable venture beyond my fondest expectations.”

¨  Critically, it is praised. ¤  A. G. Hart (AER, 1948): “The supreme merit of the book, to my taste, is a

systematic effort to find points of contact between different points of view which students and their neighbors in society may hold. Samuelson’s own policy position is middle-of-the-road. . . . In consequence of this tone of reasonableness and tolerance, his book should prove congenial to teachers and students over a wide range to right and left of Samuelson’s own political position.”

This is indeed a middle-of-the-road text


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¨  Manuscript: ¤  “Sometimes the mistakes which a flock of independent competitors make—for

instance in all overbuilding as in 1929, or in continually entering the already overcrowded grocery store business—could have been avoided by advanced centralized planning.”

¨  Published version: ¤  “But sometimes the mistakes which a flock of independent competitors make—

for instance in all overbuilding as in 1929, or in continually entering the already overcrowded grocery store business—would be lessened in an economy characterized by planning. (Of course, fallible bureaucrats might perpetrate a series of planning errors of their own, and new problems of individual liberty would be introduced.)”

But this was not the end for conservatives ¨  William Buckley Jr.

¤  New rising star of the conservative movement

¤  God and Man at Yale (1951) n  A criticism of liberal college education n  Mentions Samuelson’s Economics

¨  Plus a number of conservatives gather in think tanks that publish pamphlets criticizing the textbook.

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More threats and more reaction


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¨  At MIT, Beadle and his allies strike back. ¤  Killiam to Samuelson: “I do feel there are many businessmen with a thoroughly

honest and liberal outlook who are troubled about what they feel to be the Keynesian outlook and who have gained the impression that colleges have succumbed to one-sided propaganda”

¤  Samuelson to Killian: “myself think that much of what is called Keynesianism is incorrect and in need of quali cation. Much of my text is concerned with such quali cations and criticisms. . . . I myself rarely use the words Keynesianism and have repeatedly deplored the formation of ‘schools of thought’”.

¨  The matter is also discussed at McGraw-Hill (Samuelson’s publisher). James McGraw receives critical letters as well, including one by Lammot DuPont (Beadle’s superior).

MIT and McGraw-Hill’s joint reaction


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¨  As a result, there was some joint reaction from McGraw-Hill and MIT. ¤  First, a report is written for both the editor and the department, looking

at all criticism and finding all kinds of counterarguments. ¤  Second, it is decided that at MIT, the economics class will be

complemented by reading (including more diversity). ¤  A “Reader” companion to the textbook is written by Samuelson and

several other MIT Professors and published by McGraw-Hill. ¨  This pleased the critics more. In 1961, Walter Beadle wrote to a

friend: ¤  “Samuelson has made real improvements from a business standpoint in

each of the five editions that have now been published.”

Economics after the 1st edition


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¨  Not many information in the archives to what happens between 1952 and 1964 (2nd to 6th eds.)

¨  But we know that Samuelson introduced the “neoclassical synthesis” in the 3rd edition. ¤ Also, clearly, during this period, Samuelson is leading the

textbook market. ¤  There’s some kind of standardization of the textbook market

as well (and internationalization, too).

The crisis of economic education in the 1960s


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¨  There is a drop in economics students entering the university ¨  A test in economic literacy shows that students who have had one year of

college education know no more about economics than the rest of the population.

¨  The AEA takes the matter very seriously and a number of books/reports are written on the subject. ¤  For some observers, the problems are imputable to what is named “principles-

based” economic education. ¤  This should be replaced by “issue-based” economic education. ¤  Samuelson is considered as the role model for the former (kind of unfair).

Increasing competition on the textbook market ¨  The increasing competition is

obvious when seen through the number of reports & ads campaigns produced by McGraw-Hill.

¨  By the mid-60s, Samuelson is no longer leading the market ¤  Campbell McConnell’s

Economics is the leader ¤  Also published by McGraw-

Hill.

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Another generation of critical economists is coming ¨  They call themselves “radicals” ¨  Economic education is their favorite place

to criticize the establishment ¤  They teach alternative classes at Harvard,

MIT (among others). ¤  Some of these classes generate protests,

including police intervention. ¤  This goes to press and makes established

economics very unpopular.

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Samuel Bowles

Samuelson as old-fashioned ¨  Samuelson has yet to receive the Nobel Prize (1970).

¤  So for a popular audience, he’s mostly “textbook author Paul Samuelson” ¨  He’s taken to task as THE economist of the establishment.

¤  In substance: Economics does not treat subjects like racial discrimination, environmental problems and Marxist economics.

¤  In style: Samuelson’s snappy style, which was seen as an asset in the late 1940s, now appears to students as condescending.

¨  That Samuelson participates in debates where the radical movement is discredited does not help either.

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Changes in the textbook ¨  There’s clearly editorial pressure to change the text

¤  Copies are sent to radical economists for evaluation. ¤  There are many reports in the archives, showing a wide range of criticisms of the

textbook. ¨  As a result, Samuelson:

¤  Becomes more topical (7th ed., 1967) ¤  Adds chapter on discrimination and inequities (8th ed., 1970) ¤  Adds a chapter on schools of thought in economics (including long passages on

radicals and Marxists in the 9th edition, 1973). ¨  The word “mainstream economics” appeas for the first time in the 9th edition.

PS becomes the torchbearer for the latter.

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But this has a cost…


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¨  By the 10th edition, Samuelson is clearly tired. In 1975, he writes to his Editor: ¤  “Now that I am about to turn sixty, my physician and I have taken a close and

realistic look at my schedule. For years, I have been trying to crowd into it more than one person’s quota of activities, and we are both agreed that the arrival of one’s seventh decade of life is an appropriate time to remedy this situation.”

¨  The 10th edition is co-authored with Peter Temin (an MIT prof who had drafted changes in the curriculum there). ¤  By the 12th edition, Economics is officially co-authored by William Nordhaus (but

in truth PS has little to do with it). ¨  The textbook will survive but the textbook author is dead (metaphorically!).

Lessons to be learned from this story


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¨  Textbooks are important in that they: ¤  Record ‘progress’ in economic thinking / help recognize or initiate some ‘trends’. ¤  Lead to larger methodological issues in the education. ¤  Help see how economics position itself in societal problems.

¨  Yet, textbooks are themselves constrained by a number of things. ¤  Competition on the market / editorial decisions ¤  Matters affecting the department in which the author is located and the larger

economics profession. ¨  As a result, we need to be cautious about what we call a “textbook author”

¤  Textbook writing may begin as a personal project (1st edition) but it quickly transforms into a more collective endeavor.

PAUL SAMUELSON AND THE ROLE OF TEXTBOOKS IN ECONOMICS · PAUL SAMUELSON AND THE ROLE OF TEXTBOOKS...

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