Paul Samuelson

The Great Economists Ten Economists whose thinking changed the way we live-FT Publishing International (2014)
by Phil Thornton
Published 7 May 2014

Only time will tell what impact that debate will have on Samuelson’s long-term reputation. Further reading K. Puttaswamaiah, Paul Samuelson and the Foundations of Modern Economics (Transaction Publishers, 2001). Paul Samuelson, Foundations of Economic Analysis (1947). Paul A. Samuelson, Economics: an introductory analysis (1948). Paul A. Samuelson, Collected Scientific Papers (1966). Paul Samuelson (ed.), Inside the Economist’s Mind (2007). Mark Skousen, ‘The Perseverance of Paul Samuelson’s Economics’, Journal of Economic Perspectives, Vol. 11(2) (1997), pp. 137–52. E. Cary Soloki and Robert M. Brown (eds), Paul Samuelson and Modern Economics Theory (McGraw-Hill, 1983).

…

Chapter 7 • Milton Friedman165 Abraham Hirsch and Neil de Marchi, Milton Friedman (University of Michigan Press, 1991). William Ruger, Milton Friedman (Continuum, 2011). CHAPTER 8 Paul Samuelson– the neoclassical synthesist 167 168 The Great Economists ‘I don’t care who writes a nation’s laws – or crafts its advanced treaties – if I can write its economics textbooks.’ Paul Samuelson, Foreword to The Principles of Economics Course: A Handbook for Instructors, 1990 In the official speech awarding the Nobel Prize in economic sciences to Paul Samuelson in 1970, Professor Assar Lindbeck, of the Stockholm School of Economics, said that more than any other contemporary economist, the new laureate had contributed to raising the general analytical and methodological level in economic science.

…

In the meantime firms produce an output by employing the labour supplied by those young workers, but also by using the capital that has been made available by those workers’ savings (such as pension funds taking large shareholdings in businesses). 6. W. Nordhaus, ‘Paul Samuelson and Global Public Goods: a commemorative essay for Paul Samuelson’ (5 May 2005) http://www.econ.yale. edu/~nordhaus/homepage/PASandGPG.pdf Chapter 8 • Paul Samuelson179 While Samuelson’s theory was purposefully model-based and made assumptions that did not always equate with real life, the framework of the model provided the basis for future research. By modelling savings at an individual level, Samuelson’s OLG model opened up another way to examine the impact of various policies on the behaviour of the economy over an indefinite future.

Samuelson Friedman: The Battle Over the Free Market
by Nicholas Wapshott
Published 2 Aug 2021

Barnett, University of Kansas, December 23, 2003. 2.Massachusetts Institute of Technology (MIT) 150 Oral History project, July 19, 2007. https://infinitehistory.mit.edu/video/paul-samuelson. 3.As first cousins, they were obliged to move from Chicago, where the marriage of first cousins was illegal, first to Wisconsin, then Indiana, where it wasn’t. 4.MIT 150 Oral History project, July 19, 2007. https://infinitehistory.mit.edu/video/paul-samuelson. 5.Ibid. 6.MIT150 Oral History project. https://infinitehistory.mit.edu/video/paul-samuelson. 7.Karen Ilse Horn, Roads to Wisdom, Conversations with Ten Nobel Laureates in Economics (Edward Elgar, Cheltenham, England, 2009), p. 43. 8.MIT150 Oral History project. https://infinitehistory.mit.edu/video/paul-samuelson. 9.Ibid. 10.His father owned a set of Harvard Classics—the most important books in the Western canon—included one of the founding works of economics, Adam Smith’s Wealth of Nations, but young Samuelson failed to read it. 11.Thomas Robert Malthus (February 13, 1766–December 29, 1834), English cleric who studied the influence of demographics on economics. 12.MIT 150 Oral History project. https://infinitehistory.mit.edu/video/paul-samuelson. 13.Aaron Director (September 21, 1901–September 11, 2004), a professor at the University of Chicago Law School who played a central role in the founding of the Chicago School of economics.

…

Barnett, University of Kansas, December 23, 2003. 2.Massachusetts Institute of Technology (MIT) 150 Oral History project, July 19, 2007. https://infinitehistory.mit.edu/video/paul-samuelson. 3.As first cousins, they were obliged to move from Chicago, where the marriage of first cousins was illegal, first to Wisconsin, then Indiana, where it wasn’t. 4.MIT 150 Oral History project, July 19, 2007. https://infinitehistory.mit.edu/video/paul-samuelson. 5.Ibid. 6.MIT150 Oral History project. https://infinitehistory.mit.edu/video/paul-samuelson. 7.Karen Ilse Horn, Roads to Wisdom, Conversations with Ten Nobel Laureates in Economics (Edward Elgar, Cheltenham, England, 2009), p. 43. 8.MIT150 Oral History project. https://infinitehistory.mit.edu/video/paul-samuelson. 9.Ibid. 10.His father owned a set of Harvard Classics—the most important books in the Western canon—included one of the founding works of economics, Adam Smith’s Wealth of Nations, but young Samuelson failed to read it. 11.Thomas Robert Malthus (February 13, 1766–December 29, 1834), English cleric who studied the influence of demographics on economics. 12.MIT 150 Oral History project. https://infinitehistory.mit.edu/video/paul-samuelson. 13.Aaron Director (September 21, 1901–September 11, 2004), a professor at the University of Chicago Law School who played a central role in the founding of the Chicago School of economics.

…

It was Kaldor who, while at the London School of Economics in 1931, had, on Lionel Robbins’s instruction, helped Hayek with his use of English in the duel-by-learned-journal against Keynes. 58.MIT Oral History project. https://infinitehistory.mit.edu/video/paul-samuelson. file:///Users/nicholaswapshott/Downloads/Paul%20A.%20Samuelson.pdf. 59.Lawrence Henry “Larry” Summers (November 30, 1954–), whose father, Robert Summers, (who changed his name from Samuelson to Summers) is Paul Samuelson’s brother. President Emeritus and Charles W. Eliot University Professor of Harvard University. Former chief economist of the World Bank (1991–1993); Undersecretary of the Treasury for International Affairs (1993–1995); Deputy Secretary of the Treasury (1995–1999); Secretary of the Treasury (1999–2001); President of Harvard University (2001–2006) Director of the National Economic Council (2009–2010). 60.MIT memorial service for Samuelson, April 10, 2010. http://news.mit.edu/2010/samuelson-memorial-0412. 61.Samuelson personal correspondence, 2004.

The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street
by Justin Fox
Published 29 May 2009

It was also because most finance scholars had ceased to care about the hard work of making judgments about risk and return in the stock market. Who needed judgment, after all, when everybody knew that stock price movements were completely random? CHAPTER 4 A RANDOM WALK FROM PAUL SAMUELSON TO PAUL SAMUELSON The proposition that stock movements are mostly unpredictable goes from intellectual curiosity to centerpiece of an academic movement. WHEN PAUL SAMUELSON ARRIVED AT the Massachusetts Institute of Technology in 1940, allowed to slip away from Harvard by an economics department chairman who valued neither math geeks nor Jews, the engineering-dominated school didn’t even offer a Ph.D. in economics.

…

And the whole saga is laid out in vastly more detail in William Poundstone, Fortune’s Formula (New York: Hill and Wang, 2005), esp. 192–97. 25. As recalled by Mark Rubinstein. CHAPTER 4: A RANDOM WALK FROM PAUL SAMUELSON TO PAUL SAMUELSON 1. Jürg Niehans, A History of Economic Theory: Classic Contributions 1720–1980 (Baltimore: Johns Hopkins University Press, 1990). 2. Paul A. Samuelson, Economics: An Introductory Analysis (New York: McGraw-Hill, 1948), 570, 573. 3. Michael Szenberg, Aron Gottesman, and Lall Ramrattan, Paul Samuelson: On Being an Economist (New York: Jorge Pinto Books, 2005), 85. 4. The student, Richard Kruizenga, was chiefly interested in describing the securities and sketching their history.

…

A Random Walk from Fred Macaulay to Holbrook Working Statistics and mathematics begin to find their way into the economic mainstream in the 1930s, setting the stage for big changes to come. The Rise of the Rational Market 3. Harry Markowitz Brings Statistical Man to the Stock Market The modern quantitative approach to investing is assembled out of equal parts poker strategy and World War II gunnery experience. 4. A Random Walk from Paul Samuelson to Paul Samuelson The proposition that stock movements are mostly unpredictable goes from intellectual curiosity to centerpiece of an academic movement. 5. Modigliani and Miller Arrive at a Simplifying Assumption Finance, the business school version of economics, is transformed from a field of empirical research and rules of thumb to one ruled by theory. 6.

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems
by Linda Yueh
Published 4 Jun 2018

Rebecca Lai, 2016, ‘Election 2016: Exit Polls’, The New York Times, 8 November; www.nytimes.com/interactive/2016/11/08/us/politics/election-exit-polls.html 3.    Derek Thompson, 2009, ‘An Interview with Paul Samuelson, Part One’, The Atlantic, 17 June; www.theatlantic.com/business/archive/2009/06/an-interview-with-paul-samuelson-part-one/19586/ 4.    John Cassidy, 2009, ‘Postscript: Paul Samuelson’, The New Yorker, 14 December. 5.    Thompson, ‘An Interview with Paul Samuelson’. 6.    David C. Colander and Harry Landreth, 1996, The Coming of Keynesianism to America: Conversations with the Founders of Keynesian Economics, Cheltenham: Edward Elgar, p. 28. 7.    

…

The sentiment would be even stronger for their intellectual followers who have lived through the extraordinary period of globalization since the end of the Cold War in the early 1990s and incorporated such insights into their research. There are many who have benefited from the pioneering research of the Great Economists, but MIT’s Paul Samuelson stands out. His theories embody the synthesis of Keynesian and neoclassical ideas that characterize economics today. Samuelson helped develop the ‘neoclassical synthesis’ approach, which is the basic framework for modern macroeconomics, discussed in the Keynes chapter. In addition, Paul Samuelson’s seminal work furthered David Ricardo’s model and has become the standard set of theories for analysing the impact of international trade on the economies of trading nations.

…

Samuelson’s research explained how trade boosted growth, but at the same time unevenly affected workers. His work can help us think about the ‘losers’ from international trade. So, the ideas of this great economist can point to how to address the backlash against globalization. Paul Samuelson, ‘the last of the great general economists’ Paul Samuelson was born in 1915 and came of age in the 1930s, when the rise of protectionism worsened the US economy. Samuelson was the leading Keynesian in America after the Second World War, although he described himself as a ‘cafeteria Keynesian’ as he merely selected the parts that he liked.3 He adopted Keynesianism after being taught by top neoclassical economists at the University of Chicago, where he enrolled at the age of sixteen, after which he obtained his PhD at Harvard University and joined MIT in 1940.

The Great Economists: How Their Ideas Can Help Us Today
by Linda Yueh
Published 15 Mar 2018

Rebecca Lai, 2016, ‘Election 2016: Exit Polls’, The New York Times, 8 November; www.nytimes.com/interactive/2016/11/08/us/politics/election-exit-polls.html 3. Derek Thompson, 2009, ‘An Interview with Paul Samuelson, Part One’, The Atlantic, 17 June; www.theatlantic.com/business/archive/2009/06/an-interview-with-paul-samuelson-part-one/19586/ 4. John Cassidy, 2009, ‘Postscript: Paul Samuelson’, The New Yorker, 14 December. 5. Thompson, ‘An Interview with Paul Samuelson’. 6. David C. Colander and Harry Landreth, 1996, The Coming of Keynesianism to America: Conversations with the Founders of Keynesian Economics, Cheltenham: Edward Elgar, p. 28. 7.

…

The sentiment would be even stronger for their intellectual followers who have lived through the extraordinary period of globalization since the end of the Cold War in the early 1990s and incorporated such insights into their research. There are many who have benefited from the pioneering research of the Great Economists, but MIT’s Paul Samuelson stands out. His theories embody the synthesis of Keynesian and neoclassical ideas that characterize economics today. Samuelson helped develop the ‘neoclassical synthesis’ approach, which is the basic framework for modern macroeconomics, discussed in the Keynes chapter. In addition, Paul Samuelson’s seminal work furthered David Ricardo’s model and has become the standard set of theories for analysing the impact of international trade on the economies of trading nations.

…

Samuelson’s research explained how trade boosted growth, but at the same time unevenly affected workers. His work can help us think about the ‘losers’ from international trade. So, the ideas of this great economist can point to how to address the backlash against globalization. Paul Samuelson, ‘the last of the great general economists’ Paul Samuelson was born in 1915 and came of age in the 1930s, when the rise of protectionism worsened the US economy. Samuelson was the leading Keynesian in America after the Second World War, although he described himself as a ‘cafeteria Keynesian’ as he merely selected the parts that he liked.3 He adopted Keynesianism after being taught by top neoclassical economists at the University of Chicago, where he enrolled at the age of sixteen, after which he obtained his PhD at Harvard University and joined MIT in 1940.

Big Three in Economics: Adam Smith, Karl Marx, and John Maynard Keynes
by Mark Skousen
Published 22 Dec 2006

Government expenditures on goods and services, which had been running at under 15 percent of GNP during the 1930s, jumped to 46 percent by 1944, while unemployment reached the incredible low of 1.2 percent of the civilian labor force" (Lipsey, Steiner, and Purvis 1987, 573). Paul Samuelson Raises the Keynesian Cross As noted earlier, Keynes died in 1946, right after the war. It would be left to his disciples to lead the charge and create a "new economics." Fortunately for Keynes, a young wunderkind was ready to till his shoes. His name was Paul Samuelson, and he would write a textbook that would dominate the profession for more than an entire generation. The year was 1948, one of those watershed years that occasionally crops up in economics.

…

Marx protested the evils of exploitation in the capitalist system, and yet, according to one biographer, he "exploited everyone around him—his wife, his children, his mistress and his friends—with a ruthlessness which was all the more terrible because it was deliberate and calculating" (Payne 1968, 12). Paul Samuelson adds, "Marx was a gentle father and husband; he was also a prickly, brusque, egotistical boor" (Samuelson 1967b, 616). In sum, Marx ranted about the inner contradictions of capitalism, yet he himself was constantly beset by inner dissension. Marx's Christian Faith The most surprising irony is that Karl Marx—considered one of the most vicious opponents of religion—was brought up a Christian though many of his ancestors were rabbis.

…

Under capitalism, the rate of profit has failed to decline, even while more and more capital has been accumulated over the centuries. 2. The working class has not fallen into greater and greater misery. Wages have risen substantially above the subsistence level. The industrial nations have seen a dramatic rise in the standard of living of the average worker. The middle class has not disappeared, but expanded. As Paul Samuelson concludes, "The immiserization of the working class . . . simply never took place. As a prophet Marx was colossally unlucky and his system colossally useless" (1967, 622). 3. There is little evidence of increased concentration of industries in advanced capitalist societies, especially with global competition. 4.

Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street
by William Poundstone
Published 18 Sep 2006

Moments later, he slumped to the sidewalk. He was dead of a brain hemorrhage at the age of forty-one. Kelly would thereafter be known for an incidental connection to a movie he never saw—and for the gambling formula that would carry his name on to posterity. PART THREE Arbitrage Paul Samuelson PAUL SAMUELSON LOVED HARVARD. The love was not entirely requited. By the age of twenty-five, Samuelson had published more journal articles than his age. This distinction seemed to count little at Harvard, where Samuelson was boxed into a low-paying post as an economics instructor. Tenure was a remote prospect.

…

• Private Wire • Minus Sign PART TWO: BLACKJACK Pearl Necklace • Reno • Wheel of Fortune • More Trouble Than an $18 Whore • The Kelly Criterion, Under the Hood • Las Vegas • The First Sure Winner in History • Deuce-Dealing Dottie • Bicycle Built for Two PART THREE: ARBITRAGE Paul Samuelson • The Random Walk Cosa Nostra • This Is Not the Time to Buy Stocks • IPO • Bet Your Beliefs • Beat the Market • James Regan • Resorts International • Michael Milken • Robert C. Merton • Man vs. Machine • Why Money Managers Are No Good • Enemies List • Widows and Orphans PART FOUR: ST. PETERSBURG WAGER Daniel Bernoulli • Nature’s Admonition to Avoid the Dice • Henry Latané • The Trouble with Markowitz • Shannon’s Demon • The Feud • Pinball Machine • It’s a Free Country • Keeping Up with the Kellys • Though Years to Act Are Long • All Gambles Are Alike • A Tout in a Bad Suit • My Alien Cousin PART FIVE: RICO Ivan Boesky • Rudolph Giuliani • With Tommy Guns Blazing • The Parking Lot • Welcome to the World of Sleaze • Ultimatum • Princeton-Newport Partners, 1969–88 • Terminator • The Only Guy on Wall Street Who’s Not a Rat PART SIX: BLOWING UP Martingale Man • Kicking and Screaming • I’ve Got a Bad Feeling About This • Thieves’ World • Fat Tails and Frankenstein • Survival Motive • Eternal Luck • Life’s Rich Emotional Experiences PART SEVEN: SIGNAL AND NOISE Shannon’s Portfolio • Egotistical Orangutans • Indicators Project • Hong Kong Syndicate • The Dark Side of Infinity Notes Bibliography Acknowledgments Prologue: The Wire Service THE STORY STARTS with a corrupt telegraph operator.

…

“And he gave beautiful talks—when he gave a talk. But he hated to do it.” In 1958 Shannon accepted a permanent appointment as professor of communication sciences and mathematics at MIT. Almost from his arrival, “Shannon became less active in appearances and in announcing new results,” recalled MIT’s famed economist Paul Samuelson. In fact Shannon taught at MIT for only a few semesters. “Claude’s vision of teaching was to give a series of talks on research that no one else knew about,” explained MIT information theorist Peter Elias. “But that pace was very demanding; in effect, he was coming up with a research paper every week.”

Milton Friedman: A Biography
by Lanny Ebenstein
Published 23 Jan 2007

I also had the opportunity to meet David’s wife, Elizabeth, and to have a telephone conversation with Milton’s nephew Alan Porter. Friedman’s longtime secretary, Gloria Valentine, was encouraging and helpful. Others who gave interviews include Gary Becker, Anna Jacobson Schwartz, Lester Telser, Larry Sjaastad, Thomas Sowell, Sam Peltzman, Stephen Stigler, Larry Wimmer, John Turner, and the late D. Gale Johnson. Paul Samuelson sent a useful letter with reactions to some questions. For my biography of Hayek, I had the opportunity to interview W. Allen Wallis, Edwin Meese, and Ronald Coase, among others, and to talk briefly on the phone with Aaron Director. I also thank in particular J. Daniel Hammond, Robert Leeson, and William Frazer for their work on Friedman; the University of California at Santa Barbara for use of its library and interlibrary loan program; the Hoover Institution on War, Revolution and Peace for use of its Friedman archive; the Intercollegiate Studies Institute and Young America’s Foundation for participation in conferences on Friedman; the Liberty Fund for participation in a conference on Frank Knight; Walter Mead for encouragement and assistance; Tom Schrock for continuing advice; Mark Skousen for calling various articles to my attention; Joe Atwill and Curtis Ridling, and Cyndy x Phillips for reviewing the manuscript; and Nik Schiffmann and Lee Gientke for research contributions.

…

If prices go down, the opposite will occur. Prices are an informationbestowing mechanism. Theoretically, Viner influenced Friedman more than anyone else, and it was from Viner that Friedman learned microeconomics. Stories of Viner’s toughness and even ferocity as a teacher were and remain legion. Paul Samuelson, an economics undergraduate at Chicago at the same time that Friedman was a graduate student and who received the Nobel Prize in Economics in 1971, recalls Viner’s “famous” 301 course in economic theory. During it, students “sat tensely around the table.”3 If Viner called on a student three times and the student could not provide satisfactory answers, the student was out of the class.

…

According to the economic historian William Frazer, “Recalling Friedman’s Chicago year 1934–35 with Henry Schultz, Martin Bronfenbrenner [another Chicago student of the era] remembered Friedman mainly as a statistician rather than an economist, and Abba Lerner . . . recalled Friedman as being non-political in 1937.”12 According to Leonard Silk, who has also written on Friedman, early in his career Friedman seemed “more eager to be known as a first-class technician and objective social scientist than as a political crusader.”13 Paul Samuelson remembers Friedman as a grad student as “not primarily a macroeconomist. Just a really smart guy ready to be into anything,” noting that Friedman’s Chicago teachers were “macroeconomists.”14 Friedman expressed these views as late as a 1946 pamphlet with George Stigler opposing rent control: “For those, like us, who would like even more equality than there is at present . . . , it is surely better to attack directly existing inequalities in income and wealth at their source than to ration each of the hundreds of commodities and services that compose our standard of living.”15 In a 1948 article, Friedman wrote that among his long-run objectives was “substantial equality of economic power....

Capital Ideas: The Improbable Origins of Modern Wall Street
by Peter L. Bernstein
Published 19 Jun 2005

“Theory of Rational Option Pricing.” Bell Journal of Economics and Management Science, Vol. 4 (Spring), pp. 141–183. Merton, Robert C. 1974. “On the Pricing of Corporate Debt: the Risk Structure of Interest Rates.” Journal of Finance, Vol. XXIX, No. 2 (May), pp. 449–470. Merton, Robert C. 1983. “Paul Samuelson’s Financial Economics.” In Paul Samuelson and Modern Economic Theory, Cary E. Brown and Robert M. Solow, eds. New York: McGraw-Hill Book Company. Merton, Robert C. 1988. Personal statement (unpublished manuscript). Merton, Robert C. 1989. “On the Application of the Continuous-Time Theory of Finance to Financial Intermediation and Insurance.”

…

I have been unusually fortunate in having had such generous and essential assistance from the people named below. The book could never have taken shape without the participation of the people whose work it describes: Fischer Black, Eugene Fama, William Fouse, Hayne Leland, Harry Markowitz, John McQuown, Robert C. Merton, Merton Miller, Franco Modigliani, Barr Rosenberg, Mark Rubinstein, Paul Samuelson, Myron Scholes, William Sharpe, James Tobin, Jack Treynor, and James Vertin. Each of them spent long periods of time with me in interviews, and most of them engaged in voluminous correspondence and telephone conversations as well. All of them read drafts of the chapters in which their work is discussed and gave me important criticisms and suggestions that enrich virtually every page of the book.

…

All of them read drafts of the chapters in which their work is discussed and gave me important criticisms and suggestions that enrich virtually every page of the book. Most of them also provided their photographs. Each in his own way contributed to my understanding of the subject matter well beyond the chapters that were their immediate concern. In this regard, I hope I may be forgiven if I single out Paul Samuelson, my friend of more than fifty years. He served uncomplainingly as my mentor, inspiration, and inexhaustible research associate from the very beginning; the accumulation of handwritten wisdom that passed from his fax to my fax is a treasure in itself. And my thanks as well to Janice Murray, who made our communication so easy and rewarding.

The Rise of the Quants: Marschak, Sharpe, Black, Scholes and Merton
by Colin Read
Published 16 Jul 2012

There is now a much greater volume of trading in these derivatives, in commodities futures and in options markets, in credit default swaps and mortgage-backed securities, in foreign exchange futures and bond futures than in the traditional market for corporate securities. Yet, before the publication of the theory from the great minds Fischer Black and Myron Scholes, we knew little about how to price such financial derivatives. Meanwhile, Robert Merton, a disciple of the great mind Paul Samuelson, was rapidly extending the relatively static models of finance to a dynamic context that more effectively included time. In creating dynamic models of finance, he was able to more fully describe the evolution of markets over time. The techniques he developed, originally with the market for options in mind, even more clearly delineated finance from economics.

…

By all accounts, Harvard was impressed with Lintner. Upon receipt of his PhD, he was asked to remain at the university under a three-year paid membership to the Harvard Society of Fellows to pursue a research agenda as he saw fit. As a Harvard fellow, he followed in the footsteps The Early Years 51 of the great mind Paul Samuelson, who is documented in the fourth book of this series. Following his fellowship, Lintner was offered an assistant professorship in business administration at Harvard Business School in 1946, an associate professorship in 1951, a full professorship in 1956, and the George Gund Professor of Economics and Business Administration from 1964 until his untimely death in 1983.

…

However, there remained little options activity until the Chicago Board Options Exchange (CBOE) created a much broader and more liquid forum for their exchange that would lower transactions costs and ease trading. In fact, warrants, or company-issued options, originally played a relatively larger role in futures securities trading vis-à-vis options than they do today. This explains why pioneering work by scholars such as the great mind Paul Samuelson initially studied warrants rather than options in the mid-1960s. A new exchange The Chicago Board of Trade (CBOT) is the world’s oldest futures exchange. It was created in 1848 to satisfy the need for farmers to secure buyers The Times 101 of the bounty of the US Midwest breadbasket and for merchants and processors to ensure a steady supply at a predictable price.

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist
by Kate Raworth
Published 22 Mar 2017

‘The argument in the text is never dependent upon them; and they may be omitted,’ he wrote, ‘but experience seems to show that they give a firmer grasp of many important principles than can be got without their aid; and that there are many problems of pure theory, which no one who has once learnt to use diagrams will willingly handle in any other way.’29 It was Paul Samuelson, however, who decisively placed imagery at the heart of economic thought in the second half of the twentieth century. Known as the father of modern economics, Samuelson spent his seven-decade career at the Massachusetts Institute of Technology (MIT) and on his death in 2009 he was heralded as ‘one of the giants on whose shoulders every contemporary economist stands’.30 He was enamoured of equations and diagrams, and he profoundly influenced the use of both in economic theory and teaching.

…

Published in 1947, it was aimed at the hard-core theorist, and was unapologetically mathematical: equations, he believed, should be the mother tongue of professional economists, serving to cut through muddled thinking and replace it with scientific precision. He wrote his second book, however, for an utterly different audience, and only thanks to a twist of fate. Paul Samuelson: the man who drew economics. At the end of the Second World War, US college enrolments ballooned as hundreds of thousands of ex-servicemen returned home in search of the education that they had missed and the jobs that they desperately needed. Many opted to study engineering – essential for post-war construction – and were required to learn a little economics along the way.

…

‘I don’t care who writes a nation’s laws – or crafts its advanced treatises – so long as I can write its economics textbooks,’ he declared in later years, ‘The first lick is the privileged one, impinging on the beginner’s tabula rasa at its most impressionable state.’34 Samuelson’s 1948 Circular Flow diagram, which depicted income flowing round the economy as if it were water flowing round plumbed pipes. A long struggle of escape Paul Samuelson was not alone in appreciating the extraordinary influence wielded by those who determine how we begin. His teacher and mentor, Joseph Schumpeter, also realised that the ideas handed down to us can be very hard to shake off, but he was determined to do so, to make way for his own insights. As Schumpeter wrote in his 1954 History of Economic Analysis, In practice we all start our own research from the work of our predecessors, that is, we hardly ever start from scratch.

The Economists' Hour: How the False Prophets of Free Markets Fractured Our Society
by Binyamin Appelbaum
Published 4 Sep 2019

A visiting journalist narrated one of the professor’s performances: “Racing up and down in front of the fascinated judges, Alchian cried, ‘I’m trying to change your view of the world, to show you that what you thought was bad really may not be.’ ”54 Milton Friedman addressed the judges after receiving the Nobel Prize in 1976. Paul Samuelson also was a frequent speaker. After one of Samuelson’s speeches, some of the judges asked Manne to explain the difference between the liberal and conservative economists “since Paul Samuelson seemed to be teaching the same economics as Armen Alchian.”55 By 1980, almost 20 percent of federal judges had attended Manne’s program; by 1990, the figure was 40 percent. An examination of judges’ rulings before and after attendance found a significant shift toward trust-the-market rulings.56 A.

…

Stigler, Production and Distribution Theories: The Formative Period (New York: Macmillan, 1941). 20. Interview with George Shultz, April 19, 2018. 21. I first encountered the letter on the Twitter feed of the economic historian Beatrice Cherrier, who was kind enough to send me a digital copy. The original source is Robert Solow to Paul Samuelson, n.d., Paul Samuelson Papers, box 70, folder “Solow, 46-2007,” Rubinstein Library, Duke University, Durham, N.C. 22. Claire Friedland, “On Stigler and Stiglerisms,” Journal of Political Economy 101, no. 5 (October 1993): 780–83. 23. Stigler’s public comments on the influence of economists were maddeningly inconsistent.

…

This is the story of what happened when nations decided to take both hands off the wheel. PART I Chapter One Markets in Everything To keep the fish that they carried on long journeys lively and fresh, sea captains used to introduce an eel into the barrel. In the economics profession, Milton Friedman is that eel. — Paul Samuelson (1969)1 In late 1966, Martin Anderson, a young Columbia University economics professor with libertarian leanings, found himself seated at a dinner party next to a lawyer from Richard Nixon’s law firm. Nixon had joined the New York firm after announcing his first retirement from politics, telling reporters, “You don’t have Nixon to kick around anymore.”

Keynes Hayek: The Clash That Defined Modern Economics
by Nicholas Wapshott
Published 10 Oct 2011

He accommodated counterarguments posed by friends and collaborators, and attempted to anticipate objections from classical economists. As simple as he tried to make his case, however, much of his reasoning remained beyond the reach of the lay reader. As he explained, “I cannot achieve my object of persuading economists to re-examine critically certain of their basic assumptions except by a highly abstract argument.”20 Paul Samuelson,21 the Massachusetts Institute of Technology economist who was to become Keynes’s greatest evangelizer, summed up the accomplishment of The General Theory: “It is a badly written book, poorly organized,” he wrote. “It is arrogant, bad-tempered, polemical, and not overly generous in its acknowledgements.

…

“The truth would make us free, and fully employed too.”45 Such was the sense of excitement and expectation in the winter of 1935 when The General Theory was about to be published in Britain that Harvard undergraduates arranged for special consignments to be dispatched across the Atlantic the minute it was available. As soon as the boxes of books arrived, they pounced on them to be among the first to read the revolutionary ideas revealed in the text. As Tobin recalled, “Harvard was becoming the beachhead for the Keynesian invasion of the New World.”46 Paul Samuelson, described by Galbraith as “almost from the outset . . . the acknowledged leader of the younger Keynesian community,”47 recorded the spirit of feverish exhilaration that surrounded the arrival of Keynes’s masterwork in Harvard in February 1936. “The General Theory caught most economists under the age of thirty-five with the unexpected virulence of a disease first attacking and decimating an isolated tribe of South Sea islanders,” he recalled.

…

Harris, was another late convert to Keynes and rivalled Hansen in his prodigious output of books, as both author and editor, spreading the new Keynesian credo. He used to open his lectures with, “I am Seymour Harris, Professor of Economics at Harvard University and author of 33 books,” all of which were about Keynes. But for all Hansen and Harris’s industry on behalf of the Keynesian cause, they did not trump Paul Samuelson’s best-selling Keynesian primer, Economics: An Introductory Analysis, published in 1948, which was instantly to become the most influential economic textbook since Principles of Economics, Alfred Marshall’s definitive exposition of the classical economic case. Thus in the course of just a few years, Keynes captured the hearts and minds of many young American economists.

Capital Ideas Evolving
by Peter L. Bernstein
Published 3 May 2007

The investors of 1952 thought the same thoughts and talked the same language as the investors of 1873, although the active topics of conversation may have changed from concerns about def lation to worries about inf lation. The revolution unleashed by Capital Ideas created an entirely new way of thinking about the nature of financial markets, the theory of investing, and the role of an uncertain future in all investment decisions. Paul Samuelson has used colorful language to describe this process: “Markowitz-Sharpe-Tobin quadratic programming in terms of portfolio means and variances is a powerful approximation that has captured real-world converts the way that smallpox used to infect once-isolated aborigines.”4 Risk was at the core of all these ideas.

…

Finally, the proliferation of products, strategies, and innovation stemming from the options pricing model—what Eugene Fama has called “the biggest idea in economics of the century”—has been explosive, and may still have a long way to go.6 As just one example, the total notional amount of derivatives outstanding at the end of 2006 was $370 trillion, a number to make one’s head spin.*  The book begins by facing up front the attack on Capital Ideas by the proponents of Behavioral Finance—and especially on the idea of the Efficient Market Hypothesis. The next chapter describes the current views of Paul Samuelson, one of the great sages about market behavior and portfolio formation. Samuelson takes a dim view of efforts to outperform the returns of the market as a whole or, in a more practical sense, to outperform mutual funds indexed to some primary benchmark like the S&P 500. Later pages offer the views of other well-known academics, all of whom, in one way or another, are involved in developing practical applications for the core ideas of finance theory in new and exciting * Cited in International Strategy & Investment Group’s publication, ISI Reports, December 11, 2006. 

…

bern_c02.qxd 3/23/07 8:53 AM Page 25 The Strange Paradox of Behavioral Finance 25 Treynor is a kind of lone wolf operator and prefers what he calls “slow ideas”—ideas that will take time to bear fruit and therefore have no attraction for most investors. In the more general case, where time horizons are much shorter, skilled investors often act so rapidly that they spoil the situation for one another as opportunities disappear almost instantly. As Paul Samuelson has put it, “No easy pickings, no sure-thing gains.” That is why Fuller & Thaler seek opportunity in the smaller-capitalizations. Pickings are easier and the gains are surer, while the huge composite of large growth mutual funds can barely squeak through with something resembling outperformance before taxes and fees.

In Pursuit of the Perfect Portfolio: The Stories, Voices, and Key Insights of the Pioneers Who Shaped the Way We Invest
by Andrew W. Lo and Stephen R. Foerster
Published 16 Aug 2021

We readily acknowledge the investment success of Buffett, John Templeton, Peter Lynch, David Shaw, Jim Simons, George Soros, and many other great investors whose styles and approaches to investment aren’t easily replicated. However, the academic financial research by Markowitz as well as his fellow Nobel laureates such as James Tobin, Paul Samuelson, Bill Sharpe, Myron Scholes, Bob Merton, Gene Fama, and Bob Shiller and by other exceptional researchers has created a framework and repeatable process for investors that has led to the democratization of investment management. This book is about their contributions to portfolio management. Is there a Perfect Portfolio of assets for investors, one that offers the ideal mix of risk and reward?

…

On March 29, 1900, a French postgraduate student, Louis Bachelier, successfully defended his dissertation, “The Theory of Speculation,” in which he proposed a model of Brownian motion to explain a similarly random movement but in security prices rather than dust grains—five years before Albert Einstein famously determined the cause of Brown’s observations, providing evidence that atoms and molecules existed.2 Bachelier’s research was largely forgotten for half a century until it was rediscovered by University of Chicago mathematician Leonard Jimmie Savage, who translated the work and brought it to the attention of Paul Samuelson, the first American recipient of the Nobel Prize in Economics. The translation was published in 1964 in a book by economist Paul Cootner, The Random Character of Stock Market Prices, along with other empirical studies on that topic. The following year, Fama published his dissertation showing the randomness of stock price changes.

…

In fact, Princeton economics professor Burton Malkiel mused that Bogle’s cost matters hypothesis by itself made him deserving of tenure.1 The Vanguard Group rose dramatically from the ashes of a failed merger of funds. Bogle was inspired by one of the greatest financial economists of all time, Paul Samuelson, whose Journal of Portfolio Management article challenged practitioners to create a low-cost fund that replicated an index such as the S&P 500. Bogle answered that challenge and helped to create more wealth than perhaps almost any other manager. For example, comparing Vanguard’s expense ratio to the average fees charged by U.S. mutual funds, it’s been estimated that Vanguard’s lower fees saved investors $20 billion in 2018 alone.2 Bogle has been referred to as “the greatest investor advocate ever to grace the fund industry”3 and has made his case for the inclusion of index funds as part of any Perfect Portfolio.

What's Wrong With Economics: A Primer for the Perplexed
by Robert Skidelsky
Published 3 Mar 2020

We now learn that, with a bit of uncertainty, ‘multiple equilibria’ can be ‘endogenously’ generated. But there was no ‘uncertainty’ before the crash, only insurable risk. So, this book aims to discover why the most influential discipline for making public policy is so often cut off from reality. Economists usually scorn the study of methodology. ‘Those who can, do science’, said Paul Samuelson (1915–2009), ‘Those who can’t, prattle on about methodology.’2 Frank Hahn (1925–2013) similarly claimed, ‘I want to advise the young to avoid spending too much time and thought on methodology. As for them learning philosophy, what next?’3 In other words, these eminent economists didn’t see the need for students of economics to think about what they were doing.

…

But by failing to distinguish between needs and wants, and by taking wants as ‘given’, economics has powerfully reinforced the ethical blindness which threatens the human species with extinction. Insatiability in face of climate change is not rationality, but madness. 3 ECONOMIC GROWTH If theories, like girls, could win beauty contests, comparative advantage would certainly rate high. Paul Samuelson, Economics The only defensible purpose of economics is to help abolish poverty, opening up a more spacious life for humanity. Beyond that it has no obvious purpose, and should leave the stage to others. Abolition of poverty was the improvement in the human condition offered by the first economists.

…

Portugal, said Ricardo, should concentrate on producing wine, leaving cloth production to England, because though it can produce both wine and cloth cheaper than the English, it can produce wine at lower cost than cloth. In this way, the gains of both partners will be maximised.5 The theory of comparative advantage has been the most influential doctrine in the whole of economics. It has turned even the most hard-nosed of economists dewy-eyed; Paul Samuelson described it as ‘beautiful’. As with the Malthusian population theory, Ricardo’s comparative advantage theory is a classic example of deductive reasoning: formalising an intuition, and then deducing its consequences. Committed to the long view, Ricardo ignored any disruptive effects on Portugal in surrendering the production of cloth to England.

Sabotage: The Financial System's Nasty Business
by Anastasia Nesvetailova and Ronen Palan
Published 28 Jan 2020

But working hard or being smart is not good enough in today’s financial markets. Finance is a fiercely dynamic and competitive industry, with capital markets being among the closest to what academics call the ‘efficient market hypothesis (EMH)’. Proposed by, among others, two Nobel laureates, Paul Samuelson and Eugene Fama, EMH is often misunderstood. It tends to be simplified to imply that ‘markets know best’. The theory appears to suggest that markets allocate resources so efficiently and quickly that no outside intervention by governments or regulators is ever needed. EMH can be, and has been, easily ridiculed any time the market fails, as, for instance, during a financial crisis.

…

There is no way, EMH tells us, that anyone can make profits consistently over time just trading by the rules of the market. EHM prompts us to move away from the idea that financial and banking institutions have superior skills at reading economic data and financial trends and are able to understand the future better than anyone else. As Paul Samuelson wrote: ‘Perhaps there really are managers who can outperform the market consistently – logic would suggest that they exist. But they are remarkably well hidden.’7 In finance there seems to be a unique concentration of very smart people who work very hard to make money, and very often succeed.

…

Since credit is not allocated but generated against futures, a highly sophisticated, if delicately balanced, economic system has emerged. It appears to be at least one size bigger than it should be: always running ahead of itself, speculating against futures that may never come. It is an economy that critics often describe as unreal, artificial, fictitious and even parasitic. Paul Samuelson addressed the enigma of the economy of futurity. Consideration of a few simple and logical cases, he argued, ‘raises doubt that there is anything much in celestial a priori reasoning from the axiom that what can be perceived about the future must already be “discounted” in current price quotations’.19 Samuelson is correct.

The Missing Billionaires: A Guide to Better Financial Decisions
by Victor Haghani and James White
Published 27 Aug 2023

The framework of maximizing Expected Utility is the foundation of the field known as “decision‐making under uncertainty” as well as most other theories of individual choice and human interaction. Many of the ideas that form the basis of this book are found in the sub‐field known as “lifetime consumption and portfolio choice,” an area first formulated and explored in the 1960s by Nobel Prize‐winning economists Paul Samuelson and Robert C. Merton. The basic problem addressed is to determine the choices that a person should make with regard to investing, saving, and spending that will maximize Expected Lifetime Utility. Unfortunately, many of the original papers in this field have been too complex or abstract to gain traction in practice, with the result that very few people are using these tools to make better decisions.

…

This can be rearranged to = (pb – q)/b, where the numerator is the “edge,” the expected gain of the bet, and b is the “odds.” 1. Two such bets of 10% of wealth each year represents risk of about 14% and expected return of 4%, both of which are a bit lower than the historical risk and return in excess of T‐bills of the US stock market, but not miles away. 2. Merton, 1969. Paul Samuelson, Merton's mentor, is also credited for his contribution to the development of this formula. 3. Kelly, 1956. 4 A Taste of the Merton Share In the previous chapter, we arrived at a very useful rule of thumb for investment sizing decisions, the Merton share: where is the expected excess return of the risky investment you're considering, is the riskiness of that investment expressed as standard deviation of returns, and is your personal degree of risk‐aversion.

…

As Landsburg concludes: When an economist calls you irrational, it almost always means that if you follow through on your stated preferences, a sufficiently clever opponent can take all your money, leaving you smiling along the way. It's worth being alert to such things. The Fallacy of Large Numbers In a playfully written 1963 article titled “Risk and Uncertainty: A Fallacy of Large Numbers,” MIT economist Paul Samuelson tells the story of offering “some lunch colleagues to bet each $200 to $100 that the side of a coin they specified would not appear at the first toss. One distinguished scholar—who lays no claim to advanced mathematical skill—gave the following answer: ‘I won't bet because I would feel the $100 loss more than the $200 gain.

Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever
by Robin Wigglesworth
Published 11 Oct 2021

Jack Bogle, “Born in Strife,” Philadelphia Inquirer, September 24, 2014. 8. Bogle, Character Counts, 7. 9. Paul Samuelson, “Challenge to Judgment,” Journal of Portfolio Management, Fall 1974. 10. Bogle, Stay the Course, 39. 11. Bogle, Stay the Course, 189. 12. Charles Ellis, “The Loser’s Game,” Financial Analysts Journal, July/August 1975. 13. Bogle, Stay the Course, 44. 14. Bogle, Stay the Course, 41. 15. Bogle, Stay the Course, 45. 16. Paul Samuelson, “Index-Fund Investing,” Fortune, June 1976, 66. 17. Bogle, Stay the Course, 47. 18. Richard Phalon, “Beating the Market or ‘Indexing’ It?

…

Chapter 2 THE GODFATHER LEONARD “JIMMIE” SAVAGE, a University of Chicago statistics professor with Coke-bottle glasses and an eclectic, brilliant mind, was rummaging through the university library in 1954 when he made a discovery: a book by a little-known turn-of-the-twentieth-century French mathematician named Louis Bachelier with ideas astonishingly far ahead of their time. Savage sent postcards lauding the work to some of his friends and asked if they had “ever heard of this guy?”1 One of the recipients was Paul Samuelson, a rock-star economist who would go on to become the first American to win a Nobel Prize in the field. Samuelson could not find a copy of the book in MIT’s library, but he did locate Bachelier’s French PhD thesis. That proved enough to whet his interest. He had it quickly translated and spread the word among his economist colleagues, remarking, “Bachelier seems to have had something of a one-track mind.

…

“It seems unlikely that the public will ever embrace buying the averages in this way, since individuals usually seek dramatic gains, not a market-linked performance many equate with mediocrity,” the industry magazine wrote.39 Fouse later jokingly quoted the Nazi propagandist Joseph Goebbels to explain why the general public was slow to cotton on: “Only small secrets need protection. Big secrets are protected by the public’s incredulity.”40 That this secret would burst free into the public domain was the hope of Paul Samuelson, the doyen of American economics. In a 1976 column for Newsweek, he noted that pension funds could finally choose “prudent, across-the-board market index investing,” but lamented the dearth of similar products for ordinary investors.41 “As yet, there exists no convenient . . . fund that apes the whole market, requires no load, and that keeps commission, turnover and management fees to the feasible minimum.

A Beautiful Mind
by Sylvia Nasar
Published 11 Jun 1998

Whether or not this was true, Birkhoff’s bias had prevented him from taking advantage of the emigration of the brilliant Jewish mathematicians from Nazi Germany.27 Indeed, Harvard also had ignored Norbert Wiener, the most brilliant American-born mathematician of his generation, the father of cybernetics and inventor of the rigorous mathematics of Brownian motion. Wiener happened to be a Jew and, like Paul Samuelson, the future Nobel Laureate in economics, he sought refuge at the far end of Cambridge at MIT, then little more than an engineering school on a par with the Carnegie Institute of Technology.28 William James, the preeminent American philosopher and older brother of the novelist Henry James, once wrote of a critical mass of geniuses causing a whole civilization to “vibrate and shake.”29 But the man in the street didn’t feel the tremors emanating from Princeton until World War II was practically over and these odd men with their funny accents, peculiar dress, and passion for obscure scientific theories became national heroes.

…

By the time Nash arrived, a “trust” of game theory research had grown up at RAND including such game theorists as Lloyd S. Shapley, J. C. McKinsey, N. Dalkey, F. B. Thompson, and H. F. Bohnenblust, such pure mathematicians as John Milnor, statisticians David Blackwell, Sam Karlin, and Abraham Girschick, and economists Paul Samuelson, Kenneth Arrow, and Herbert Simon.13 Most of the RAND military applications of game theory concerned tactics. Air battles between fighters and bombers were modeled as duels.14 The strategic problem in a duel is one of timing. For each opponent, having the first shot maximizes the chance of a miss.

…

The military, as well as industry, loomed awfully large, so large that MIT’s armed, plainclothes campus security force existed solely for the purpose of guarding the half-dozen “classified” sites scattered around the campus and preventing those without proper security clearances and identification from wandering in. ROTC and courses in military science were required of all MIT’s two-thousand-plus undergraduate men.6 The academic departments like mathematics and economics existed pretty much to cater to the engineering student — in Paul Samuelson’s words, “a pretty crude animal.”7 All counted as “service departments,” gas stations where engineers pulled up to get their tanks filled with obligatory doses of fairly elementary mathematics, physics, and chemistry.8 Economics, for example, had no graduate program at all until the war.9 Physics had no Nobel Laureates on its faculty at the time.10 Teaching loads were heavy — sixteen hours a week was not uncommon for senior faculty — and were weighted toward large introductory courses like calculus, statistics, and linear algebra.11 Its faculty were younger, less well known, and less credentialed than Harvard’s, Yale’s, or Princeton’s.

How Markets Fail: The Logic of Economic Calamities
by John Cassidy
Published 10 Nov 2009

In 1954 or 1955, nobody seems to recall for sure, Jimmy Savage, a statistician at the University of Chicago who had coauthored several important papers about risk with Milton Friedman, happened across a book that Bachelier had written in 1914. He sent a note to a number of people he knew, including Paul Samuelson, the famous MIT economist, asking if they had heard of the Frenchman. Samuelson dug a copy of Bachelier’s thesis out of the MIT library, and it impressed him. The coin-tossing model was resurrected: by the early 1960s, Samuelson and a number of other economists were publishing papers claiming that stock prices followed a random walk.

…

After spending a year as a graduate student in the history department at Berkeley, he moved back to Chicago and enrolled in the Ph.D. program in economics. In preparation for his classes with Friedman and his colleague George Stigler, whom Chicago students knew as “Mr. Macro” and “Mr. Micro,” Lucas read Paul Samuelson’s Foundations of Economic Analysis, which had first appeared in 1947, and which presented economics as a branch of applied mathematics. “I loved the Foundations,” Lucas later recalled. “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.

…

Akerlof was a bright and studious kid. In high school, he later recalled, “I belonged to a small group of students, who in today’s terminology would be called nerds . . . Socially, I was a misfit. I failed to understand why my classmates spent the typical free afternoon watching American Bandstand.” At MIT, Akerlof studied under Paul Samuelson and Robert Solow, two of the leading figures of postwar economics. By the early 1960s, the subject had been divided into several mutually antagonistic camps. The high theorists were busy debating the intricacies of general equilibrium and game theory. Out in Chicago, Friedman and his followers were pursuing their own libertarian path.

Stocks for the Long Run 5/E: the Definitive Guide to Financial Market Returns & Long-Term Investment Strategies
by Jeremy Siegel
Published 7 Jan 2014

Campbell, Strategic Asset Allocation: Portfolio Choice for Long-Term Investors, New York: Oxford University Press, 2002. Also see Nicholas Barberis, “Investing for the Long Run When Returns Are Predictable,” Journal of Finance, vol. 55 (2000), pp. 225-264. Paul Samuelson has shown that mean reversion will increase equity holdings if investors have a risk-aversion coefficient greater than unity, which most researchers find is the case. See Paul Samuelson, “Long-Run Risk Tolerance When Equity Returns Are Mean Regressing: Pseudoparadoxes and Vindications of ‘Businessmen’s Risk,’” in W. C. Brainard, W. D. Nordhaus, and H. W. Watts, eds., Money, Macroeconomics, and Public Policy, Cambridge, MA: MIT Press, 1991, pp. 181-200.

…

But the risk and return on stocks and bonds are not physical constants, like the speed of light or gravitational force, waiting to be discovered in the natural world. Investors cannot, as in the physical sciences, run repeated controlled experiments, holding all other factors constant, and home in on the “true” value of each variable. As Nobel laureate Paul Samuelson was fond of saying, “We have but one sample of history.” This means that despite the overwhelming quantity of historical data, one can never be certain that the underlying factors that generate asset prices have remained unchanged. Indeed we saw in Chapter 3 that the correlations between assets classes change substantially over time Yet one must start by analyzing the past in order to plan for the future.

…

Fortunately for investors, central bankers around the world are committed to keeping inflation low, and they have largely succeeded. But if inflation again rears its head, investors will do much better in stocks than in bonds. 15 * * * Stocks and the Business Cycle The stock market has predicted nine out of the last five recessions. —PAUL SAMUELSON, 19661 I’d love to be able to predict markets and anticipate recessions, but since that’s impossible, I’m as satisfied to search out profitable companies as Buffett is. —PETER LYNCH, 19892 A well-respected economist is about to address a large group of financial analysts, investment advisors, and stockbrokers.

The Classical School
by Callum Williams
Published 19 May 2020

This is as we should expect from environmental conditions that were unlikely to produce either a demand for or supply of general treatises.” Even in the 19th century America did not produce many economists, and those that it did, such as Henry George, tended to borrow ideas from the European classical economists. No Americans featured in the “family tree of economics” which was introduced in the 1958 edition of Paul Samuelson’s famous textbook, Economics. It was not until the 20th century that American economists began to dominate the discipline as a whole.5 You, and you… Why does the title of this book refer to a “classical school”? To be sure, the people profiled here had very different ideas about how the world worked.

…

They were philosophers more than they were hard scientists. The book ends with Alfred Marshall largely because in his work you start to see a break with the classical way of doing things: Marshall loved his equations, and he fumbled his way towards testing his theories with empirical data. After Marshall came John Maynard Keynes, Paul Samuelson, Milton Friedman–and the emergence of modern economics. Some histories of economic thought read more like hagiographies than critical examinations. But I will show that most of the people in this book made big intellectual mistakes. Historians generally caution against using the benefit of hindsight to judge the people of the past.

…

Empirical research does not find much evidence that trade unions result in wages going up one year, but then down the next. And if you paid workers more, they might work harder, thereby leading to both higher wages and higher profits. These days most people seem bemused that the wage-fund doctrine was ever taken seriously. The great Paul Samuelson confessed himself shocked by the “falseness and emptiness of the wage fund doctrine”. James Bonar, a Scottish political economist, argued that the theory “is the crowning instance of an untrue abstraction… and it has probably done more injury to the reputation of economic theory than any other generalisation ever received into economics textbooks”.

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown
by Philip Mirowski
Published 24 Jun 2013

The footnote (*) to the text reads: “I guess the big exception to this is if you want to discard methodological individualism altogether, but the theoretical enterprises that took this route (such as structuralism) don’t seem to me to be prospering.” 28 Quiggin, Zombie Economics, p. 83, 129, 121, 87. 29 Paul Krugman blog, http://krugman.blogs.nytimes.com/2010/11/26/the-instability-of-moderation/#more-14713, November 26, 2010. 30 See, for instance, the letter of Paul Samuelson to Assar Lindbeck, February 14, 1977, in Box 4, Folder “Nobel Nominating Committee,” Paul Samuelson Papers, Perkins Library, Duke University. 31 This literature became so prevalent that this footnote offers just a representative sampling: Backhouse, The Puzzle of Modern Economics; Brock and Colander, “Complexity, Pedagogy, and the Economics of Muddling Through”; Colander, “The Death of Neoclassical Economics”; Colander, Holt, and Rosser, “Live and Dead Issues in the Methodology of Economics” and “The Changing Face of Economics”; J.

…

This is itself a pungent symptom of zombie thought, and is widely found across the board of the “legitimate left” of the economics profession, from Paul Krugman to Joseph Stiglitz to Adair Turner to Amartya Sen to Simon Johnson. Paul Krugman, feeling secure in his status, has conveniently confessed to the derangement: The brand of economics I use in my daily work—the brand that I still consider by far the most reasonable approach out there—was largely established by Paul Samuelson back in 1948, when he published the first edition of his classic textbook. It’s an approach that combines the grand tradition of microeconomics, with its emphasis on how the invisible hand leads to generally desirable outcomes, with Keynesian macroeconomics, which emphasizes the way the economy can develop magneto trouble, requiring policy intervention.

…

Nor do they simply expel the proponents of one side of the theory in order to maintain doctrinal purity, as happened with the rational-expectations movement and its epigones. During the Cold War, the economics profession was growing more exclusive, but was not completely intransigently intolerant of rival doctrines, for reasons of ideological appearances. For instance, evidence from the Paul Samuelson archives suggests he really did nominate Joan Robinson for the Bank of Sweden economics “Nobel.”30 Things really ratcheted upward in terms of imposed conformity only after the Fall of the Wall, for equally obvious political reasons. However, the apogee of denial of divergent thought occurred during the Great Bubble.

The Inner Lives of Markets: How People Shape Them—And They Shape Us
by Tim Sullivan
Published 6 Jun 2016

The men who follow in the rest of this chapter were some of the main protagonists in the early days of this history, but by no means the only ones. To tell the complete story would require a book of its own. What we’re after is, instead, the broader path that economics took to become a pristine, mathematical discipline. “Let Me Write the Textbooks” Economics’ postwar trajectory is captured, in a sense, by following the career of Paul Samuelson, one of the preeminent economists of the twentieth century. He’s credited with not only helping economics develop a common language but also exposing this new language to the wider world. His economics textbook sold over four million copies during its decades-long reign as the bible for introductory economics courses worldwide.

…

He seems, to the best of our observation, content pondering big questions in the relaxed and unhurried manner that’s defined his career: when we e-mailed him to ask if he would talk to us about his classic paper on asymmetric information, “The Market for ‘Lemons,’” he responded, “Sure, happy to talk whenever is good for you.”5 In explaining how he came to do the work that ultimately won him a Nobel Prize, the Berkeley economist recalled his experiences as a PhD student at MIT in the 1960s (in the economics department built by Paul Samuelson). He arrived at graduate school just as economists were starting to get past the extreme abstraction that had ruled the profession in earlier decades. When initially confronted with the question of what inspired him to write about the used car market in the paper that made him famous, Akerlof didn’t talk first about unemployment (a failure of standard models that has troubled Akerlof throughout four decades as an economist), or 1960s economics counterculture, or any other economic phenomenon.

…

You can only confront these questions if you consider the strategic choices companies like Microsoft or Coke might make to try to ensure they’re the only game in town, and the regulatory decisions an enlightened government might choose to make sure they aren’t. Tirole’s Theory of Industrial Organization remains the standard reference on the topic, despite being published nearly three decades ago. (It also has more than thirteen thousand citations on Google Scholar, which is extremely unusual for a textbook; it’s about twice as many citations as Paul Samuelson’s classic Economics text, even though the latter is fifty years older.11) Tirole’s Nobel is emblematic of the postwar trend in economics—begun by George Akerlof’s market for lemons paper and continued by the many applied theorists that followed—toward tailoring models to circumstance. As a result, it’s hard to boil his opus down to media-friendly sound bites.

Hubris: Why Economists Failed to Predict the Crisis and How to Avoid the Next One
by Meghnad Desai
Published 15 Feb 2015

The idea was that business people added to their capital stock if they had experienced or expected a rise in their sales. At the aggregate level, this was translated into change in GDP, actual or expected. As a consequence, the role of interest rates was completely downgraded. The Keynesian model was simplified to a multiplier-accelerator model by Paul Samuelson, the first economist to so christen the model when he explored the possibility of cycles using Keynesian logic.3 As to Keynes’s monetary theory, followers concluded that monetary policy would be ineffective as a tool for recovery. They also took seriously Keynes’s idea that in the long run it would be necessary to drive the interest rate to zero.

…

The cure for the Great Depression, much of which had ended before 1936, was perhaps more due to international exchange rate depreciation, and in Britain a loose monetary policy. Renewal of Attack on Keynesian Economics The postwar hegemony of Keynesian economics was complete in universities. At Harvard, Alvin Hansen became the proselytizer for Keynesian ideas. His students Paul Samuelson, James Tobin, James Duesenberry, and Lloyd Metzler went on to dominate postwar economics teaching in the US. Hansen stripped any subtlety from Keynes’s theory even more than had Hicks. His famous Keynesian Cross diagram concentrated on the multiplier and tried to show how total expenditure – consumption determined by income and investment (taken to be given) – determined output.

…

Innovations such as the consumption function, while they spoke of individual behavior, were macroeconomic and were not related to microeconomic concepts such as demand curves or the utility functions of consumers. The marginal efficiency of capital was argued in terms of a single investor, but somehow aggregated for the economy as a whole. Paul Samuelson (1915–2009), as the High Priest of economics (albeit at a very young age, being not yet 40 by 1950), cut through the Gordian knot and opined that Keynesian economics at a macro level gave us the tools to achieve full employment, which allowed micro economics come into its full play. This dichotomous, some would say schizophrenic, compromise was called the neoclassical-Keynesian synthesis.

The Alternative: How to Build a Just Economy
by Nick Romeo
Published 15 Jan 2024

Friedman’s argument has the form: If businesses exist, then my hypothesis is true. Businesses exist, therefore my hypothesis is true. His “if P, then Q” argument is logically valid, but it’s not sound, so it generates nonsense when its content has no empirical basis. If Paul Samuelson was a professor of economics, then lollipops grow on trees. Paul Samuelson was a professor of economics, therefore lollipops grow on trees. What’s most striking and insidious about Friedman’s analogy is the assumption that democratic governance, human agency, and environmental limits simply have no relevance to economic behavior.

…

The unquestioned authority of economists masquerading as scientists, even of the social variety, is undemocratic and pernicious. Because of the immense influence the discipline of economics has had on public policy and political consciousness, the economics curriculum in universities has provoked fierce struggles. Politics All the Way Down In 1990, the American economist Paul Samuelson wrote, “I don’t care who writes a nation’s laws—or crafts its advanced treaties—if I can write its economics textbooks.”29 Samuelson’s Economics, first published in 1948, became America’s best-selling economics textbook for decades, selling millions of copies and helping introduce the concepts of John Maynard Keynes to America.

…

When workers retired or left a company, these could be redeemed for cash, and the company would either retire or redistribute the shares.9 The arrangement simultaneously gives workers some ownership over capital and allows retiring founders a mechanism to fund their exits by selling their own ownership shares to the ESOP trust. The suggestion that workers should own the businesses that they help to make profitable struck some people as radical. In the early 1970s, the reporter Mike Wallace asked Professor Paul Samuelson on the popular television show 60 Minutes for his thoughts on Kelso: Wallace: All right. My understanding of Kelsoism is that it’s designed to enable men who are born without capital to buy it, to pay for it out of the income it produces, to own it and therefore to receive income from that capital.

Economics Rules: The Rights and Wrongs of the Dismal Science
by Dani Rodrik
Published 12 Oct 2015

We still have endless debates today about what Karl Marx, John Maynard Keynes, or Joseph Schumpeter really meant. Even though all three are giants of the economics profession, they formulated their models largely (but not exclusively) in verbal form. By contrast, no ink has ever been spilled over what Paul Samuelson, Joe Stiglitz, or Ken Arrow had in mind when they developed the theories that won them their Nobel. Mathematical models require that all the t’s be crossed and the i’s be dotted. The second virtue of mathematics is that it ensures the internal consistency of a model—simply put, that the conclusions follow from the assumptions.

…

But no one could deny that, thanks to it and the literature it has spawned, we understand much better than we ever did the circumstances under which Adam Smith’s Invisible Hand does and does not do its job.‡ Let’s turn now to another important example of how economic modeling helps clarify arguments that may be somewhat counterintuitive. In 1938, a young Paul Samuelson was challenged by Stanislaw Ulam, the Polish-American mathematician, to state one proposition in the social sciences that is both true and nontrivial. Samuelson’s answer was David Ricardo’s Principle of Comparative Advantage. “Using four numbers, as if by magic, it shows that there is indeed a free lunch—a free lunch that comes with international trade.”5 Ricardo’s demonstration, back in 1817, that specialization according to comparative advantage produces economic gains for all countries was as simple as it is powerful.6 The nontrivial nature of the principle is obvious by how often it is misunderstood, even among sophisticated commentators.

…

The big theories in the end deliver less than what they promise. They are shallow approaches that identify the proximate causes but need to be backed up with considerable detail, necessarily specific to context. As I’ve highlighted, they are best thought of as a scaffolding. The Theory of Business Cycles and Unemployment Ever since Paul Samuelson’s doctoral dissertation, published in 1947 as Foundations of Economic Analysis, economics has been split between microeconomics and macroeconomics. The domain of microeconomics is price theory, the ideas covered in the previous section. Macroeconomics deals with the behavior of economic aggregates—inflation, total output, and employment, in particular.

The Clash of the Cultures
by John C. Bogle
Published 30 Jun 2012

(When we talk money rather than basis points measured in hundredths of 1 percent, we get a far better picture of the staggering profit in fund management.) Owning a mutual fund management company has often proved rewarding beyond the dreams of avarice—owning mutual funds, far less so. Back in 1967, Paul Samuelson hit the proverbial nail on the head when he told a Congressional hearing that, “there was only one place to make money in the mutual fund business—as there is only one place for a temperate man to be in a saloon—behind the bar and not in front of it . . . so I invested in a management company.”

…

When the underwriters brought me the news of the failure, they suggested that we just call the whole thing off and cancel the deal. I remember saying: “Oh, no we won’t. Don’t you realize that we now have the world’s first index fund?” The Professor, the Student, and the Index Fund Nobel Laureate economist Paul Samuelson played a major role in the creation of the first index fund. More than 25 years earlier, I’d hinted at the idea of an index fund in my 1951 Princeton University senior thesis, titled “The Economic Role of the Investment Company.” I had always loved contrarian ideas that challenged the status quo, and was often inspired to take the road less traveled by.

…

, I graduated magna cum laude in Economics. On July 5, 1951, I entered the mutual fund industry, joining Walter Morgan’s pioneering Wellington Management organization. A Priceless Endorsement From that lowly beginning in 1948, and then through his support for that first index mutual fund in 1975, my association with Paul Samuelson grew ever closer and warmer. In 1993, I asked him to endorse my first book—Bogle on Mutual Funds. He demurred. But to my utter astonishment he told me that he would prefer to write the foreword. Some excerpts: The same surgeon general who required cigarette packages to say: “Warning, this product may be dangerous to your health” ought to require that 99 out of 100 books written on personal finance carry that same label.

The Bitcoin Standard: The Decentralized Alternative to Central Banking
by Saifedean Ammous
Published 23 Mar 2018

Buchanan and Gordon Tullock, The Calculus of Consent: Logical Foundations of Constitutional Democracy (1962). 22 Mark Skousen, “The Perseverance of Paul Samuelson's Economics,” Journal of Economic Perspectives, vol. 11, no. 2 (1997): 137–152. 23 David Levy and Sandra Peart, “Soviet Growth and American Textbooks: An Endogenous Past,” Journal of Economic Behavior & Organization, vol. 78, issues 1–2 (April 2011): 110–125. 24 Mark Skousen, “The Perseverance of Paul Samuelson's Economics,” Journal of Economic Perspectives, vol. 11, no. 2 (1997): 137–152. 25 Paul Krugman, “Secular Stagnation, Coalmines, Bubbles, and Larry Summers,” New York Times, November 16, 2003. 26 For a formal modeling of this statement, see D.

…

The death of the populist and powerful FDR and his replacement by the meeker and less iconic Truman, coming up against a Congress controlled by Republicans, created political deadlock that prevented the renewal of the statutes of the New Deal. All of these factors together, when analyzed by Keynesian economists, would point to impending disaster, as Paul Samuelson, the man who literally wrote the textbooks for economic education in the postwar era, wrote in 1943: The final conclusion to be drawn from our experience at the end of the last war is inescapable—were the war to end suddenly within the next 6 months, were we again planlessly to wind up our war effort in the greatest haste, to demobilize our armed forces, to liquidate price controls, to shift from astronomical deficits to even the large deficits of the thirties—then there would be ushered in the greatest period of unemployment and industrial dislocation which any economy has ever faced.10 The end of World War II and the dismantling of the New Deal meant the U.S. government cut its spending by an astonishing 75% between 1944 and 1948, and it also removed most price controls for good measure.

…

Source: George Hall, “Exchange Rates and Casualties During the First World War,” Journal of Monetary Economics. 5 Friedrich Hayek, Monetary Nationalism and International Stability (Fairfield, NJ: Augustus Kelley, 1989 [1937]). 6 A thorough accounting of Hoover's interventionist policies can be found in Murray Rothbard's America's Great Depression. 7 Quoted in Henry Hazlitt, The Failure of the New Economics. p. 277. 8 Otto Mallery, Economic Union and Durable Peace (Harper and Brothers, 1943), p. 10. 9 Robert Higgs, “World War II and the Triumph of Keynesianism” (2001), Independent Institute research article. Available at http://www.independent.org/publications/article.asp?id=317 10 Paul Samuelson, “Full Employment after the War,” in Seymour Harris, Postwar Economic Problems (New York: McGraw‐Hill, 1943). 11 After being investigated and testifying in front of Congress, White suffered two heart attacks and died from an overdose of medication, which may have been suicide. A good treatment of this episode can be found in Benn Steil's The Battle of Bretton Woods, which pushes the view that White was a Soviet spy.

Stocks for the Long Run, 4th Edition: The Definitive Guide to Financial Market Returns & Long Term Investment Strategies
by Jeremy J. Siegel
Published 18 Dec 2007

Campbell, Strategic Asset Allocation: Portfolio Choice for Long-Term Investors, New York: Oxford University Press, 2002. Also see Nicholas Barberis, “Investing for the Long Run When Returns Are Predictable,” Journal of Finance, vol. 55 (2000), pp. 225–264. Paul Samuelson has shown that mean reversion will increase equity holdings if investors have a risk aversion coefficient greater than unity, which most researchers find is the case. See Paul Samuelson, “Long-Run Risk Tolerance When Equity Returns Are Mean Regressing: Pseudoparadoxes and Vindications of ‘Businessmen’s Risk’” in W. C. Brainard, W. D. Nordhaus, and H. W. Watts, eds., Money, Macroeconomics, and Public Policy, Cambridge: MIT Press, 1991, pp. 181–200.

…

Despite the overwhelming quantity of historical data, one can never be certain that the underlying factors that generate asset prices have remained unchanged. One cannot, as in the physical sciences, run repeated controlled experiments, holding all other factors constant while estimating the value of the parameter in question. As Nobel laureate Paul Samuelson is fond of saying, “We have but one sample of history.” Yet one must start by analyzing the past in order to understand the future. The first chapter showed that not only have fixed-income returns lagged substantially behind those on equities but, because of the uncertainty of inflation, bonds can be quite risky for long-term investors.

…

The audience wants to know if the economy is really going to do well enough to support these high stock prices. This chapter is an adaptation of my paper “Does It Pay Stock Investors to Forecast the Business Cycle?” in Journal of Portfolio Management, vol. 18 (Fall 1991), pp. 27–34. The material benefited significantly from discussions with Professor Paul Samuelson. 1 “Science and Stocks,” Newsweek, September 19, 1966, p. 92. 2 Peter Lynch, One Up on Wall Street, New York: Penguin Books, 1989, p. 14. 207 Copyright © 2008, 2002, 1998, 1994 by Jeremy J. Siegel. Click here for terms of use. 208 PART 3 How the Economic Environment Impacts Stocks The economist’s address is highly optimistic.

Adaptive Markets: Financial Evolution at the Speed of Thought
by Andrew W. Lo
Published 3 Apr 2017

The free market Chicago School of economics is usually associated with its most eloquent champion, Milton Friedman, but the Efficient Markets Hypothesis has become at least as prominent a hallmark, thanks to Gene Fama. EFFICIENT MARKETS UNPACKED Two economists with very dissimilar styles of thought, Paul Samuelson and Eugene Fama, reached the same conclusion about efficient markets. Fama’s fascination with computers, data, and statistical analysis led him down a very different intellectual path to the Efficient Markets Hypothesis than Samuelson’s elegant, simpleminded, physics-inspired version. But both men’s versions of the Efficient Markets Hypothesis have the same Zenlike, counterintuitive flavor: the more efficient the market, the more random the sequence of price changes in the market.

…

If just one of them is contradicted by the data, the theory can and should be rejected, and the field moves on to the next theory (and as long as there are assistant professors out there trying to get tenure, there’s always a next theory). Because science is a human endeavor, some scientists can be difficult to convince, especially if they played a role in creating or upholding an earlier theory. However, like evolution, science itself is an ongoing process also subject to natural selection. Paul Samuelson often remarked, “Science progresses funeral by funeral,” paraphrasing the great physicist Max Planck with a pithy if somewhat morbid characterization of the process of scientific discovery. In the end, the better theory has the last laugh, and scientific knowledge accumulates slowly but surely, one prediction at a time.

…

In 1947, the seeds of an alternate theory were planted by an unassuming graduate student working on a topic that most economists would have dismissed as irrelevant to their field. These ideas were eventually pushed out of the economic mainstream by true believers in market rationality. In that year, Herbert Simon published his Ph.D. thesis, Administrative Behavior. It appeared, ironically enough, the same year as Paul Samuelson’s Ph.D. thesis, Foundations of Economic Analysis. Administrative Behavior was a remarkably underwhelming title for a classic that would become the Magna Carta of the field of organizational behavior and, like Samuelson’s Foundations, is still in print today. SIMON SAYS SATISFICE Herbert Alexander Simon was an outsider to economics: his primary background wasn’t in mathematics or physics, but in what we would today call management science.

Termites of the State: Why Complexity Leads to Inequality
by Vito Tanzi
Published 28 Dec 2017

I had also spent another two years working for a CongressionalPresidential Commission (the Outdoor Recreation Resources Review Commission) that was tasked with determining the optimal use for the extensive public land owned by the US federal government. This commission produced several reports that set the stage for the future use of public land. During the years I spent at Harvard, in the first half of the 1960s, some of the leading economists of the time – Paul Samuelson, Robert Solow, Simon Kuznets, Kenneth Arrow, Franco Modigliani, Wassily Leontief, Kenneth Galbraith, Robert Dorfman, Alvin Hansen, Otto Eckstein, James Duesenberry, and several others – were in the Boston area, either at Harvard or at MIT. Richard Musgrave, who was then considered the leading public finance economist in the United States, would come to Harvard a little later and would be the second reader of my doctoral dissertation; I thus completed my public finance preparation under a third refugee from Nazi Germany.

…

He was widely known to the public, and, when he discussed economic policies, he spoke in a language that normal citizens could understand. The Council of Economic Advisers, which had prepared the Report, included among its staff two future Nobel Prize winners in economics (James Tobin and Robert Solow) and had also relied on consultants that included two other future Nobel Prize winners (Kenneth Arrow and Paul Samuelson). The Report would attract the kind of attention that could only be dreamed of by the authors of recent reports. The 1962 Report was a clear example of the extent to which the Keynesian Revolution and trust in the government to be able to make policy changes assumed to be beneficial to the citizens had reached their apotheosis, while economists had reached the peak of their prestige.

…

Some discussions, promoted especially by James Buchanan and his collaborators, and, to some extent, independently by Mancur Olson (1965), were initiated in the 1960s on the role of fiscal institutions in determining policy outcomes, and on the need for rules that would reduce the policy discretion that policymakers have when they make policy decisions. This, to some extent, is the problem of dealing with “soft budgets.” As mentioned earlier, the need to have some rules had been recognized for a long time by writers including David Hume, Max Weber., and others. Keynesian economists, including, prominently, Paul Samuelson, had considered discretion an important asset for policymakers to have in the pursuit of countercyclical policy, because it allowed them to react quickly, easily, and sufficiently to economic crises. The proposal mentioned earlier, made in the 1962 Economic Report of the President, to give the president of the United States the discretion to change, at his own initiative, the tax rates, or the public spending on capital projects, was a manifestation of the merit attributed to discretion by Keynesian economists.

A Splendid Exchange: How Trade Shaped the World
by William J. Bernstein
Published 5 May 2009

As so famously put by Keynes: Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.21 Trade's modern scribblers-David Ricardo, Richard Cobden, Eli Heckscher, Bertil Ohlin, Wolfgang Stolper, and Paul Samuelson-will help us to understand the massive upheavals seen in our ever more integrated global system. Although the structure of this book is chronological, its many interwoven narratives will supersede the flow of mere dates and events. For example, two closely related stories, the south Arabian incense trade and the domestication of the camel, both span thousands of years.

…

Cordell Hull, the longestserving American secretary of state, clearly discerned the damage to world security done by the tariff wars of the early twentieth century and laid the groundwork for the GATT and WTO. By courtesy of the United States House of Representatives. This photograph of economists Wolfgang Stolper (left) and Paul Samuelson (right) was taken fifty years after they developed a theorem that explained who wins, and who loses, with free trade. BY courtesy of the University of Michigan Press. On December 13, 1577, a five-vessel flotilla under the command of Francis Drake left Plymouth, England. Drake's secret charge from Queen Elizabeth was threefold: to repeat Magellan's circumnavigation, to establish trade with the Spice Islands, and to plunder Iberian shipping.

…

The great premodern thinkers in the field-Henry Martyn, Adam Smith, and David Ricardo-described the overall benefits of free trade. They understood but largely ignored the fact that a significant minority of inno cent people were usually harmed. Their twentieth-century descendants- Bertil Ohlin, Eli Heckscher, Paul Samuelson, and Wolfgang Stolper- provided a framework that identifies who wins, who loses, and how they react. By 1860, northern Europe, basking in the warm glow of the repeal of the Corn Law, the signing of the Cobden-Chevalier Treaty, and the "tariff disarmament" that followed, seemed firmly on the road to free trade.

Radical Uncertainty: Decision-Making for an Unknowable Future
by Mervyn King and John Kay
Published 5 Mar 2020

Honest and capable executives and politicians, of which there are many, try instead to make incremental decisions which they think will improve their business, or make the world a better place. And happy households are places where family members work together to ensure that tomorrow is at least as good as today. Most economists would readily acknowledge that no one actually engages in the kinds of calculation which are described in economic models. But since the work of Paul Samuelson, economists have relied on the claim that if people observed certain axioms which constituted ‘rationality’ they would – unconsciously – be optimising, rather as Molière’s M. Jourdain had been talking prose for forty years without knowing it. And when this axiomatic approach is applied to consumer behaviour, as it was by Samuelson, the method is more fruitful than the sceptical observer might expect.

…

It is easy to understand why economists and statisticians, in search of clear and comprehensive solutions, have sought wide extension of the scope of probabilistic reasoning. The underlying mathematics has a certain simplicity and beauty, and in practice can be applied by those who have acquired the requisite modest technical skill. Arguably the two most brilliant economists of the post-war period, Paul Samuelson and Robert Solow, occupied adjoining offices at MIT for over half a century. As Samuelson relates, ‘When young he [Solow] would say, if you don’t regard probability theory as the most interesting subject in the world, then I feel sorry for you. I always agreed with that.’ 9 The appeal of probability theory is understandable.

…

The two-envelope problem is a striking illustration of the difficulty of applying probabilistic reasoning when the range of possible outcomes is not known completely, i.e., when there is radical uncertainty. And there are other good reasons why decision-makers might not focus on expected value. Paul Samuelson posed to a colleague the wager which offered a 50% chance of winning $200 and a 50% chance of losing $100. The colleague replied that he would not take the bet, but would be interested if Samuelson promised to repeat the offer one hundred times. From the perspective of expected value, this response is a mistake – the colleague is turning down a wager with an expected value of $50.

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
by George A. Akerlof and Robert J. Shiller
Published 1 Jan 2009

He was taking a class on monetary theory given by Paul Samuelson at MIT in the spring of 1964. Samuelson related that a member of President Dwight Eisenhower’s Council of Economic Advisers, Raymond Saulnier, had proposed the following idea. It might be possible to attain low unemployment in the short run, at the cost of high inflation. But as that inflation occurred, expectations about inflation would increase, so that maintenance of the low level of unemployment would entail higher inflation. That argument should sound familiar—although in this class it was related by Paul Samuelson, not Milton Friedman. But the ending of the argument does not remind us of Milton Friedman.

…

But recessions do have at least one silver lining: the cut they take into economic life reveals how capitalist societies really work. To give one example, Keynes’ General Theory, written in the heart of the Great Depression, gave us for the first time an understanding of how macro economies really behave. That is why it was so inspiring, prompting Paul Samuelson to say, in 1946, that the Keynesian revolution, which appeared during the Great Depression, has infected the thinking of virtually every economist. But as the memory of the Great Depression has faded, so too has an appreciation and understanding of Keynesian theory. For the past year we have been seeing a great deal of excellent reportage on how we got into the current mess.

…

It is indicative how important it is to macroeconomics that just four years later, James Tobin, an arch foe of Milton Friedman, would declare in his own presidential address to the American Economic Association that “an economic theorist can, of course, commit no greater crime than to assume money illusion.”11 Tobin failed to mention that money illusion had been standard fare just four years earlier. It lay at the heart of the views on macroeconomics of some of the century’s leading economists, including Keynes, Paul Samuelson, Robert Solow, Irving Fisher, Franco Modigliani, and Tobin himself. Presumption We see Fisher’s and Keynes’ unadulterated money illusion as a remarkably naïve belief. It was in need of serious revision. But that does not mean that one should jump to the opposite extreme. It is not necessarily true that, on the contrary, there is no money illusion at all.

Misbehaving: The Making of Behavioral Economics
by Richard H. Thaler
Published 10 May 2015

Briefly stated, the argument is that even if people are not capable of actually solving the complex problems that economists assume they can handle, they behave “as if” they can. To understand the “as if” critique, it is helpful to look back a bit into the history of economics. The discipline underwent something of a revolution after World War II. Economists led by Kenneth Arrow, John Hicks, and Paul Samuelson accelerated an ongoing trend of making economic theory more mathematically formal. The two central concepts of economics remained the same—namely, that agents optimize and markets reach a stable equilibrium—but economists became more sophisticated in their ability to characterize the optimal solutions to problems as well as to determine the conditions under which a market will reach an equilibrium.

…

And he frowned upon “those working men who, before prohibition, could not resist the lure of the saloon on the way home Saturday night,” which was then payday. Quite evidently, from Adam Smith in 1776 to Irving Fisher in 1930, economists were thinking about intertemporal choice with Humans in plain sight. Econs began to creep in around the time of Fisher, as he started on the theory of how Econs should behave, but it fell to a twenty-two-year-old Paul Samuelson, then in graduate school, to finish the job. Samuelson, whom many consider to be the greatest economist of the twentieth century, was a prodigy who set out to give economics a proper mathematical foundation. He enrolled at the University of Chicago at age sixteen and soon went off to Harvard for graduate school.

…

Yet when this game is played in the laboratory, 40–50% of the players cooperate, which means that about half the players either do not understand the logic of the game or feel that cooperating is the just the right thing to do, or possibly both. The Prisoner’s Dilemma comes with a great story, but most of us don’t get arrested very often. What are the implications of this game for normal life? Consider a related game called the Public Goods Game. To understand the economic significance of this game, we turn back to the great Paul Samuelson, who formalized the concept of a public good in a three-page paper published in 1954. The guy did not belabor things. A public good is one that everyone can consume without diminishing the consumption of anyone else, and it is impossible to exclude anyone from consuming it. A fireworks display is a classic example.

The Accidental Theorist: And Other Dispatches From the Dismal Science
by Paul Krugman
Published 18 Feb 2010

Yet the kind of economics covered in the textbooks is a technical subject that many people find hard to follow. How reassuring, then, to be told that it is all irrelevant—that all you really need to know are a few simple ideas! Quite a few supply-siders have created for themselves a wonderful alternative intellectual history in which John Maynard Keynes was a fraud, Paul Samuelson and even Milton Friedman are fools, and the true line of deep economic thought runs from Adam Smith through obscure turn-of-the-century Austrians straight to them. And so it doesn’t really matter whether supply-side economics makes any sense, or even whether it goes down to a crushing electoral defeat.

…

You must be prepared to work through little models before you can use the big words—in fact, it is usually a good idea to try to avoid the big words altogether. If you balk at this task—if you think that you are too grown-up for this sort of thing—then you may sound impressive and sophisticated, but you will have no idea what you are talking about. A Good Word for Inflation Many years ago, Paul Samuelson memorably cautioned against basing economic policy on “shibboleths,” by which he meant slogans that take the place of hard thinking. Strictly speaking, this was an incorrect use of the word: The OED defines a shibboleth as “A catchword or formula adopted by a party or sect, by which their adherents or followers may be discerned, or those not their followers may be excluded.”

…

However, if the firm pays for coal but not for the use of clean water, it is to be expected that management will be economical in its use of coal and wasteful in its use of water.” In other words, when it comes to the environment, we do not expect the free market to get it right. So what should be done? Going all the way back to Paul Samuelson’s first edition in 1948, every economics textbook I know of has argued that the government should intervene in the market to discourage activities that damage the environment. The usual recommendation is to do so either by charging fees for the right to engage in such nasty activities—a.k.a. “pollution taxes”—or by auctioning off rights to pollute.

Obliquity: Why Our Goals Are Best Achieved Indirectly
by John Kay
Published 30 Apr 2010

Byrne, The Whiz Kids: The Founding Fathers of American Business—and the Legacy They Left Us (New York: Bantam Doubleday Dell, 1993). 3 Friedrich von Hayek, Law, Legislation and Liberty, (Chicago: University of Chicago Press, 1973), vol. 1, “Rules and Order,” p. 49. 4 Ibid. 5 Adam Ferguson, An Essay on the History of Civil Society (1767; reprint, Edinburgh: Edinburgh University Press, 1966), p. 122. 6 David Hume, Essays: Moral, Political, Literary (1777; reprint, ed. Eugene F. Miller, Indianapolis: Liberty Classics, 1985), book II, chapter XII. Chapter 19: Very Well Then, I Contradict Myself—How It Is More Important to Be Right Than to Be Consistent 1 Paul Samuelson, Foundations of Economic Analysis (1947; reprint, Cambridge, MA: Harvard University Press, 1966). 2 Paul Samuelson, “Altruism as a Problem Involving Group Versus Individual Selection in Economics and Biology,” American Economic Review 83, no. 2 (May 1998), pp. 143–8. 3 Francis M. Cornford, Microcosmographia Academica (Cambridge: Bowes & Bowes, 1908), chapter VII. 4 Walt Whitman, “Song of Myself,” in Leaves of Grass (1855; reprint, Hertfordshire, UK: Wordsworth Editions, 2006), p. 69. 5 F.

…

Dame Helen Gardner included some poems in her anthology and left out countless others. Accountants have to report on whether a measure of profit reflects a true and fair view. If we are consistent in our choices, then we are maximizing our utility—or at least we are maximizing something. This idea, first clearly articulated in Paul Samuelson’s Foundations of Economic Analysis1 sixty years ago, rescued economics from a muddle born of nineteenth-century utilitarianism and enabled the subject to become queen of the social sciences. The theory of rational choice dominates economic thinking today, and its influence has spread to politics, psychology and sociology.

Investment: A History
by Norton Reamer and Jesse Downing
Published 19 Feb 2016

This was not an obvious result before its publication, and it ultimately generated a flurry of literature in the field of corporate finance on the role of capital structure and its interaction with asset pricing. Paul Samuelson and Bridging the Gap in Derivatives Theory We now come full circle within the discussion of the evolution of asset pricing theory and return to the pricing of derivatives. The man who, in a sense, connected the earlier work of Louis Bachelier to that of Black and Scholes, described later, was Paul Samuelson. Samuelson made a stunning breadth of contributions to economics until the end of his life at the age of ninety-four. Hailing from Gary, Indiana, he studied at the University of Chicago in the early 1930s, taking several classes alongside such distinguished classmates as Milton Friedman.

…

John Maynard Keynes, perhaps the most influential economist of the period, if not of the last century, saw much of both his own savings and the endowment assets of King’s College he helped manage lost in the Crash. Irving Fisher, too, suffered from the crisis. Not only was he bullish before the Crash, he published in 1930 after the events of October of the previous year saying that much of the manufacturing sector was undervalued. Paul Samuelson, too, conducted his own retrospective game in which he covered up the dates and looked at only the fundamentals at the time to see if he would have bought or sold. He has said, “I discovered that I would have been caught by the 1929 debacle.”17 Even the apparent market wizard Jesse Lauriston Livermore, the Great Bear of Wall Street, who had called the top and who made substantial sums shorting stocks ahead of both the Panic of 1907 and the Crash of 1929, would see his fortune wiped out some five years later from ill-fated speculative plays.

…

The mathematical underpinnings of this description of randomness could be applied not only to the motions of small particles but also to the movements of markets. Bachelier’s work did not seem to have an immediate and profound influence on those markets, however. Though it did have some effect, as it showed up in applied probability books and in some prestigious journals, it was really when Paul Samuelson came across Bachelier’s work decades later that this contribution was appropriately appreciated by the financial community.3 Bachelier, though not as lauded as he may have deserved to be among the financial community of his day, was the father of modern mathematical finance. The Emergence of Investment Theory 231 Irving Fisher: Net Present Value Whereas Bachelier employed advanced mathematics to think about the price of a derivative, Irving Fisher used mathematics in an approach to a more fundamental question: how does one value the price of the underlying asset (that is, an asset that is not a derivative)?

More Money Than God: Hedge Funds and the Making of a New Elite
by Sebastian Mallaby
Published 9 Jun 2010

Some said he might be leaving for good, but others had their doubts; “there’s as much chance of Michael giving up Wall Street for a year as there is of Vladimir Horowitz giving up the piano permanently,” one friend insisted.49 As it turned out, Steinhardt managed to stay away from trading until the fall of the following year. Then he stormed back, broke up with his partners, and marched into the 1980s. 3 PAUL SAMUELSON’S SECRET In famous congressional testimony in 1967, the great economist Paul Samuelson delivered his verdict on the money-management industry. Citing a recent dissertation by a PhD candidate at Yale, he suggested that randomly chosen stock portfolios tended to beat professionally managed mutual funds. When the House banking committee chairman sounded incredulous, the professor stood his ground.

…

p. cm. Includes bibliographical references. ISBN: 1-101-45721-X 1. Hedge funds. 2. Investment advisors. I. Title. HG4530.M249 2010 332.64'524—dc22 2009053253 To my parents, Christopher and Pascale CONTENTS Introduction: The Alpha Game 1. BIG DADDY 2. THE BLOCK TRADER 3. PAUL SAMUELSON’S SECRET 4. THE ALCHEMIST 5. TOP CAT 6. ROCK-AND-ROLL COWBOY 7. WHITE WEDNESDAY 8. HURRICANE GREENSPAN 9. SOROS VERSUS SOROS 10. THE ENEMY IS US 11. THE DOT-COM DOUBLE 12. THE YALE MEN 13. THE CODE BREAKERS 14. PREMONITIONS OF A CRISIS 15. RIDING THE STORM 16. “HOW COULD THEY DO THIS?”

…

After the debacle of the corn blight, Weymar began to allocate more capital to the Technical Computer System, and the human traders developed a fresh respect for the program’s decisions. Indeed, the new risk-control system gave them little choice: It prohibited traders from committing more than a tenth of their capital in betting against a trend, and the trends used in implementing the controls were the ones identified by Vannerson’s program. Even Paul Samuelson was won over to the new approach. He stumped up a fresh chunk of capital to be invested by the TCS, even though trend following had little standing within academia and none within his own research. IN 1974 A YOUNG RECRUIT NAMED MICHAEL MARCUS joined the team at Commodities Corporation. He was far removed from Weymar’s original conception of the model trader.

Against the Gods: The Remarkable Story of Risk
by Peter L. Bernstein
Published 23 Aug 1996

The following people also made significant contributions to my work and warrant my deepest appreciation: Kenneth Arrow, Gilbert Bassett, William Baumol, Zalmon Bernstein, Doris Bullard, Paul Davidson, Donald Dewey, David Durand, Barbara Fotinatos, James Fraser, Greg Hayt, Roger Hertog, Victor Howe, Bertrand Jacquillat, Daniel Kahneman, Mary Kentouris, Mario Laserna, Dean LeBaron, Michelle Lee, Harry Markowitz, Morton Meyers, James Norris, Todd Petzel, Paul Samuelson, Robert Shiller, Charles Smithson, Robert Solow, Meir Statman, Marta Steele, Richard Thaler, James Tinsley, Frank Trainer, Amos Tversky,* and Marina von N. Whitman. Eight people generously undertook to read the manuscript in its entirety and to give me the benefit of their expert criticisms and suggestions.

…

No one, he insisted, can know what everybody else is going to do at any given moment: "Unlimited foresight and economic equilibrium are thus irreconcilable with each other."' This conclusion drew high praise from Frank Knight and an offer by Knight to translate this paper by Morgenstern from German into English. Morgenstern appears to have been short on charm. Nobel Laureate Paul Samuelson, the author of the long-run best-selling textbook in economics, once described him as "Napoleonic.... [A]lways invoking the authority of some physical scientists or other."*' Another contemporary recalls that the Princeton economics department `just hated Oskar."9 Morgenstern himself complained about the lack of attention his beloved masterpiece received from others.

…

This `can get' [the winnings he can expect] is, of course, presumed to be a minimum; he may get more if others make mistakes (behave irrationall y)."19 This stipulation has posed a major problem for critics, including distinguished behavioral psychologists like Daniel Ellsberg and Richard Thaler, whom we will meet later. In a highly critical paper published in 1991, the historian Philip Mirowski asserted, "All is not well in the House of Game Theory-in every dreamhouse a heartache-and signs of pathology can no longer be ignored."20 He cites criticisms by Nobel Prize winners Henry Simon, Kenneth Arrow, and Paul Samuelson. He claims that game theory would never have amounted to anything had von Neumann not sold it to the military; he even goes so far as to speculate, "Some laid the blame for the escalation of nuclear weaponry directly at the door of game theory."21 Indeed, Mirowski claims that Morgenstern was a "godsend" to von Neumann because he proposed economists as an audience for game theory when no one else was interested.

The Economics Anti-Textbook: A Critical Thinker's Guide to Microeconomics
by Rod Hill and Anthony Myatt
Published 15 Mar 2010

One common term used to describe this phenomenon is offshoring. The neoclassical consensus – until recently – was that this did not disturb the ‘result’ that free trade was beneficial to all. But that consensus has been disturbed by recent arguments by Gomory and Baumol (2000) and Paul Samuelson (2004) that offshoring could produce net economic losses. This created quite a stir, because Paul Samuelson is not your average econ­ omist. Winner of the Nobel Prize in economics in 1970, he wrote much of the canon of neoclassical theory. Samuelson called the view that the long-run gains from all forms of international trade must more than offset the losses a ‘popular polemical untruth’.

…

What would happen if they just remained unemployed? 3 Didn’t the United States, Canada and Germany industrialize behind high tariff walls? Isn’t it a little hypocritical to now oppose other countries doing the same? 4 Must the long-run gains from all forms of international trade more than offset the losses? Paul Samuelson recently described this view as a ‘popular polemical untruth’. Why? Suggestions for further reading Take a look at ‘Appendix A: The limits of dissent’ in Marglin (2008, pp. 265–98). This has an especially good section on whether comparative advantage justifies free trade (pp. 274–82). On methodology and the minimum wage controversy, a very good source is Card and Krueger’s 1995 book, Myth and Measurement: The new economics of the minimum wage.

…

According to Akerlof and Shiller (2009: 131): ‘No one has ever made rational sense of the wild gyrations in financial prices, such as stock prices. … The question is not just how to forecast these events before they occur. … No one can even explain why these events rationally ought to have happened even after they have happened.’ iv Micro near-efficiency and macro inefficiency Paul Samuelson (1998) often remarked that while the stock market is mostly micro efficient, it is macro inefficient. The behavioural research (discussed in Section 2 of this addendum) that has shown the existence of market anomalies and predictable price movements undermines the notion that asset markets are micro efficient.

Pivotal Decade: How the United States Traded Factories for Finance in the Seventies
by Judith Stein
Published 30 Apr 2010

.’ … People have accepted the fact that government has got to plan as well as individuals in this country.”9 Keynesianism was in its heyday in the United States in the 1960s when Presidents John Kennedy and Lyndon Johnson cut taxes by $11.6 billion to increase aggregate demand and investment. (Spending on military items for the war in Vietnam helped, too.) The resulting investment rates of 16 and 17 percent, as a percentage of GDP, equaled those of the boom of the mid-1950s. Paul Samuelson proclaimed, with the hubris of the era, “By the proper choice of monetary and fiscal policy we as the artists, mixing the colors of our palette, can have the capital formation and rate of current consumption that we desire.”10 Governments could choose tax, spending, and monetary policies to produce full employment.

…

Returning from a trip to Japan in November, Connally remarked that monetary uncertainty could continue for “an almost indefinite period” and that the United States would not suffer if it did.92 These words produced hysteria among the foreign policy elites. Hormats warned Kissinger that Europe would become hostile and the United States would become a “scapegoat” for Europe’s economic woes.93 Leading economists across the spectrum, from Milton Friedman to Paul Samuelson, predicted a trade war if things were not settled soon.94 Amplified by daily warnings from foreign embassies that the sky was falling, Shultz concluded at the end of October that now that “we have their attention” it was time to move on negotiations.95Connally and Shultz got down to work. Nixon’s economic package attempted to alter exchange rates and open up European and Japanese markets in order to restore U.S. affluence in 1971.

…

Economist Wassily Leontief, Nobel Prize winner in 1973, proposed to do just that. Leontief asserted that keeping the American “economy in good working order required more than just watching a few major statistics and making changes in the budget and money supply,” the main tools of Keynes. Recall Paul Samuelson’s comment twenty years earlier: “Whatever rate of capital formation the American people want to have, the American system can, by proper choice of fiscal and monetary program contrive to do.”70 It did not seem to be true. Walter Heller, who had helped make Keynesianism the state religion of the 1960S, confessed to fellow economists at the end of 1973 that “the energy crisis caught us with our parameters down.

Gaming the Vote: Why Elections Aren't Fair (And What We Can Do About It)
by William Poundstone
Published 5 Feb 2008

Afterward, he and almost everyone else reverted to the more accurate-and dismal-name. The audacious nihilism of Arrow's proof was quickly compared to Coders. "The search of the great minds of recorded history for the perfect democracy, it turns out, is the search for a chimera, for logical self-contradiction," wrote MIT economist Paul Samuelson in 1952. "New scholars all over the world-in mathematics, politics, philosophy, and economics-are trying to salvage what can be salvaged from Arrow's devastating discovery that is to mathematical politics what Kurt Coders 1931 impossibility-of-proving-consistency theorem is to mathematical logic." 51 GAMING THE VOTE No century before the twentieth could have been shocked by the revelation that the social contract is founded on as flimsy a foundation as mathematics itself.

…

To look at it another way, Arrow's theorem says that election outcomes can be decided by quirks of procedure as much as the voters' authentic wishes. That better recalls a remark, probably apocryphal, attributed to Joseph Stalin: 'Those who cast the votes decide nothing. Those who count the votes decide everything," Upon the 1972 announcement of Arrow's Nobel Prize, Paul Samuelson supplied the now-standard journalist's gloss: "What Kenneth Arrow proved once and for all is that there cannot possibly be ... an ideal voting scheme," To some extent, Arrow's theorem refutes the notion of a "will of the people." We all believe in a public will, envisioning it in our own political image-that is to say, as decisive and self-consistent.

…

What Arrow's x, y, and z really demonstrate is that strategic voting can change the outcome of a range vote. This observation is equally true of ranked systems, of course. Arrow conceded that "the above result appears to depend on the particular method of choosing the units 255 GAMING THE VOTE of utility. But this is not true, although the paradox is not so obvious in other cases." Paul Samuelson echoed this thought in a 1967 symposium, saying, in effect, that an Arrow-style impossibility theorem can be proved for range voting. Samuelson must have been thinking of a proof involving Arrow's original, ranking version of irrelevant alternatives. That said, it's easy to show that range voting meets all of Arrow's conditions with the reasonable tweak I just mentioned.

The Globalization Paradox: Democracy and the Future of the World Economy
by Dani Rodrik
Published 23 Dec 2010

The proportion of respondents in an NBC/Wall Street Journal poll saying globalization has been good for the U.S. economy has fallen precipitously, from 42 percent in June 2007 to 25 percent in March 2008. And surprisingly, the dismay has also begun to show up in an expanding list of mainstream economists who now question globalization’s supposedly unmitigated virtues. So we have the late Paul Samuelson, the author of the postwar era’s landmark economics textbook, reminding his fellow economists that China’s gains in globalization may well come at the expense of the United States; Paul Krugman, the 2008 Nobelist in Economics, arguing that trade with low-income countries is no longer too small to have an effect on inequality in rich nations; Alan Blinder, a former U.S.

…

India need only be not as bad in textiles as it is in other manufactures. What creates comparative advantage is differences across nations in comparative costs, not in absolute costs. This is a powerful argument and one that critics of free trade often fail to fully digest before taking it on. As Paul Samuelson once suggested in response to a challenge by a mathematician with little respect for the social sciences, it is probably the only proposition in economics that is at once true and non-trivial. “That it is logically true need not be argued before a mathematician,” Samuelson said; “that it is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.”4 Fallacious reasoning often substitutes for intelligent commentary on trade.

…

In a famous but apocryphal quote attributed to Abraham Lincoln, the Great Emancipator is supposed to have said, I do not know much about the tariff, but I know this much, when we buy manufactured goods abroad, we get the goods and the foreigner gets the money. When we buy the manufactured goods at home, we get both the goods and the money.5 Of course this is exactly the kind of mercantilist fallacy that Martyn (and Adam Smith, David Ricardo, and Paul Samuelson after him) wanted to refute. The true cost of consuming a good is the labor and other scarce resources we have to employ to obtain it, not the money that facilitates the transaction. Public Skepticism on Trade Such fallacies tend to make economists impatient with objections to free trade and dismissive of those who would want to interfere with it.

Debunking Economics - Revised, Expanded and Integrated Edition: The Naked Emperor Dethroned?
by Steve Keen
Published 21 Sep 2011

Yet after several exchanges, the leading bishop of the true believers had conceded that the heretics were substantially correct. Summing up the conflict in 1966, Paul Samuelson observed that the heretics ‘merit our gratitude’ for pointing out that the simple homilies of economic theory are not in general true. He concluded that ‘If all this causes headaches for those nostalgic for the old time parables of neoclassical writing, we must remind ourselves that scholars are not born to live an easy existence. We must respect, and appraise, the facts of life’ (Samuelson 1966: 583). One might hope that such a definitive capitulation by as significant an economist as Paul Samuelson would have signaled a major change in the evolution of economics.

…

These contours were therefore christened ‘indifference curves.’ 3.5 Indifference curves: the contours of the ‘utility hill’ shown in two dimensions Since indifference curves were supposed to represent the innate preferences of a rational utility-maximizing consumer, economists turned their minds to what properties these curves could have if the consumer could be said to exhibit truly rational behavior – as neoclassical economists perceived it. In 1948, Paul Samuelson codified these into four principles: Completeness: If presented with a choice between two different combinations of goods, a consumer can decide which he prefers (or can decide that he gets the same degree of satisfaction from them, in which case he is said to be indifferent between them).

…

In doing so however, it should never be forgotten that a given wealth distribution rule [imposed by the ‘benevolent central authority’] is being adhered to and that the ‘level of wealth’ should always be understood as the ‘optimally distributed level of wealth.’ (Ibid.: 118; emphasis added) These high-level texts, though, are at least honest that there is a problem in aggregating from the individual consumer to the market demand curve. Undergraduate students instead are reassured that there is no problem. Paul Samuelson’s iconic undergraduate textbook makes the following didactic statement about how a market demand curve is derived, and whether it obeys the ‘Law of Demand,’ which flatly contradicts the SMD results: The market demand curve is found by adding together the quantities demanded by all individuals at each price.

Money and Government: The Past and Future of Economics
by Robert Skidelsky
Published 13 Nov 2018

The most famous economic theory of cycles is the Kondratiev cycle, a long wave of forty or fifty years, which starts with a cluster of new technologies and exhausts itself when they have been used up. Schumpeter drew on this idea in his depiction of capitalism’s cycles of creation and destruction. Within the long cycles are shorter cycles of boom and bust, lasting eight to ten years. Lacking proper scientific explanation (Paul Samuelson called cycle theories ‘science fiction’), cycles have nevertheless had a great influence on macroeconomic policy. Typical macroeconomic constructions, such as the ‘cyclically adjusted budget deficit’, refer explicitly to short cycles of definite duration, which oscillate round some ‘normal’ or ‘long-run’ situation. 14 I n t roduc t ion Historical cycles refer to disturbances of a moral/social, rather than technological, equilibrium.

…

The essence of this fable is that though it was convenient to make contracts in money, behind the veil of the contracts were real things being traded for each other at their real (i.e. barter) prices. The theory of the bartering savage is heavily indebted to the classical anthropology of Adam Smith’s day, at the heart of which is the figure of homo economicus, who pursues his self-interest in isolation from society. That this still underlies neo-classical psychology is made clear in Paul Samuelson’s famous textbook, where we read: ‘A great debt of gratitude is owed to the first two ape-men who suddenly perceived that each could be made better off by giving up some of one good in exchange for some of another.’5 Most economists have favoured the bartering savage story, because it leaves out society and government.

…

Having set these rates, leave them alone unless there is some major change in national policy or condition of national life.’14 A rise in the full employment budget surplus would indicate that the actual budget was too restrictive. American policy laid great stress on the automatic stabilizers. As Paul Samuelson pointed out in what became economics’ standard textbook: ‘the modern fiscal system has great inherent automatic stabilizing properties’. This is largely because of the much greater role of fiscal transfers as compared to before the war. When the economy turns down, government tax receipts fall and spending on unemployment benefits and other transfers rise, creating an automatic deficit that mitigates the fall in private spending.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing
by Burton G. Malkiel
Published 10 Jan 2011

But today, the information superhighway carries news far more swiftly than carrier pigeons. And Regulation FD (Fair Disclosure) requires companies to make prompt public announcements of any material news items that may affect the price of their stock. Moreover, insiders who do profit from trading on the basis of nonpublic information are breaking the law. The Nobel laureate Paul Samuelson summed up the situation as follows: If intelligent people are constantly shopping around for good value, selling those stocks they think will turn out to be overvalued and buying those they expect are now undervalued, the result of this action by intelligent investors will be to have existing stock prices already have discounted in them an allowance for their future prospects.

…

Finding inconsistencies in the efficient-market theory became such a cottage industry during the 1990s and early 2000s that I will devote an entire chapter (chapter 11) to the market anomalies and so-called predictable patterns that have been uncovered. Moreover, I worry about accepting all the tenets of the efficient-market theory. As the quote from Paul Samuelson indicates, the theory holds that, at any time, stocks sell at the best estimates of their intrinsic values. Thus, uninformed investors buying at the existing prices are really getting full value for their money, whatever securities they purchase. This line of reasoning is uncomfortably close to that of the “greater fool” theory.

…

Two issues remain: First, it is clear that such skill is very rare; and second, there appears to be no effective way to find such skill before it has been demonstrated. As I indicated in chapter 7, the best-performing funds in one period of time are not the best performers in the next period. The top performers of the 1990s had dreadful returns in the first decade of the 2000s. Paul Samuelson summed up the difficulty in the following parable. Suppose it was demonstrated that one out of twenty alcoholics could learn to become a moderate social drinker. The experienced clinician would answer, “Even if true, act as if it were false, for you will never identify that one in twenty, and in the attempt five in twenty will be ruined.”

An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy
by Marc Levinson
Published 31 Jul 2016

Shortly after New Year’s Day of 1973, stock prices began a long and painful decline around the world. From Great Britain to the United States to Hong Kong and Japan, more than half the value of investors’ holdings of corporate shares would be wiped out within two years.3 Economic forecasters simply closed their eyes to the stock market’s decline, taking comfort in the American economist Paul Samuelson’s quip that “Wall Street indexes predicted nine of the last five recessions.” In the early weeks of 1973, the market’s message of impending collapse was not only unwanted but completely unbelievable. Things were simply too good. January 1973 was the second-busiest month ever for US home-builders, and home prices were rising smartly in Great Britain and Japan.

…

The asset price bubble that decimated Japanese households’ finances in the 1990s; the thousands of bank failures in the United States between 1980 and 1994; the deep downturn, fed by excessive lending to unqualified borrowers, that began in Europe and the United States in 2008, bringing painfully high unemployment and threatening the very survival of the European Union—all can be traced to political efforts to make economies grow faster than productivity advances would allow. It was a fool’s errand. The American economist Paul Samuelson put it well: “The third quarter of the Twentieth Century was a golden age of economic progress. It surpassed any reasoned expectations. And we are not likely to see its equivalent soon again.”20 Acknowledgments This book, I suppose, began with my own personal history. I was a student in West Germany at the time of the 1973 oil crisis, and I experienced both the euphoria of car-free Sundays and the queues of ill-tempered drivers desperate for gasoline.

…

The Guardian, December 21, 1972; David Gumpert, “Rise in Demand Causes Shortage of a Variety of Materials, Parts,” Wall Street Journal, December 8, 1972; President’s Council of Economic Advisers, Economic Report of the President, 1973, 82; Bank of Japan, Monthly Economic Review, January 1973, 1; “Commentary,” Bank of England Quarterly Bulletin 13 (March 1973): 6; John L. Hess, “Forecasters’ Word Is ‘Boom,’” New York Times, January 7, 1973; Charles Reeder, The Sobering Seventies (Wilmington, DE: DuPont, 1980), 101. 3. E. Philip Davis, “Comparing Bear Markets—1973 and 2000,” National Institute Economic Review 183 (2003): 78–89. 4. Paul Samuelson, “Science and Stocks,” Newsweek, September 19, 1966; memo from Dr. Ranz, BMWi, to various cabinet ministers, “Angepasste mittelfristige Zielprojektion bis 1976,” March 20, 1973, BA, B 102/248423; Don Oberdorfer, “Japanese Economy Is Booming Again,” Washington Post, January 14, 1973. 5. OECD Economic Outlook 13 (June 1973): 102. 6.

Heads I Win, Tails I Win
by Spencer Jakab
Published 21 Jun 2016

A missing decimal place or some other mental slip happens every once in a while, and it’s an awful feeling, even when the subject of the error is nice about it. Robert J. Samuelson, the Washington Post business columnist, was exceedingly gracious when I used his name in front of a quote by the eminent economist Paul Samuelson, telling me that it’s happened before. “Once, the New York Times had me winning Paul Samuelson’s Nobel Prize. I kept waiting for the $1 million check to arrive, but it never did.” So naturally a reporter like me can be a real pedant when people bring up a quote that “everyone” knows someone made. For example, Willie Sutton never said that he robbed banks because that’s where the money is, Ben Franklin’s famous dictum about thrift wasn’t “A penny saved is a penny earned,” and P.

…

Take the October 1987 crash, the stock market’s worst ever single-day decline in percentage terms, which led to widespread but unfounded speculation that it would mark the start of a recession or something even worse. After all, the less severe Black Tuesday in 1929 is popularly seen as the cause of the Great Depression, even though the story is actually far more complicated. Such head fakes led economist Paul Samuelson to quip that “Wall Street indexes predicted nine of the last five recessions.” Be that as it may, the stock market seems almost clairvoyant sometimes—sort of like a fortune-teller with some smudges on her crystal ball. I’ll admit that up until this point in the book, I haven’t encouraged you to pay its gyrations much heed.

How I Became a Quant: Insights From 25 of Wall Street's Elite
by Richard R. Lindsey and Barry Schachter
Published 30 Jun 2007

I learned once again that I was not suited for work in a large organization. Mark Hoffman and I moved on to establish Upstream Technologies in late 1999. The goal of Upstream was to apply the tools, discipline, and quality control that quants had developed for institutional use to individual accounts, even the very small ones. We recruited Paul Samuelson, previously chief investment officer at Panagora, and a set of talented youngsters. It was clear that for the taxable investor individually managed accounts dominate mutual funds. Mutual funds generate taxable distributions (often including short-term capital gains), and investors are unable to take advantage of the unrealized losses in the fund’s underlying portfolio.

…

The paper we wrote about within-horizon risk won a Graham and Dodd Award, and our within-horizon risk measures are now widely used throughout the industry.4 Full-Scale Optimization. A couple of years ago, I wrote a short piece for Peter Bernstein in which I showed the mathematical equivalence of portable alpha strategies with currency overlay strategies. Soon after publication, I received a note from Paul Samuelson critiquing my approach and mean-variance analysis in general. He argued that computational power now enables us to maximize plausible utility functions numerically, based on the entire distribution of returns, not just the first JWPR007-Lindsey May 7, 2007 17:15 Mark Kritzman 257 two moments.

…

However, utility functions that incorporated kinks or inflection points proved problematic for mean-variance analysis. Given the growing popularity of hedge funds and the concern for thresholds that many investors had, I worked with my colleagues, Tim Adler, Jan-Hein Cremers, and Sébastien Page to develop a robust full-scale optimization algorithm.5 As a consequence of Paul Samuelson’s critique and my eagerness to understand it, we introduced an entirely new way of constructing portfolios that easily addresses nonnormality and a wide range of utility functions. Efficient Trading. Institutional investors often reallocate their portfolios to shift their asset mixes or to shuffle their investment managers.

Visions of Inequality: From the French Revolution to the End of the Cold War
by Branko Milanovic
Published 9 Oct 2023

(Princeton: Princeton University Press, 2016), 71. 69 . Paul Samuelson’s Economics had an inestimable effect on the schooling of thousands of economists in the United States and around the world. Paul A. Samuelson, Economics: An Introductory Analysis (New York: McGraw Hill, 1948). It had an early competitor in Lorie Tarshis’s text, but the latter quickly lost out because, among other things, its approach was regarded as too Marxist. Lorie Tarshis, Elements of Economics: An Introduction to the Theory of Price and Employment (Boston: Houghton Mifflin, 1947). 70 . Paul Samuelson, Economics, 10th ed. (New York: McGraw Hill Kogakusha, 1976).

…

For them, output is distributed in accordance with participants’ endowments of capital and skill, and according to factor prices generated within the process of production. Through political decisions, output can be further redistributed to help those who are poor and who receive insufficient income from production itself. Endowments, in such a view of the world, are seen as lying outside economics. This is clearly enunciated by Paul Samuelson in his Economics, as shown by Eli Cook. 27 Economists appear modest in their claims. Like the engineers of societal production, they are in charge of output maximization under conditions of given endowments and technology. Markets generate incomes and economists leave the task of further redistribution to those more qualified than them: the politicians. 28 Production and market-determined prices are technical, not historical, categories.

…

The vacuity of Blinder’s work (which is representative of neoclassical Cold War economics more generally) is equal to those empty Soviet descriptions of income inequality under socialism: neither had anything useful to tell us about historical determinants of inequality, class structure, discrimination, income gaps, or anything else from real life. Other examples. Paul Samuelson’s Economics was an immensely influential textbook worldwide. 69 It also stands as evidence of this inability to integrate income distribution studies within the neoclassical paradigm. While issues of factor shares—determinations of wages and profits—are given lots of space, over a hundred pages spanning six chapters, they are never “unified” into an income distribution.

The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies
by Erik Brynjolfsson and Andrew McAfee
Published 20 Jan 2014

For instance, the new satellite accounts created by the Bureau of Economic Analysis estimate that investment in R&D capital accounted for about 2.9 percent of GDP and has increased economic growth by about 0.2 percent per year between 1995 and 2004.26 It’s hard to say exactly how large the bias is from miscounting all the types of intangible assets, but we are reasonably confident the official data underestimate their contribution.* New Metrics Are Needed for the Second Machine Age It’s a fundamental principle of management: what gets measured gets done. Modern GDP accounting was certainly a huge step forward for economic progress. As Paul Samuelson and Bill Nordhaus put it, “While the GDP and the rest of the national income accounts may seem to be arcane concepts, they are truly among the great inventions of the twentieth century.”27 But the rise in digital business innovation means we need innovation in our economic metrics. If we are looking at the wrong gauges, we will make the wrong decisions and get the wrong outputs.

…

Disagreements over these questions often seem so entrenched that there can be no common ground. But there’s actually quite a bit of it. Whether you study from the best-selling introductory textbooks Principles of Economics, written by Harvard’s Greg Mankiw, a conservative economist who advised George Bush and Mitt Romney, or Economics: An Introductory Analysis, written by MIT’s Paul Samuelson, a liberal advisor to John Kennedy and Lyndon B. Johnson, you’ll learn many of the same things.* Across good Econ 101 textbooks, and across good economists, there’s far more agreement about government’s role in promoting economic growth than you might expect from the more vitriolic public debates in the media.

…

Later advocates included philosopher Bertrand Russell and civil rights leader Martin Luther King, Jr., who wrote in 1967, “I am now convinced that the simplest approach will prove to be the most effective—the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.”3 Many economists on both the left and the right have agreed with King. Liberals including James Tobin, Paul Samuelson, and John Kenneth Galbraith and conservatives like Milton Friedman and Friedrich Hayek have all advocated income guarantees in one form or another, and in 1968 more than 1,200 economists signed a letter in support of the concept addressed to the U.S. Congress.4 The president elected that year, Republican Richard Nixon, tried throughout his first term in office to enact it into law.

More From Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources – and What Happens Next
by Andrew McAfee
Published 30 Sep 2019

“Comparative advantage” is the counterintuitive idea that even if country A is more efficient at producing both of two products than country B, the best thing is for it to produce only one of those products—the one where its comparative advantage in efficiency is bigger—and trade for the other one with country B. This arrangement is in the self-interest of both countries and leaves them both better off. Comparative advantage was first described by the English political economist David Ricardo in 1817. The Nobel Prize–winning economist Paul Samuelson tells the story that he was once asked by the mathematician Stanislaw Ulam to “name me one proposition in all of the social sciences which is both true and non-trivial.” Samuelson’s answer, which he only thought of years later, was comparative advantage. As he wrote, “That it is logically true need not be argued before a mathematician; that it is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.”

…

Both of these sources are conservative, but this does not mean that they are misrepresenting the mood of Earth Day. V. Foxfire is a term for bioluminescence caused by fungi that live in decaying wood. VI. The check was not accompanied by any note. CHAPTER 5 The Dematerialization Surprise Well, when events change, I change my mind. What do you do? —Paul Samuelson, on Meet the Press, 1970I Unlike Julian Simon and Paul Ehrlich, environmental scientist Jesse Ausubel didn’t spend much time thinking about resource prices. But as the Simon-Ehrlich bet was coming to its final years, he started to take a keen interest in resource quantities—how much material of different kinds we humans were using as we went about building our economies and lives.

…

the Corn Laws: David Ross, ed., “The Corn Laws,” Britain Express, accessed February 28, 2019, https://www.britainexpress.com/History/victorian/corn-laws.htm. Samuelson tells the story: Paul A. Samuelson, “The Way of an Economist,” in International Economic Relations: Proceedings of the Third Congress of the International Economic Association, ed. Paul Samuelson (London: Macmillan, 1969), 1–11. 8 percent of Europe’s iron… 60 percent: Stephen Broadberry, Rainer Fremdling, and Peter Solar, “Chapter 7: Industry, 1700–1870” (unpublished manuscript, n.d.), 34–35, table 7.6, fig. 7.2. two-thirds of the world’s coal: Gregory Clark, “The British Industrial Revolution, 1760–1860” (unpublished manuscript, Course Readings ECN 110B, Spring 2005), 1.

Concentrated Investing
by Allen C. Benello
Published 7 Dec 2016

Wasik, Keynes’s Way to Wealth: Timeless Investment Lessons from the Great Economist (New York: McGraw‐Hill, 2014). 49. David Chambers, Elroy Dimson, and Justin Foo, “Keynes the Stock Market Investor: A Quantitative Analysis,” Journal of Financial and Quantitative Analysis 50 (2015): 843–868. doi:10.1017/S0022109015000186. 50. Ibid. 51. Ibid. 52. Paul Samuelson, “The Keynes Centenary,” The Economist 287 (1983). 53. David Chambers, Elroy Dimson, and Justin Foo, “Keynes the Stock Market Investor: A Quantitative Analysis,” Journal of Financial and Quantitative Analysis 50 (2015): 843–868. doi:10.1017/S0022109015000186. 54. Ibid. 55. Jess H. Chua and Richard S.

…

In one of his earlier flights of fancy, Shannon had begun an intensive study of the stock market in the late 1950s.6 He wanted to know if his information theory could help him decode the market’s random walk. His research led him to fill three library shelves with books, including Adam Smith’s Wealth of Nations, John von Neumann and Oskar Morgenstern’s Theory of Games and Economic Behavior, Paul Samuelson’s Economics, and Fred Schwed’s Where Are the Customer’s Yachts? In a notebook Shannon recorded a varied list of thinkers, including French mathematician Louis Bachelier, Benjamin 74 Concentrated Investing Graham, and Benoit Mandelbrot. He took notes about margin trading; short selling; stop‐loss orders; the effects of market panics; capital gains taxes and transaction costs.

…

When the details of the trade leaked out—a former math professor who had been a professional blackjack player used convertible arbitrage to make a riskless profit—Thorp became a mini‐celebrity for the second time, and the Kelly Criterion finally got its day in the sun. Not everyone was enamored of the criterion. Economist Paul Samuelson, the first American to win the Nobel Memorial Prize in Economic Sciences, and considered by the New York Times the foremost American economist of the twentieth century, was so maddened with the idea that he wrote a paper seeking to refute it. The paper, “Why We Should Not Make Mean Log of Wealth Big Though Years To Act Are Long,” appeared in a 1979 edition of the Journal of Banking and Finance.

The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns
by John C. Bogle
Published 1 Jan 2007

Rather than selecting an actively managed mutual fund with a superior record, he directed the trustees to invest 90 percent of the assets in the trust in a “very low-cost S&P 500 index fund. (I suggest Vanguard’s.)” It is reasonable to assume that Mr. Buffett considered “looking for the needle.” But he finally decided to “buy the haystack.” * * * Need more advice? With his customary wisdom, the late Paul Samuelson summed up the difficulty of selecting superior managers in this parable. “Suppose it was demonstrated that one out of twenty alcoholics could learn to become a moderate social drinker. The experienced clinician would answer, ‘Even if true, act as if it were false, for you will never identify that one in twenty, and in the attempt five in twenty will be ruined.’

…

Little can change the fact that current expected returns on a broad set of asset classes are low versus history. Stick to the basics with discipline.” * * * The simple ideas in this book really work. I believe the classic index fund must be the core of such a winning strategy. But even I would not have had the temerity to say what the late Dr. Paul Samuelson of MIT said in a speech to the Boston Society of Security Analysts in the autumn of 2005: “The creation of the first index fund by John Bogle was the equivalent of the invention of the wheel, the alphabet, and wine and cheese.” Those essentials of our existence that we have come to take for granted have stood the test of time.

The Man Who Knew: The Life and Times of Alan Greenspan
by Sebastian Mallaby
Published 10 Oct 2016

In 1945, Ira Mosher, the leader of the National Association of Manufacturers, denounced the “unmitigated warfare that has been waged for a decade against the free competitive enterprise system.”10 Perhaps a little of that sentiment may have filtered into the School of Commerce, despite the generally pro-government outlook of Greenspan’s generation. Besides, university economics faculties were caught in a sort of time warp. By 1945, John Maynard Keynes’s ideas had been embraced by New Dealers in Washington, but they did not yet dominate the undergraduate curriculum the way they did after 1948, the year in which Paul Samuelson, the self-described “brash whippersnapper go-getter” at the Massachusetts Institute of Technology, published his classic introductory textbook, Economics.11 Samuelson’s text cemented in the minds of undergraduates the case for a mixed economy, and if Greenspan had been exposed to it at the start of his studies, it is at least conceivable that he might have developed differently.

…

But most economists believed that other factors mattered more than interest rates: shifts in workers’ negotiating power, gains in productivity by companies, new opportunities to sell abroad—any of these could have a more pronounced effect on prices.3 “Today few economists regard Federal Reserve monetary policy as a panacea for controlling the business cycle,” Paul Samuelson declared in the first edition of his famous textbook, published in 1948.4 In the words of the monetary historian Robert Hetzel, “After World War II, monetary policy was an orphan.”5 On the last day of January 1951, Truman impressed upon the Fed’s leaders the gravity of the Korean crisis. He summoned the entire membership of the Fed’s interest-rate-setting body, the Federal Open Market Committee (FOMC), over to the White House and did his best to frighten them.

…

Keynes had taught how to combat economic slowdowns by running a government budget deficit, and neo-Keynesians had grasped how slumps could be averted by the central bank as well: low interest rates, hitherto regarded principally as a means of helping the government to borrow, were now understood as a tool of economic management.2 “The supply of money, its availability to investor borrowers, and the interest cost of such borrowings can have important effects on [GNP],” Paul Samuelson instructed in the 1961 edition of his bestselling textbook, revising the dismissal of monetary policy in his 1948 edition.3 “The worst consequences of the business cycle . . . are probably a thing of the past,” Samuelson wrote confidently, and conservative economists agreed.4 At the end of 1959, Greenspan’s mentor Arthur Burns proclaimed, “The business cycle is unlikely to be as disturbing or troublesome to our children as it was to us and our fathers.”5 It was not just that economists understood how to prevent recessions.

Reset: How to Restart Your Life and Get F.U. Money: The Unconventional Early Retirement Plan for Midlife Careerists Who Want to Be Happy
by David Sawyer
Published 17 Aug 2018

Something new under the sun In 1974, John (known affectionately as Jack) Bogle was fired from his position as chairman of fund management firm Wellington after approving a disastrous company merger. In that same year the late Nobel prize-winning Massachusetts Institute of Technology (MIT) academic Paul Samuelson – seen by many as the most influential economist of the late 20th century[358] – published a paper in The Journal of Portfolio Management called “A Challenge to Judgment[359]”. In it, he challenged the performance of the active fund management business that had sprung up in the ’50s and ’60s and said: “At the least, some large foundation should set up an in-house portfolio that tracks the S&P 500 Index – if only for the purpose of setting up a naïve model against which their in-house gunslingers can measure their prowess.”

…

If you choose the actively managed fund route, you could be one of the lucky 18% and beat the index, but, as we’ve discovered, there’s a four in five chance you won’t be. Leading proponents We’re not talking a ragbag of back-bedroom bloggers. Proponents of index funds count among them some of the finest minds on the planet: Warren Buffett; Paul Samuelson; Eugene Fama; Jack Bogle; Pete Adeney; JL Collins; Harold Pollack; ex-star fund manager at Magellan, Peter Lynch; and Douglas Dial, ex-portfolio manager of the US’s largest pension fund. Here’s their two-penneth. Buffett said, in his annual shareholder letter of 2013: “[When he dies] my advice to the trustee [of his estate, his wife] couldn’t be simpler: Put 10% of the cash in short-term government bonds and 90% in a low-cost S&P 500 index fund.

…

Simply put, ETFs are often slightly cheaper than equivalent OEICs, cover more obscure indexes (eg, global small-cap and value), and sometimes come with small initial charges – watch for them in the small print – as well as the ongoing charges figure (OCF). [358] most important economist of the late 20th century: “Paul Samuelson – Wikipedia.” toreset.me/358. [359] “A Challenge to Judgment”: “The inspiration for John Bogle’s great invention – MarketWatch.” 5 Mar. 2014, toreset.me/359. [360] $403bn: “VFINX - Vanguard 500 Index Fund Investor Shares | Vanguard.” toreset.me/360. [361] 29% of the entire US market: “Index funds to surpass active fund assets in U.S. by 2024: Moody’s.” 2 Feb. 2017, toreset.me/361

The Scandal of Money
by George Gilder
Published 23 Feb 2016

Contemplating the 1970s without mentioning this epochal event could be justified only if it had as little effect as Nixon promised at the time. Nixon’s announcement was full of reassurances that leaving the gold standard would “strengthen” or “stabilize” the dollar. Milton Friedman, who urged Nixon to make the move, predicted that it would have little effect on the worth of the currency. Paul Samuelson led a parade of eminent figures forecasting a sharp decline in the price of gold. That gold in fact quadrupled over the next three years and rose by a factor of twenty-three before a correction at the end of the decade illustrated the blindness of both the economic profession and the politicians in charge to the metrics and dynamics of money.

…

The economist Arnold Kling of the Cato Institute observes that “as a percentage of GDP the decrease in government purchases was larger than would result from the total elimination of government today.”2 Some 150,000 government regulators were laid off, along with perhaps a million other civilian employees of government. Disbanded were such managerial agencies as the War Production Board, the War Labor Board, and the Office of Price Administration, beloved of John Kenneth Galbraith. Every Keynesian and socialist economist confidently predicted doom. In 1945, Paul Samuelson—sounding like his Nobel laureate successor Paul Krugman crying for trillions in new “stimulus,” or Larry Summers predicting “secular stagnation,” or Thomas Piketty and Robert Gordon envisioning an end to growth—prophesied “the greatest period of unemployment and dislocation which any economy has ever faced.”

How to Read Numbers: A Guide to Statistics in the News (And Knowing When to Trust Them)
by Tom Chivers and David Chivers
Published 18 Mar 2021

He would be described as the ‘sage of the credit crunch’ by one newspaper, which added: ‘if Mr Cable cannot see through the financial fog then no one can, or so the legend goes.’11 This is a book about numbers, so it’s worth pointing out that this is a fundamentally numerical prediction: Cable predicted that some numbers (particularly the numbers in the ‘credit’ columns of various major banks) were about to go downwards very rapidly. Was he truly a sage? There’s an old joke by the economist Paul Samuelson, who once said that the stock market ‘has predicted nine of the last five recessions’.12 Critics have suggested that Cable had done the same thing.13 He made the prediction in 2003 (and apparently again in 2006); the crash didn’t happen until 2008. He predicted another crash in 2017, but nothing particularly noticeable happened.14 More relevantly, thousands of other MPs, journalists, academics and so on issued various pronouncements about what would and wouldn’t happen to the economy in the coming years; some of them were always going to say the right thing.

…

House of Commons Hansard Debates, 13 November 2003, Column 397 https://publications.parliament.uk/pa/cm200203/cmhansrd/vo031113/debtext/31113-02.htm 11. Melissa Kite, ‘Vince Cable: Sage of the credit crunch, but this Liberal Democrat is not for gloating’, the Daily Telegraph, 2008 https://www.telegraph.co.uk/news/politics/liberaldemocrats/3179505/Vince-Cable-Sage-of-the-credit-crunch-but-this-Liberal-Democrat-is-not-for-gloating.html 12. Paul Samuelson (1966), quoted in Bluedorn, J. C., Decressin, J. and Terrones, M. E., ‘Do asset price drops foreshadow recessions?’, IMF Working Paper, October 2013, p. 4. 13. Asa Bennett, Romanifesto: Modern Lessons from Classical Politics, Biteback Publishing, 2019. 14. Rachael Pells, ‘British economy “will turn nasty next year”, says former Business Secretary Sir Vince Cable’, the Independent, 2016 https://www.independent.co.uk/news/business/sir-vince-cable-british-economy-will-turn-nasty-next-year-says-man-who-predicted-2008-economic-crash-a7394316.html 15.

Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School
by Andrew Hallam
Published 1 Nov 2011

I just don’t want to be giving away hundreds of thousands of dollars during my investment lifetime to a slick talker in a salesperson’s cloak. And I don’t think you should either. What would a nobel prize-winning economist suggest? The most efficient way to diversify a stock portfolio is with a low fee index fund.3 Paul Samuelson, 1970 Nobel Prize in Economics Arguably the most famous economist of our time, the late Paul Samuelson was the first American to win a Nobel Prize in Economics. It’s fair to say that he knew a heck of a lot more about money than the brokers suffering from conflicts of interest at your neighborhood Merrill Lynch, Edward Jones, or Raymond James offices.

Arguing With Zombies: Economics, Politics, and the Fight for a Better Future
by Paul Krugman
Published 28 Jan 2020

Slumps could be fought with appropriate government policies: low interest rates for relatively mild recessions, deficit spending for deeper downturns. And given these policies, much of the rest of the economy could be left up to markets. Indeed, this position—call it free-market Keynesianism—became more or less the standard view of U.S. economists, especially after the publication of Paul Samuelson’s groundbreaking textbook in 1948. Conservatives, however, weren’t happy with this formulation. They viewed Keynesian economics as the thin end of the wedge: Once you accepted a government role in fighting recessions, you might adopt a more expansive view of government in general. During the forties and fifties they fought a rear-guard action, trying to prevent the teaching of Keynesian economics in universities.

…

The downside of this strategy is, of course, that many of your colleagues will tend to assume that an insight that can be expressed in a cute little model must be trivial and obvious—it takes some sophistication to realize that simplicity may be the result of years of hard thinking. I have heard the story that when Joseph Stiglitz was being considered for tenure at Yale, one of his senior colleagues belittled his work, saying that it consisted mostly of little models rather than deep theorems. Another colleague then asked, “But couldn’t you say the same about Paul Samuelson”? “Yes, I could,” replied Joe’s opponent. I have heard the same reaction to my own work. Luckily, there are enough sophisticated economists around that in the end intellectual justice is usually served. And there is a special delight in managing not only to boldly go where no economist has gone before, but to do so in a way that seems after the fact to be almost child’s play.

…

By “unstable” I don’t just mean Minsky-type financial instability, although that’s part of it. Equally crucial are the regime’s intellectual and political instability. INTELLECTUAL INSTABILITY The brand of economics I use in my daily work—the brand that I still consider by far the most reasonable approach out there—was largely established by Paul Samuelson back in 1948, when he published the first edition of his classic textbook. It’s an approach that combines the grand tradition of microeconomics, with its emphasis on how the invisible hand leads to generally desirable outcomes, with Keynesian macroeconomics, which emphasizes the way the economy can develop magneto trouble, requiring policy intervention.

Toward Rational Exuberance: The Evolution of the Modern Stock Market
by B. Mark Smith
Published 1 Jan 2001

Writing in the 1950s, John Kenneth Galbraith declared, “On Jan. 1, 1929, as a matter of simple probability, it was most likely that the [stock market] boom would end before the year was out.” Of course, Galbraith had the benefit of twenty-twenty hindsight. Other scholars have not claimed such prescience. Economist Paul Samuelson wrote in 1979 that “playing as I often do the experiment of studying price profiles with their dates concealed, I discovered that I would have been caught in the 1929 debacle … The collapse from 1929 to 1933 was neither foreseeable nor inevitable.”1 Samuelson was not alone. Noted economist John Maynard Keynes lost heavily in the crash, as did other leading members of the academic community.

…

In 1934, one year after Cowles published his research, a paper by Stanford University professor Holbrook Working appeared in the Journal of the American Statistical Association. Working was unfamiliar with Cowles and had had little prior interest in the financial markets. As later described by economist Paul Samuelson, Working was “a dry stick … not a sparkling expositor.” He was extremely thin and “old looking.” Samuelson believed that Working’s research would have received more attention had he been associated with Harvard or the University of Chicago; as Samuelson put it, Stanford at the time was considered to be “in the boondocks.”24 Working’s article carried a title only a statistician could love: “A Random Difference Series for Use in the Analysis of Time Series.”

…

Conceptually, the act of hitting a pitched ball with a bat is “simple.” But only a tiny fraction of the population can perform this simple task well enough to play in the major leagues, and only a small fraction of those can manage to do it successfully even 30% of the time (a .300 hitter). Nobel Prize—winning economist Paul Samuelson has been a passionate defender of the idea that the market is efficient. But even he concedes that it is at least theoretically possible that a few individuals can consistently earn above-market returns, properly adjusted for risk. As he puts it, “People differ in their heights, pulchritude and acidity, why not in their P.Q., or performance quotient?”

End This Depression Now!
by Paul Krugman
Published 30 Apr 2012

And to be honest, Minsky’s heterodoxy wasn’t the only reason he was ignored by the mainstream. His books are not, to say the least, user-friendly; nuggets of brilliant insight are strewn thinly across acres of turgid prose and unnecessary algebra. And he also cried wolf too often; to paraphrase an old joke by Paul Samuelson, he predicted around nine of the last three major financial crises. Yet these days many economists, yours truly very much included, recognize the importance of Minsky’s “financial instability hypothesis.” And those of us, again like yours truly, who were relative latecomers to Minsky’s work wish that we had read it much earlier.

…

Keynes himself described his theory as “moderately conservative in its implications,” consistent with an economy run on the principles of private enterprise. From the beginning, however, political conservatives—especially those most concerned with defending the position of the wealthy—fiercely opposed Keynesian ideas. And I mean fiercely. Paul Samuelson’s textbook Economics, whose first edition was published in 1948, is widely credited with bringing Keynesian economics to American colleges. But it was actually the second entry. A previous book, by the Canadian economist Lorie Tarshis, was effectively blackballed by right-wing opposition, including an organized campaign that successfully induced many universities to drop the book.

Utopia for Realists: The Case for a Universal Basic Income, Open Borders, and a 15-Hour Workweek
by Rutger Bregman
Published 13 Sep 2014

“We’re now self-sufficient, income-earning artists,” she told the researchers.36 Among youth included in the experiment, almost all the hours not spent on paid work went into more education. Among the New Jersey subjects, the rate of high school graduations rose 30%.37 And thus, in the revolutionary year of 1968, when young demonstrators the world over were taking to the streets, five famous economists – John Kenneth Galbraith, Harold Watts, James Tobin, Paul Samuelson, and Robert Lampman – wrote an open letter to Congress. “The country will not have met its responsibility until everyone in the nation is assured an income no less than the officially recognized definition of poverty,” they said in an article published on the front page of The New York Times.

…

The Ultimate Yardstick From the wreckage of depression and war, the GDP emerged as the ultimate yardstick of progress – the crystal ball of nations, the number to trump all others. And this time, its job was not to bolster the war effort, but to anchor the consumer society. “Much like a satellite in space can survey the weather across an entire continent so can the GDP give an overall picture of the state of the economy,” economist Paul Samuelson wrote in his bestselling textbook Economics. “Without measures of economic aggregates like GDP, policymakers would be adrift in a sea of unorganized data,” he continued. “The GDP and related data are like beacons that help policymakers steer the economy toward the key economic objectives.”21 At the start of the 20th century the U.S. government employed a grand total of one economist; more accurately, an “economic ornithologist,” whose job was to study birds.

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Eleventh Edition)
by Burton G. Malkiel
Published 5 Jan 2015

But today, the information superhighway carries news far more swiftly than carrier pigeons. And Regulation FD (Fair Disclosure) requires companies to make prompt public announcements of any material news items that may affect the price of their stock. Moreover, insiders who do profit from trading on the basis of nonpublic information are breaking the law. The Nobel laureate Paul Samuelson summed up the situation as follows: If intelligent people are constantly shopping around for good value, selling those stocks they think will turn out to be overvalued and buying those they expect are now undervalued, the result of this action by intelligent investors will be to have existing stock prices already have discounted in them an allowance for their future prospects.

…

If you find yourself at age eighty, withdrawing 4 percent each year and with a growing portfolio, either you have profound faith that medical science has finally discovered the Fountain of Youth, or you should consider loosening the purse strings. *Technically, the finding that risk is reduced by longer holding periods depends on the reversion-to-the-mean phenomenon described in Chapter 11. The interested reader is referred to Paul Samuelson’s article “The Judgment of Economic Science on Rational Portfolio Management” in the Journal of Portfolio Management (Fall 1989). †I assume that the savings can be made in an IRA or other tax-favored savings vehicle, so income taxes on interest earnings are ignored. ‡In the ninth edition of this book, I recommended a 4½ percent rule because bond yields were considerably higher than they were in 2014.

…

Two issues remain: First, it is clear that such skill is very rare; and second, there appears to be no effective way to find such skill before it has been demonstrated. As I indicated in chapter 7, the best-performing funds in one period of time are not the best performers in the next period. The top performers of the 1990s had dreadful returns in the first decade of the 2000s. Paul Samuelson summed up the difficulty in the following parable. Suppose it was demonstrated that one out of twenty alcoholics could learn to become a moderate social drinker. The experienced clinician would answer, “Even if true, act as if it were false, for you will never identify that one in twenty, and in the attempt five in twenty will be ruined.”

Extreme Money: Masters of the Universe and the Cult of Risk
by Satyajit Das
Published 14 Oct 2011

In his doctoral dissertation, he laid out the argument that stock prices were random, reflecting all available information relevant to its value. Prices followed a random walk and market participants could not systematically profit from market inefficiencies. The EMH does not require market price to be always accurate. Investors force the price to fluctuate randomly around its real value. As economist Paul Samuelson put it: “if one could be sure that a price will rise, it would already have risen.”6 The EMH was the finance version of The Price Is Right, the corollary of Chicago’s belief in free markets. Reviewing Markowitz’s work, David Durand observed that the “argument rests on the concept of the Rational Man.”

…

If the stock price goes up then the value of the call option increases but you suffer a loss on the shares, as you have to buy them back at the higher price. By adjusting the ratio of options to the shares, you can construct a portfolio where the changes in the value of the options and shares exactly offset, at least, for small movements in the stock price. Working as research assistant to Paul Samuelson, Robert Merton was also working on option pricing. Merton introduced an idea—continuous time mathematics. Black and Scholes assumed that the portfolio would be rebalanced to keep it free of risk by changing the number of shares held at discrete time intervals. Merton forced the time intervals into infinitely small fragments of time, effectively allowing continuous and instantaneous rebalancing.

…

Her stifling worldview encompassed politics, interior design, and dancing. Despite a failure to create a lasting legacy or political movement, Rand remains an influence on conservative thinking. The New York Times dubbed Rand the “novelist Laureate” of the Reagan administration, citing her influence on Greenspan.13 Paul Samuelson, the economist, recalled that: The trouble is that [Greenspan] had been an Ayn Rander. You can take the boy out of the cult but you can’t take the cult out of the boy. He actually had instructions, probably pinned on the wall: “Nothing from this office should go forth which discredits the capitalist system.

Transport for Humans: Are We Nearly There Yet?
by Pete Dyson and Rory Sutherland
Published 15 Jan 2021

Unfortunately, when sat at the base of the ‘S’, many optimists and myopics are vulnerable to the lure of extrapolating that midway exponential growth, drawing an inexorable and fanciful line upwards. Physical transport technologies such as driverless cars and Hyperloop trains attract huge amounts of funding when the economy is strong – almost $750 billion in 2018 and 201926 – but the revolution always seems to lie just around the corner. To paraphrase the twentieth-century economist Paul Samuelson, technologists correctly predicted nine of the last five transport revolutions. Governments and politicians have a different problem: they predicted perhaps only two of them.27 Who remembers the Segway: one of those transport revolutions that never quite happened? Like the whirring gyroscopes that kept it upright, it was hyped at dizzying speed as a vision for the new millennium.

…

but rather ‘Wouldn’t we be more profitable (and less risky) if we could get Concorde passengers to fly first class on our flat-bed service?’ And so the lifeblood of Concorde began to drain away. * * * 26 OliverWyman. 2020. Decreased investments in mobility startups. Report, June (https://owy.mn/3vVHhbV). 27 In 1966, four years before winning his Nobel Memorial Prize in Economic Sciences, Paul Samuelson quipped that declines in US stock prices had correctly predicted nine of the last five American recessions. 28 C. Wolmar. 2018. Driverless Cars: On a Road to Nowhere. London: London Publishing Partnership. 29 It was an Achilles heel, not a freak accident, that led to disaster in July 2000. 30 History of Advertising Trust. 1977.

Makers and Takers: The Rise of Finance and the Fall of American Business
by Rana Foroohar
Published 16 May 2016

The Ford and Carnegie foundations in particular, but also others like the Walgreen Foundation (established by the communist-hating drugstore titan Charles Walgreen), began giving donations to support an approach to business that would make it seem more serious and weighty, a “real science” to be contended with. Business and economics education began to develop a notion of itself as a hard science. One of the watershed moments for this new school of thought was the publication in 1947 of economist Paul Samuelson’s Foundations of Economic Analysis, which laid out the case for a new approach to economic thinking—one that resembled the abstract, hyperrational field of physics much more than the messy reality of the social sciences. Indeed, the language of the time makes it clear that the elites were a bit embarrassed about any ties that business education might have to actual factory floors.

…

But despite a more than doubling of the industry’s asset base, fees have actually risen, too, by a whopping 81 percent—from $48 billion to $87 billion.22 “The staggering economies of scale that characterize money management have been largely arrogated by fund managers to themselves, rather than shared with their fund shareholders,” concludes Bogle. Or, as the great economist Paul Samuelson put it presciently in 1967, “I decided that there was only one place to make money in the mutual fund business—as there is only one place for a temperate man to be in a saloon, behind the bar and not in front of the bar. And I invested in…[a] management company.”23 In lieu of pouring all your money into Fidelity or BlackRock, there are any number of studies that tell us how much better off we are investing the Vanguard way, in low- or no-fee index funds.

…

Ameriprise Financial, “Ameriprise Financial Completes Columbia Management Acquisition,” news release, May 3, 2010. 19. Bogle, The Clash of the Cultures, 117–18. 20. Rana Foroohar, “Why Some Men Are Big Losers,” Time, June 10, 2013. 21. Bogle, “Big Money in Boston,” 138. 22. Bogle Senate testimony, September 16, 2014. 23. Paul Samuelson, Institute Professor, Massachusetts Institute of Technology, statement before the hearing on Mutual Fund Legislation of 1967 by US Senate Committee on Banking and Currency, August 2, 1967. 24. Author interview with Buffett for this book. 25. “Against the Odds: The Costs of Actively Managed Funds Are Higher than Most Investors Realise,” Economist, February 20, 2014. 26.

Destined for War: America, China, and Thucydides's Trap
by Graham Allison
Published 29 May 2017

Communism as an ideology that people could voluntarily embrace has been consigned to the dustbin of history. Command-and-control economics and politics have repeatedly shown that they do not work. Students at Harvard are thus confounded when I make them read a chapter from the most popular economics textbook of the mid-twentieth century, Paul Samuelson’s Economics: An Introductory Analysis, published in 1964. It foresaw Soviet GNP overtaking that of the US by the mid-1980s.41 The twentieth century was defined by a cascade of world wars: the First, the Second, and the specter of a Third that could well have been the last. In that final contest, the adversaries believed the stakes were so high that each was prepared to risk the death of hundreds of millions of its own citizens to defeat the other.

…

The Soviet economy, meanwhile, had begun to surge. Industrial production increased 173 percent over prewar levels by 1950, and annual economic growth (at least as officially reported) averaged 7 percent between 1950 and 1970,149 prompting fears that the Soviet Union might rival and even surpass the US economically.150 Paul Samuelson’s best-selling 1960s textbook, Economics: An Introductory Analysis, projected that Soviet GNP would overtake that of the US by the mid-1980s.151 Though Samuelson’s prediction never came to pass, the USSR did overtake the US in two key areas: military spending and production of iron and steel, both in the early 1970s.152 Responding to the challenge, the United States employed all of the traditional instruments of warfare short of bombs and bullets, and many untraditional instruments as well.

…

May and Hong, “A Power Transition and Its Effects,” 11–17. [back] 39. Ibid., 14–17. [back] 40. George Will, “America’s Lost Ally,” Washington Post, August 17, 2011, https://www.washingtonpost.com/opinions/americas-lost-ally/2011/08/16/gIQAYxy8LJ_story.html?utm_term=.3188d2889da3. [back] 41. Paul Samuelson, Economics: An Introductory Analysis, 6th ed. (New York: McGraw-Hill, 1964), 807. [back] 42. Churchill, The Second World War, vol. 3: The Grand Alliance (Boston: Houghton Mifflin, 1950), 331. [back] 43. James Forrestal letter to Homer Ferguson, May 14, 1945. See Walter Millis, ed., The Forrestal Diaries (New York: Viking Press, 1951), 57.

Crisis Economics: A Crash Course in the Future of Finance
by Nouriel Roubini and Stephen Mihm
Published 10 May 2010

Leeson, “The Austrian School of Economics: 1950-2000,” both in Samuel, Biddle, and Davis, eds., Companion to History of Economic Thought, 262-77, 445-53. 54 Schumpeter’s worldview: Joseph Alois Schumpeter, Capitalism, Socialism, and Democracy (London: Routledge, 2006), 81-86. 55 According to some Austrian economists: See, for example, Murray Rothbard, America’s Great Depression (New York: New York University Press, 1973). 56 “Greenspan put”: Peronet Despeignes, “Greenspan Put May Be Encouraging Complacency,” Financial Times, December 8, 2000; Marcus Miller, Paul Weller, and Lei Zhang, “Moral Hazard and the US Stock Market: Analysing the ‘Greenspan Put,’ ” Economic Journal 112 (2002): C171-86. 57 the road that Japan paved in the 1990s: See, for example, Benjamin Powell, “Explaining Japan’s Recession,” Quarterly Journal of Austrian Economics 5 (2002): 35-50. 57 Economists who swear fealty to Keynes: Krugman, Return of Depression Economics, 74-77; Charles Yuji Horioka, “The Causes of Japan’s ‘Lost Decade’: The Role of Household Consumption,” Japan and the World Economy 18 (2006): 378-400. 59 “economists set themselves . . .”: John Maynard Keynes, A Tract on Monetary Reform (London: Macmillan, 1923), 80. 59 “Well, . . . this is probably a change . . .”: Conor Clarke, “An Interview with Paul Samuelson, Part Two,” Atlantic, June 18, 2009, online at http://correspondents.theatlantic.com/conor_clarke/2009/06/an_interview_with_paul_samuelson_part_two.php. 60 Scottish journalist: Charles Mackay, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds (London: National Illustrated Library, 1852). This expanded edition replaced the original work published in 1841.

…

In facing these challenges, it’s worth adding one more arrow to the quiver of crisis economics. The study of crises cannot be confined to economic theories alone. A final perspective is necessary, one that is not easily distilled to a school of thought, a model, or an equation: the study of the past. The Uses of History In June 2009 the legendary economist Paul Samuelson sat down with an interviewer. Samuelson, who remained as productive as ever into his nineties, is widely considered the greatest economist of the last half century. A founder and codifier of the neoclassical school, he oversaw his profession’s embrace of esoteric mathematical models as a way of describing timeless economic phenomena.

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right
by George R. Tyler
Published 15 Jul 2013

Protectionism was avoided and even aggressively attacked when identified abroad. These nations didn’t experience an American-style stagnation of wages and offshoring of jobs. Instead, Australia and northern Europe pursued policies informed by the best and brightest trade economists of our age. Drawing on the theories of David Ricardo, for example, economists Paul Samuelson and Wolfgang F. Stolper had concluded as early as 1941 that international trade creates long-term losers as well as winners. So leaders abroad crafted remediation: a balance of clever mechanisms maximizing the gains from globalization and broadcasting those gains to families, while minimizing its harm to jobs and wages.

…

Central banks attract criticism for two main reasons: First, they create credit, which always raises the risk of credit bubbles, deep recessions and inflation; that’s why conservatives with the Austrian School endorse the discipline of the gold standard. Milton Friedman disagreed with them, placing his faith in robotic monetary growth targets administered by the Fed, rejecting fears of the Austrian School’s Henry Hazlitt. President Nixon ignored the Austrians (and also the advice of Nobel Laureate Paul Samuelson) in favor of Friedman when he abandoned gold in mid-August 1971. Unlike the Austrians, President Nixon and his successors like President Reagan and Alan Greenspan perhaps never read the most famous fable of the German literary giant, Johann Wolfgang Goethe. It’s right there in Faust: the creation of paper money is mere alchemy.23 History has proven Hazlitt, Samuelson, and Goethe right and Friedman wrong.24 Second, as mentioned, conservatives like Hayek believe that central banks are too easily captured by the business community, with monetary policies adopted for political ends.

…

We will return to this evidence of European economic prowess in a moment. Unsurprisingly, as we see in Table 4, American and European workers in relatively unskilled, labor-intensive sectors fared less well. That’s consistent with the famous conclusion reached in 1941 by Wolfgang F. Stolper and Paul Samuelson, which is the source of the received wisdom among economists that freer trade permanently harms some employees in rich democracies.8 The IMF analysts concluded that the unskilled worker share of total wages fell somewhat sharply in both America and Europe. The Impact of Technology Progress and Globalization on Unskilled Labor 1980 2003 Labor’s income share in unskilled sectors1 United States 25% 18% Europe2 34% 24% Index of unskilled employment United States 100% 121% Europe 100% 86% Table 4. 1 Measured as share of economy-wide value added. 2 Includes: Austria, Belgium, Denmark, Finland, France, Germany, Italy, Norway, Portugal, and Sweden.

Race Against the Machine: How the Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy
by Erik Brynjolfsson
Published 23 Jan 2012

They understand that some human workers may lose out in the race against the machine. Ironically, the best-educated economists are often the most resistant to this idea, as the standard models of economic growth implicitly assume that economic growth benefits all residents of a country. However, just as Nobel Prize-winning economist Paul Samuelson showed that outsourcing and offshoring do not necessarily increase the welfare of all workers, it is also true that technological progress is not a rising tide that automatically raises all incomes. Even as overall wealth increases, there can be, and usually will be, winners and losers. And the losers are not necessarily some small segment of the labor force like buggy whip manufacturers.

Losing Control: The Emerging Threats to Western Prosperity
by Stephen D. King
Published 14 Jun 2010

He named it California after a sixteenth-century Spanish novel (The Exploits of Explanadían) in which there was a reference to a mythical island of that name ruled by Calafía, a pagan queen. California properly fell into Spanish hands in 1769 following the establishment of a number of missions up and down the land. Mexico gained its independence from the Spanish in 1821. 6. See, for example, Paul Samuelson’s article ‘Where Ricardo and Mill rebut and confirm arguments of mainstream economists supporting globalization’, Journal of Economic Perspectives, 18.3 (2004), pp. 135–46. 7. See, for example, Alan G. Ahearne; Joseph E. Gagnon; Jane Haltmaier; Steven B. Kamin, Preventing Deflation: Lessons From Japan’s Experience in the 1990s. published by the Federal Reserve in 2002 and available at http://www.federalreserve.gov/pubs/ifdp/ 2002/729/ifdp729.pdf. 8.

…

Countries and regions that, at the time of writing, still had an explicit dollar peg included the Caribbean nations, Cuba, the Democratic Republic of Congo, Ecuador, Equatorial Guinea, Hong Kong, Liberia, Malaysia, Nigeria, Oman, Panama, Saudi Arabia, Singapore, Syria and the United Arab Emirates (source: Bloomberg). 15. Bela Balassa, ‘The purchasing power parity doctrine: a reappraisal’, Journal of Political Economy, 72 (1964), pp. 584–96; Paul Samuelson, ‘Theoretical notes on trade problems’, Review of Economics and Statistics, 23 (1964), pp. 145–54. 16. The minutes and transcripts of FOMC meetings can be found at http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm. CHAPTER 6: HAVES AND HAVE-NOTS 1. Remarks made in Heber Springs, Arkansas, at the dedication of Greers Ferry Dam, 3 October 1963 2.

Skin in the Game: Hidden Asymmetries in Daily Life
by Nassim Nicholas Taleb
Published 20 Feb 2018

Before explaining the concept, consider the following three maxims: Judging people by their beliefs is not scientific. There is no such thing as the “rationality” of a belief, there is rationality of action. The rationality of an action can be judged only in terms of evolutionary considerations. The axiom of revelation of preferences (originating with Paul Samuelson, or possibly the Semitic gods), as you recall, states the following: you will not have an idea about what people really think, what predicts people’s actions, merely by asking them—they themselves don’t necessarily know. What matters, in the end, is what they pay for goods, not what they say they “think” about them, or the various possible reasons they give you or themselves for that.

…

Glossary Rent Seeking: trying to use protective regulations or “rights” to derive income without adding anything to economic activity, without increasing the wealth of others. As Fat Tony would define it, it is like being forced to pay protection money to the Mafia without getting the economic benefits of protection. Revelation of Preferences: the theory, originating with Paul Samuelson (initially in the context of choice of public goods), that agents do not have full access to the reasoning behind their actions; actions are observables, while thought is not, which prevents the latter from being used for rigorous scientific investigation. In economics, experiments require an actual expenditure by the agent.

Wealth and Poverty: A New Edition for the Twenty-First Century
by George Gilder
Published 30 Apr 1981

A negative income tax was to be established, distributing money to perhaps one-third of all Americans as automatically and comprehensively as the IRS takes it from the rest of us. Poverty was to be abolished by redistribution. Endorsed on various occasions by such diverse voices as Richard Nixon, Milton Friedman, George McGovern, Paul Samuelson, and—above all in eloquent persistence—Daniel Patrick Moynihan, it was an idea whose time had apparently come. But no sooner had the consensus prevailed, so it seemed, than it collapsed. Senator Moynihan announced, with great courage and simplicity, “I was wrong.” Books and articles poured forth, declaring that the present welfare system, for all its manifest faults, was, as it were, “our welfare system, right or wrong,” an almost geological feature, one expert described it, with rocks and rills and purpled hills like America itself.

…

Disbanded were such managerial agencies as the War Production Board, the War Labor Board, and the Office of Price Administration beloved of John Kenneth Galbraith. Confidently predicting doom was every Keynesian economist. Sounding exactly like his Nobel laureate successor Paul Krugman supporting trillions in new “stimulus” in 2010, Paul Samuelson in 1945 prophesied “the greatest period of unemployment and dislocation which any economy has ever faced.” In an account of these events, CATO economist Arnold Kling observed that “as a percentage of GDP the decrease in government purchases was larger than would result from the total elimination of government today.”

…

This policy is leading to capital losses, real estate depreciation, disinvestment, capital flight, skilled emigration, and contraction of private employment. Obama administration policy was so drastically negative toward the creations of the private economy that change could release huge positive energies. Once again discredited will be Keynesian pessimists. As dramatically as the post-war recovery of the 1950s confounded Paul Samuelson’s jeremiad, the responses of U.S. entrepreneurs can again galvanize an American century. We just need to adopt a full supply-side solution. ACKNOWLEDGMENTSb WEALTH AND POVERTY ARE the prime concerns of economics, but they are subjects too vast and vital to be left to economists alone. Although economists have provided me with some of my most valued counsel—and I will be acknowledging them in numbers—this book is in part an essay on the limitations of contemporary economics in analyzing the sources of creativity and progress in all economies.

The Power of Gold: The History of an Obsession
by Peter L. Bernstein
Published 1 Jan 2000

The following people also provided significant assistance along the way and deserve my warmest thanks: Barbara Boehm, Ulla BuchnerHoward, Mike Clowes, Barclay Douglas, Hans Falkena, Rob Ferguson, Benjamin Friedman, Milton Friedman, Alan Greenspan, James Howell, Henry Hu, Steve Jones, Dwight Keating, Leora Klapper, Benjamin Levene, Richard Rogalski, Paul Samuelson, Ronald Sobel, and Gentaro Yura. Convention dictates that the author relieves all of the above from any responsibility for errors that may remain in the manuscript. Charlie Kindleberger decries this convention, pointing out that the author, after all, depended on the authority of these individuals in preparing the work and should not be expected to check out the accuracy of their suggestions.

…

The time has come for exchange rates to be set straight.... There is no longer any need for the United States to compete with one hand behind its back.... We are not about to ease up and lose the economic leadership of the world.6 "They've really shot both barrels," observed the President of Bankers Trust Company on Monday morning. Paul Samuelson, the Nobel Prize-winning economist, asserted in an article for the New York Times that "The President had no real choice. His hand was forced by the massive hemorrhage of dollar reserves of recent weeks.... For more than a decade the American dollar has been an overvalued currency.... [The new policy] also helps Japan ... since it is foolish for Japan to give away goods without being repaid for them in equivalent goods."

…

*Knox, Secretary of War during World War II, was famous for his remark about the Japanese when he put his arm around the shoulder of T. V. Tsoong, the Chinese Ambassador: "Don't worry, T. V., we'll lick those yellow bastards yet." *1 heard this story as a Harvard undergraduate in the late 1930s; Professor Paul Samuelson of MIT was good enough to confirm it in personal correspondence. *Leffingwell regularly sent Norman food packages during World War II and carried on an active correspondence with his old friend. `Both men died before they could see the product of their work in full flower, Keynes in April 1946 and White in August 1948.

The State and the Stork: The Population Debate and Policy Making in US History
by Derek S. Hoff
Published 30 May 2012

William Nordhaus, a Yale economist on President Jimmy Carter’s Council of Economic Advisers, wrote in the American Economic Review, “Economists have for the most part ridiculed the new [Malthusian] view of growth, arguing that it is merely Chicken Little Run Wild.”33 Still, Nordhaus believed that the limits-to-growth paradigm warranted serious consideration, and other mainstream economists praised the book for opening eyes to the ultimate finiteness of the earth’s resources. Paul Samuelson, an MIT Nobel laureate and leader of his generation of American Keynesians, noted, “It may be that in order to convince public opinion on the need to do something about ecology and not just talk about it, the overselling of . . . the Club of Rome, of biological scientists like the distinguished Paul Ehrlich . . . may still be found to earn a gold 226 chapter 8 star for good performance in that court of final judgment.”34 Nobel laureate and theorist of economic growth Robert Solow roundly dismissed the MIT study and yet wrote, “I hope nobody will conclude that I believe the problems of population control, environmental degradation, and resource exhaustion to be unimportant, or that I am one of those people who believe that an adequate response to such problems is a vague confidence that some technological solution will turn up.

…

For the drifting-upwards unemployment of the 1950s, see Council of Economic Advisers (hereafter CEA), “Dramatic Facts on Unemployment and Labor Force,” JFK Papers, President’s Office Files, Staff Memoranda, Box 63A, Folder “Heller, Walter W. Briefing Book on Economic Matters, 12/20/62.” 10. National Party Platforms, vol. 2, 1960–1976, comp. Donald Bruce Johnson (Urbana: University of Illinois, 1978), 582. 11. Oral History Interview with Walter Heller, Kermit Gordon, James Tobin, Gardner Ackley, and Paul Samuelson, by Joseph Pechman, August 1, 1964, John F. Kennedy Library Oral History Program. 12. CEA, “Dramatic Facts.” 13. John Kenneth Galbraith to JFK, June 12, 1961, Papers of John Kenneth Galbraith, JKFL, Box 76, Folder “Correspondence with JFK, 1/6/61–11/15/63.” 302 notes to chapter five 14. James L.

…

Roberts, “On Reforming Economic Growth,” 132. notes to chapter eight 353 88. See Sauvy’s comments in Teitelbaum and Winter, Fear of Population Decline, 121. Sauvy was a founding member of the (French) Association for a Demographic Renaissance, created in 1976 to promote population growth. 89. Paul Samuelson, “An Exact Consumption Loan Model of Interest with or without the Social Contrivance of Money,” Journal of Political Economy 66 (December 1958): 467–82. 90. Henry Aaron, “The Social Insurance Paradox,” Canadian Journal of Economics and Political Science 32 (August 1966): 371–74. 91. For intergenerational conflict, see Anne Foner, “Age Stratification and Age Conflict in Political Life,” American Sociological Review 39 (April 1974): 187–96; and Leonard D.

The Great Divergence: America's Growing Inequality Crisis and What We Can Do About It
by Timothy Noah
Published 23 Apr 2012

Among laborers engaged in manufacturing men’s clothing, for instance, a 1 percent increase in the foreign-born proportion of a city’s population lowered wages by 1.5 to 3 percent.12 Surveying the economic literature in 2006, the economists Timothy Hatton (of Australian National University and the University of Essex) and Jeffrey Williamson (of Harvard) calculated that in 1910 unskilled wages in the United States would have been about 9 to 14 percent higher had there been no immigration between 1870 and 1910.13 Did the Great Compression, the long and prosperous midcentury period during which incomes became more equal and stayed that way, owe a debt to the immigration restrictions imposed in the 1920s? The Nobel Prize–winning economist Paul Samuelson thought so. “By keeping labor supply down,” he wrote in his bestselling economics textbook, a restrictive immigration policy “tends to keep wages high.”14 Less than a decade after the 1965 immigration law reopened the spigot, middle-class incomes were stagnating, and by 1979 inequality was increasing.

…

The average monthly wage is $449, or about one tenth the average in the United States.3 When a manufacturing nation with an aggressively mercantilist trade policy and a preposterously huge pool of cheap labor (that’s China) sells a lot of stuff to a manufacturing nation with a much smaller, more prosperous labor pool (that’s the United States), the outcome will be lower wages for workers in the more prosperous nation. Or so established economic theory tells us. The theory in question is the Stolper-Samuelson theorem, first elaborated in a 1941 paper by two young economists, Wolfgang Stolper (of Swarthmore and later the University of Michigan) and Paul Samuelson (of MIT). Samuelson, who considered himself “the midwife, helping to deliver Wolfie’s brainchild,” would go on to write the twentieth century’s bestselling economics textbook and to win the Nobel Prize. Fifty years after the theorem’s debut, the Columbia economist Jagdish Bhagwati wrote, “I know of no major international economic theorist today who would not trade an arm and a leg” for its authorship.4 The Stolper-Samuelson theorem challenged the notion dating back to David Ricardo that everybody benefited when trade between nations proceeded unimpeded.

Marx: A Very Short Introduction
by Peter Singer
Published 15 Mar 2000

The expression ‘a really human morality’ cited on p. 82 comes from Engels’s Anti-Dühring, also reprinted in Feuer, at p. 272. The quotation from Hegel on p. 20 is from The Philosophy of History (trans. J. Sibree, ed. C. J. Friedrich, Dover, New York, 1956), p. 19. The contemporary economist quoted on p. 76 is Paul Samuelson, writing in the American Economic Review, vol. 47 (1957), p. 911. Further Reading Writings by Marx Marx wrote so much that the definitive edition of all the writings of Marx and Engels, now in the process of publication in East Germany, will take twenty-five years and a hundred volumes to complete.

Currency Wars: The Making of the Next Gobal Crisis
by James Rickards
Published 10 Nov 2011

Only massive government interventions involving bank capital, interbank lending, money market guarantees, mortgage guarantees, deposit insurance and many other expedients prevented the wholesale collapse of capital markets and the economy. With few exceptions, the leading macroeconomists, policy makers and risk managers failed to foresee the collapse and were powerless to stop it except with the blunt object of unlimited free money. To explain why, it is illuminating to take 1947, the year of publication of Paul Samuelson’s Foundations of Economic Analysis, as an arbitrary dividing line between the age of economics as social science and the new age of economics as natural science. That dividing line reveals similarities in market behavior before and after. The collapse of Long-Term Capital Management in 1998 bears comparison to the collapse of the Knickerbocker Trust and the Panic of 1907 in its contagion dynamics and private resolution by bank counterparts with the most to lose.

…

Bank closings, gold seizures, import tariffs and capital controls would be on the table. America’s infatuation with the Keynesian illusion has now resulted in U.S. power being an illusion. America can only hope that nothing bad happens. Yet given the course of events in the world, that seems a slim reed on which to lean. Financial Economics At about the same time that Paul Samuelson and others were developing their Keynesian theories, another group of economists were developing a theory of capital markets. From the faculties of Yale, MIT and the University of Chicago came a torrent of carefully reasoned academic papers by future Nobel Prize winners such as Harry Markowitz, Merton Miller, William Sharpe and James Tobin.

The Misbehavior of Markets: A Fractal View of Financial Turbulence
by Benoit Mandelbrot and Richard L. Hudson
Published 7 Mar 2006

“The notion of equilibrium in the market for risky assets had great beauty for me,” he recalled. He tried applying the model beyond stocks, to bonds, cash, and finally, to warrants, a close cousin of options. Now, many smart people before Black had tried to find a formula for valuing warrants or options—including Bachelier and Paul Samuelson, the MIT economist. One common problem was that, to figure out what an option or warrant was worth today, they thought they had to know what the underlying stock would be worth at expiration—that is, how far “in the money” or “out of the money” the option would end up being. But that was a hopeless approach.

…

“Out of necessity I became a good listener,” Scholes later recalled. “I learned to think abstractly and to conceptualize the solution to problems.” He went on to get a doctorate in economics from the University of Chicago, and was then offered a teaching job at MIT. There, several smart young economists had gathered around economists Paul Samuelson, Franco Modigliani, and Paul Cootner (the first two eventually won Nobels). And on Tuesday evenings, a workshop on finance met to discuss new issues. There, Scholes and Black got to know each other. Together, they took up Black’s work again. They made an odd couple—the austere, reserved Harvard man and the temperamental, disputatious Canadian.

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
by Nassim Nicholas Taleb
Published 1 Jan 2001

Answer: There was a bunch of intelligent people who felt compelled to use mathematics just to tell themselves that they were rigorous in their thinking, that theirs was a science. Someone in a great rush decided to introduce mathematical modeling techniques (culprits: Leon Walras, Gerard Debreu, Paul Samuelson) without considering the fact that either the class of mathematics they were using was too restrictive for the class of problems they were dealing with, or that perhaps they should be aware that the precision of the language of mathematics could lead people to believe that they had solutions when in fact they had none (recall Popper and the costs of taking science too seriously).

…

Whenever they both seemed to make the same mistake of reasoning they ran empirical tests on subjects, mostly students, and discovered very surprising results on the relation between thinking and rationality. It is to their discovery that we turn next. FLAWED, NOT JUST IMPERFECT Kahneman and Tversky Who has exerted the most influence on economic thinking over the past two centuries? No, it is not John Maynard Keynes, not Alfred Marshall, not Paul Samuelson, and certainly not Milton Friedman. The answer is two noneconomists: Daniel Kahneman and Amos Tversky, the two Israeli introspectors, and their specialty was to uncover areas where human beings are not endowed with rational probabilistic thinking and optimal behavior under uncertainty. Strangely, economists studied uncertainty for a long time and did not figure out much—if anything, they thought they knew something and were fooled by it.

Economists and the Powerful
by Norbert Haring , Norbert H. Ring and Niall Douglas
Published 30 Sep 2012

Any attempt to model this transformation inevitably points to fundamental problems of the neoclassical theory of capital and income distribution (Keen 2001/2008). MARKET POWER 159 The 1960s and ’70s saw a protracted fight over neoclassical capital theory, the so-called Cambridge Capital Controversy. Neoclassical economists, including Paul Samuelson and Robert Solow from MIT (the Massachusetts Institute of Technology), defended neoclassical capital theory against an attack from economists working in Cambridge, England, chiefly Joan Robinson and Piero Sraffa. The English economists attacked the neoclassical notion that the (relative) price of the two factors of production, labor and capital, determines how much of each is used.

…

They would have to be chosen, by chance, the government or somebody else. As the different equilibriums are likely to be associated with rather different distributions of income between capitalists and workers, whoever had the power to see that their side’s preferred distribution was selected would be of key importance. 160 ECONOMISTS AND THE POWERFUL Paul Samuelson admitted defeat at the first World Congress of the Econometric Society in Rome in 1965, which is documented in the November 1966 edition of the Quarterly Journal of Economics. Samuelson concluded the Congress by stating that the neoclassical rule that falling interest rates lead to increasing capital intensity cannot be universally true, admitting in effect that the neoclassical theory of capital is faulty.

Servant Economy: Where America's Elite Is Sending the Middle Class
by Jeff Faux
Published 16 May 2012

But the actual content of these agreements was unimportant to economists defending intellectual dogma. Indeed, a survey of the economists who supported the first of these deals, NAFTA, showed that only one in nine had actually read the treaty itself.4 Not even the venerable Nobel Prize winner Paul Samuelson, a founder of the neoliberal economics that dominated postwar economic policy and a staunch supporter of free trade, was exempt from the contempt of the academic inquisition that tolerates no heresy. When Samuelson suggested in a 2004 article that the United States might not, after all, benefit from free trade, he was dismissed as an old man who had lost his marbles.5 His point was simply that the dogma that free trade was a win-win for everyone had become dubious as (1) highly skilled workers overseas became increasingly cheaper to hire, (2) the gains from producing goods more cheaply elsewhere went to capital rather than labor, and (3) the United States lost a comparative advantage in expanding industries.

…

Gordon Lafer, Neither Free nor Fair: The Subversion of Democracy under NLRB Elections, American Rights at Work, July 2007, http://www.americanrightsatwork.org/publications/general/neither-free-nor-fair.html. 4. Pat Choate, Dangerous Business: The Risks of Globalization (New York: Alfred A. Knopf, 2008), 140. 5. Paul Samuelson, “Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supportive of Globalization,” Journal of Economic Perspectives 18, no. 3 (Summer 2004): 135–146. 6. Heidi Shierholz, Jared Bernstein, and Lawrence Mishel, The State of Working America, 2008/2009 (Washington, DC: Economic Policy Institute, 2008). 7.

Radical Markets: Uprooting Capitalism and Democracy for a Just Society
by Eric Posner and E. Weyl
Published 14 May 2018

MARKETS FOR COLLECTIVE DECISIONS Politics is concerned with creating “goods” (which economists call “public” or “collective” goods) that affect the entire population or large groups of people—in contrast to the “private goods” exchanged on traditional markets that individuals consume by themselves. Examples of public goods include clean air, military defense, and public sanitation. Private goods are currently allocated through markets. Public goods can’t be using standard markets, or at least not with good results. As the legendary economist and Nobel Laureate Paul Samuelson explained in his 1954 article, “The Pure Theory of Public Expenditure,” standard markets are designed to allocate private goods to those who value them the most.28 This is clearest in an auction—where the highest bidder is assumed to be the person who values the good most—but the price system as a whole works as a kind of decentralized auction.

…

The social problems brought on by migration were often severe—including a considerable amount of civil strife—but manageable, and over the long term the country prospered. But today, open borders are impractical both economically and politically. In their famous 1941 treatise, “Protection and Real Wages,” Wolfgang Stolper and Paul Samuelson (who we met in the previous chapter) investigated the effect of international trade in goods or labor on the incomes of various people within different countries.20 While trade between a pair of countries always increases the aggregate wealth of both countries, it can have important redistributive effects.

Keeping at It: The Quest for Sound Money and Good Government
by Paul Volcker and Christine Harper
Published 30 Oct 2018

And what was the economic purpose, and for that matter the morality, of the government inducing chronic inflation—intentionally debasing the nation’s currency a little every year? My mother would see through that. Harvard, and the then upstart Massachusetts Institute of Technology (MIT) economics faculty nearby, was successful in attracting a slew of young scholars—James Tobin, Jim Duesenberry, Bob Solow, and others. Paul Samuelson from MIT, already greatly respected, sometimes appeared. Later armed with Nobel Prizes, they came to question Hansen’s simplistic certainty, but they played a major role in embedding Keynesian thinking in the political as well as the intellectual world. At the same time, there were bridges to the older Austrian tradition.

…

It included a review of the international monetary system, the structure and responsibilities of the Federal Reserve, and the scope of banking regulations. For me, it was a first-class ticket to a high-level discussion of issues that came to dominate my career. I could be introduced to former Fed Board chairman Eccles and, more importantly, to active, influential economists ranging from Milton Friedman to Paul Samuelson. Several members of the commission staff, especially Eli Shapiro of MIT and Larry Ritter of New York University’s Stern School of Business, became close friends. The comprehensive commission report has been lost in the mists of time. It did, however, help bolster the case for Federal Reserve independence, which had come into question in parts of the Congress.

Beyond the 4% Rule: The Science of Retirement Portfolios That Last a Lifetime
by Abraham Okusanya
Published 5 Mar 2018

Because equity past performance tells us that they’ll most likely outperform cash over the long term. How do we know that equities tend to outperform bonds over the long term? Past performance tells us so. And of course, basic reasoning backs this up. Renowned academics, from Harry Markowitz, Paul Samuelson and William Sharpe to Robert Shiller and Gene Fama, have greatly improved our understanding of how the capital markets work. In the process, they’ve won Nobel Prizes! Much of their work is based on the exploration of asset classes using extensive historical performance data. If it’s good enough for Fama or Sharpe, it’s good enough for me.

Tribe: On Homecoming and Belonging
by Sebastian Junger
Published 23 May 2016

And Barbara Hammond provided a continual source of encouragement, wisdom, and advice that saved me from many blunders and dead ends. I am also indebted to my agent, Stuart Krichevsky; my editor, Sean Desmond; and my publicists, Cathy Saypol and Brian McLendon. I would also like to thank Deb Futter and Jamie Raab at Grand Central, as well as Paul Samuelson, who handled the day-to-day details of the publicity effort. Mari Okuda also did another amazing job as senior production editor on the manuscript, and I am very grateful to her for her great skill with the English language. The book appeared in early form in Vanity Fair magazine, and I am grateful to Graydon Carter and Doug Stumpf for trusting my instincts on this topic.

The Irrational Economist: Making Decisions in a Dangerous World
by Erwann Michel-Kerjan and Paul Slovic
Published 5 Jan 2010

I suggest that one should instead approach the climate change problem and the energy problem by solving them via stochastic dynamic calculus, as in continuous-time finance with predictable assets returns. (This approach was developed in 1969 by American economists and Nobel Laureates Robert Merton and Paul Samuelson.) There are indeed clear links to the literature of dynamic finance: (1) Preserving a nonrenewable resource, or reducing emission of CO2 under a constraint of maximum concentration, is equivalent to an increase in saving; (2) the uncertainty about the stock of the resource, or the uncertainty about the desirable maximum concentration of CO2, is parallel to income uncertainty in the standard consumption-portfolio problem; (3) emitting greenhouse gases when the environmental impact is uncertain is equivalent to investing in a risky asset.

…

For example, while higher water temperatures and higher humidity can increase the intensity of cyclones, increased vertical shear may tend to destroy the vortex and thereby break up the storms. See “Hurricanes in a Warmer World,” Union of Concerned Scientists (2006). 5 This is a tricky issue. Paul Samuelson’s well-known paper (“Risk and Uncertainty: A Fallacy of the Law of Large Numbers,” Scientia, April/May 1963) urges caution regarding the pitfalls in repeated gambles and the issue of how far risk can be diversified through inter-temporal mechanisms. 6 Dwight Jaffee, Howard Kunreuther, and Erwann Michel-Kerjan, “Long-Term Insurance for Addressing Catastrophe Risk,” Working Paper # 14210, National Bureau of Economic Research (2008).

Priceless: The Myth of Fair Value (And How to Take Advantage of It)
by William Poundstone
Published 1 Jan 2010

With a few exceptions, they didn’t want to bother with measuring the psychological aspects of money. They much preferred to assume it could be done in principle. Utility is a powerful idea (so goes the prospectus) because its imaginary price tags determine all economic decisions. MIT economist Paul Samuelson developed this notion into his doctrine of “revealed preference.” This appealingly sensible thesis says that the only way to learn about utility is to look at the choices people make. Choices reveal all that we can know of utility, and utility in turn determines the prices that consumers are willing to pay.

…

“Each of the blind men was partly right,” says a character in an old Walt Kelly Pogo cartoon. “Yeah,” his friend adds, “but they were all mostly wrong.” Twelve Cult of Rationality The Las Vegas experiment threw down the gauntlet. By using real people and real money, Lichtenstein and Slovic had invaded economists’ turf. Their experiment was a challenge to Paul Samuelson’s doctrine of revealed preference, a bulwark of modern economics. In some situations at least, revealed preferences weren’t so revealing at all. Choices failed to predict the prices people would pay. As Lichtenstein put it: “If you can’t talk about a preference, what the hell can you talk about?”

A World Without Work: Technology, Automation, and How We Should Respond
by Daniel Susskind
Published 14 Jan 2020

Goos and Manning in “Lousy and Lovely Jobs” were perhaps the first to put the ALM hypothesis to use in this way. 27.  Hans Moravec, Mind Children (Cambridge, MA: Harvard University Press, 1988). 28.  The origins of this quotation are contested. The earliest recorded version of it comes from the Nobel Prize–winning economist Paul Samuelson, but Samuelson himself later attributed it to Keynes. See http://quoteinvestigator.com/2011/07/22/keynes-change-mind/. 29.  Carl Frey and Michael Osborne, “The Future of Employment: How Susceptible Are Jobs to Computerisation?,” Technological Forecasting and Social Change 114 (January 2017): 254–80. 30.  

…

In 1977, the ratio was 28.2, in 2000 it was 376.1, and in 2014 it had fallen to 303.4. 27.  “It is rather remarkable how nearly constant are the proportions of the various categories over long periods of time, between both good years and bad. The size of the total social pie may wax and wane, but total wages seem always to add up to about two-thirds of the total.” Paul Samuelson, quoted in Hagen Krämer, “Bowley’s Law: The Diffusion of an Empirical Supposition into Economic Theory,” Papers in Political Economy 61 (2011). 28.  John Maynard Keynes, “Relative Movements of Real Wages and Output,” Economic Journal 49, no. 93 (1939): 34–51; Nicholas Kaldor, “A Model of Economic Growth,” Economic Journal 67, no. 268 (1957): 591–624; and Charles Cobb and Paul Douglas, “A Theory of Production,” American Economic Review 18, no. 1 (1928): 139–65. 29.  

Capital in the Twenty-First Century
by Thomas Piketty
Published 10 Mar 2014

Furthermore, the fact that the Soviet Union joined the victorious Allies in World War II enhanced the prestige of the statist economic system the Bolsheviks had put in place. Had not that system allowed the Soviets to lead a notoriously backward country, which in 1917 had only just emerged from serfdom, on a forced march to industrialization? In 1942, Joseph Schumpeter believed that socialism would inevitably triumph over capitalism. In 1970, when Paul Samuelson published the eighth edition of his famous textbook, he was still predicting that the GDP of the Soviet Union might outstrip that of the United States sometime between 1990 and 2000.17 In France, this general climate of distrust toward private capitalism was deepened after 1945 by the fact that many members of the economic elite were suspected of having collaborated with the German occupiers and indecently enriched themselves during the war.

…

Nevertheless, the “U-shaped curve” of the capital/income ratio in the twentieth century is smaller in amplitude in the United States than in Europe. Expressed in years of income or output, capital in the United States seems to have achieved virtual stability from the turn of the twentieth century on—so much so that a stable capital/income or capital/output ratio is sometimes treated as a universal law in US textbooks (like Paul Samuelson’s). In comparison, Europe’s relation to capital, and especially private capital, was notably chaotic in the century just past. In the Belle Époque capital was king. In the years after World War II many people thought capitalism had been almost eradicated. Yet at the beginning of the twenty-first century Europe seems to be in the avant-garde of the new patrimonial capitalism, with private fortunes once again surpassing US levels.

…

And if the savings and growth rates are such that the capital stock represents ten years of national income, then the return on capital will fall to 3 percent. In all cases, the capital share of income will be 30 percent. The Cobb-Douglas production function became very popular in economics textbooks after World War II (after being popularized by Paul Samuelson), in part for good reasons but also in part for bad ones, including simplicity (economists like simple stories, even when they are only approximately correct), but above all because the stability of the capital-labor split gives a fairly peaceful and harmonious view of the social order. In fact, the stability of capital’s share of income—assuming it turns out to be true—in no way guarantees harmony: it is compatible with extreme and untenable inequality of the ownership of capital and distribution of income.

With Liberty and Dividends for All: How to Save Our Middle Class When Jobs Don't Pay Enough
by Peter Barnes
Published 31 Jul 2014

A basic income guarantee, or citizen’s income, is an equal amount paid by government to all, with the money coming from general taxes. There’s no means test and the income is unconditional. Leading advocates have included economists Robert Theobald and Nobel Prize winner James Tobin.1 In 1968, Paul Samuelson, John Kenneth Galbraith, and 1,200 other economists signed a document supporting the idea.2 Four years later, a modest version ($1,000 per person per year) was proposed by presidential candidate George McGovern, whom Tobin advised. Called a “demogrant,” it was poorly explained, badly received, and quickly withdrawn.

The Quants
by Scott Patterson
Published 2 Feb 2010

The groundwork for the efficient-market hypothesis had begun in the 1950s with the work of Markowitz and Sharpe, who eventually won the Nobel Prize for economics (together with Merton Miller) in 1990 for their work. Another key player was Louis Bachelier, the obscure French mathematician who argued that bond prices move according to a random walk. In 1954, MIT economist Paul Samuelson—another future Nobel laureate—received a postcard from Leonard “Jimmie” Savage, a statistician at Chicago. Savage had been searching through stacks at a library and stumbled across the work of Bachelier, which had largely been forgotten in the half century since it had been written. Savage wanted to know if Samuelson had ever heard of the obscure Frenchman.

…

“Patterns of price movements are not random,” he said, a shot across the bow of the efficient-market random walkers such as Eugene Fama. “However, they’re close enough to random so that getting some excess, some edge out of it, is not easy and not so obvious, thank God.” After chuckling at this cryptic statement, Simons added: “God probably doesn’t care.” One day in 2003, Paul Samuelson came to speak at Renaissance’s headquarters in East Setauket. The MIT economist and Nobel laureate had long held that it was impossible to beat the market. He qualified that statement by saying that if anyone could do it, they would hide away and not tell anyone about their secret. “Well, it looks like I’ve found you,” Samuelson said to the laughter of the wealthy quants of East Setauket.

A Mind at Play: How Claude Shannon Invented the Information Age
by Jimmy Soni and Rob Goodman
Published 17 Jul 2017

It didn’t help that, in appearance, Wiener was easy to ridicule. Bearded, bespectacled, nearsighted, with red-veined skin and a ducklike walk, there was hardly a stereotype of the addle-pated academic that Wiener did not fulfill. “From every angle of vision there was something idiosyncratic about Norbert Wiener,” mused Paul Samuelson. Hans Freudenthal remembered, In appearance and behaviour, Norbert Wiener was a baroque figure, short, rotund, and myopic, combining these and many qualities in extreme degree. His conversation was a curious mixture of pomposity and wantonness. He was a poor listener. . . . He spoke many languages but was not easy to understand in any of them.

…

“It turned out that everything he claimed”: Sergio Verdú, “Fireside Chat on the Life of Claude Shannon,” www.youtube.com/watch?v=YEt9P2kp9BE. Chapter 19: Wiener “the American John Von Neumann”: Nasar, A Beautiful Mind, 135. “I had full liberty . . . He would begin the discussion”: Norbert Wiener, Ex-Prodigy: My Childhood and Youth (Cambridge, MA: MIT Press, 1964), 67–68. “From every angle”: Paul Samuelson, “Some Memories of Norbert Wiener,” in The Legacy of Norbert Wiener: A Centennial Symposium (Cambridge, MA: American Mathematical Society, 1994). “In appearance and behaviour”: Hans Freudenthal, “Norbert Wiener,” in Complete Dictionary of Scientific Biography, www.encyclopedia.com/people/science-and-technology/mathematics-biographies/norbert-wiener.

Transaction Man: The Rise of the Deal and the Decline of the American Dream
by Nicholas Lemann
Published 9 Sep 2019

Using dozens of dense mathematical formulas, its authors, Kenneth Arrow and Gerard Debreu, endeavored to demonstrate that under the right economic conditions, prices will always find their natural level—which made their findings a far cry from Berle’s, Means’s, and Galbraith’s argument that it was a good idea for government to set prices. No one who was not an academic economist may have read the Arrow-Debreu article, but from 1948 on, millions of college students learned about economics from an introductory textbook by Arrow’s relative by marriage, Paul Samuelson, which presented Keynesian economic management as gospel and was highly skeptical of Berle-style planning (and, in later editions, specifically made fun of Galbraith for being an unrigorous popularizer). After the war, academic economists, who usually thought in terms of how well markets functioned rather than how much power corporations had, had their own permanent office in the White House, the Council of Economic Advisers.

…

Not long afterward, he took up a senior position at Citigroup, his friend Sanford Weill’s firm, whose rise to the status of financial superpower he had helped from his government position. Summers succeeded Rubin as Treasury secretary, and it fell to him to complete the work on derivatives that Brooksley Born’s attack had made necessary. Summers was an academic economist, the scion of an economics royal family—the Nobel Prize winners Kenneth Arrow and Paul Samuelson were both his uncles. The inventors of modern derivatives were the kind of people for whom he had the greatest respect. “Larry thought I was overly concerned with the risks of derivatives,” Rubin, who had run the trading floor at Goldman Sachs and thought of himself as an expert on prudent assessment of risk, wrote in his memoir.

Panderer to Power
by Frederick Sheehan
Published 21 Oct 2009

Greenspan was not a prolific contributor to academic journals. 27“Economists Sift Jobs and Stocks,” New York Times, December 28, 1959, p. 39. 28 “Wall Street Worries,” Time, January 26, 1962. “The New Economics” In 1961, John Kennedy was a fresh face in the White House. He recruited advisors who promoted the “New Economics,” largely, an American version of John Maynard Keynes’s beliefs. A leading proponent was Paul Samuelson: a graduate of the University of Chicago, of Harvard University, a kingpin of the Massachusetts Institute of Technology’s rise as an economic think tank, and a fervent flag waver for the efficient market hypothesis (EMH).29 In 1970, Samuelson would be awarded the Nobel Prize in economic sciences.

…

Only an accredited economist could think it made sense: “We cannot and will not accept any ‘speed limit’ on American growth.”45 No speed limit was applied to either the stock market or to the house mortgage market, the engines for growth over the next decade. The MIT-and Harvard-trained Summers, nephew of Nobel Prize–winning economist Paul Samuelson, leads the Obama administration’s brain trust. Beckner continued: “Fed officials deny these election-year attempts to pressure them had any impact, but thereafter Greenspan and others went to great lengths to deny they wanted to restrain growth.”46 Magnifying glass in hand, Beckner sniffs the trail: “In his February 20, 1996 … testimony, Greenspan … said the Fed would ‘welcome’ faster growth.”47 Beckner spoke to a “former Fed official” shortly before Clinton blessed Greenspan’s third term as chairman: “Alan Greenspan is so dedicated to trying to get himself reappointed that he is willing to compromise some of his independence in order to do so.

It's Better Than It Looks: Reasons for Optimism in an Age of Fear
by Gregg Easterbrook
Published 20 Feb 2018

Only two generations ago, intelligent people in the West actually believed Nikita Khrushchev’s “we will bury you” boast—that the communist working class would overawe the free-market world economically by outproducing the West. Did not historical determinism mandate this result? Was not communism elaborately organized around industrial production, while the Enlightenment system was organized around the frail notion of personal happiness? In 1961, Paul Samuelson, the first American to win the Nobel Prize for Economics, predicted the Soviet economy would pass the US economy by the 1980s at the latest. Around the same time, John Kenneth Galbraith, Samuelson’s rival as highest-profile American economist, began to say that an evolving “technostructure” of huge, impersonal factories would blow American-style entrepreneurs out of the water.

…

Roser shows that if one person in one hundred lived in democracy two centuries ago, today there are fifty-six. Jonathan Powell of Central Florida University and Clayton Thyne of the University of Kentucky: Jonathan Powell and Clayton Thyne, “Coup d’État or Coup d’Autocracy? The Impact of Coups on Democratization, 1950–2008,” Foreign Policy Analysis, February 2016. Paul Samuelson… predicted the Soviet economy would pass the US economy by the 1980s at the latest: Samuelson’s venerable textbook Economics (New York: McGraw Hill), which first went to press in 1948, began including this forecast with the 1961 edition. The United States outproduces China and Russia combined: As elsewhere in this book, this is the standard calculation—employed by the World Bank, the CIA, and other authorities—for gauging GDP by exchange rates.

The Great Divide: Unequal Societies and What We Can Do About Them
by Joseph E. Stiglitz
Published 15 Mar 2015

I was driven to find out why our society worked the way it did. I became an economist not just to understand inequality, discrimination, and unemployment but also, I hoped, to do something about these problems plaguing the country. The most important chapter of my Ph.D. thesis at MIT, written under the supervision of Robert Solow and Paul Samuelson (both of whom were later to receive Nobel Prizes), focused on the determinants of the distribution of income and wealth. Presented in a meeting of the Econometric Society (the international association of economists focusing on mathematics and statistical applications to economics) in 1966 and published in its journal, Econometrica, in 1969, it still often serves half a century later as a framework for thinking about the subject.

…

But the articles are based on a long history of academic research, begun when I was a graduate student at M.I.T. and a Fulbright scholar at Cambridge, UK, in the mid-1960s. Back then—and until recently—there was little interest among the American economics profession in the subject. And so, I owe a great deal to my thesis supervisors, two of the great economists of the twentieth century, Robert Solow (whose own dissertation was on the subject) and Paul Samuelson, for encouraging me in this line of research, as well as for their great insights.4 And an especial thanks to my first co-author, George Akerlof, who shared the 2001 Nobel Prize with me. At Cambridge, we often discussed the determinants of the distribution of income, and I benefited enormously from conversations with Frank Hahn, James Meade, Nicholas Kaldor, James Mirrlees, Partha Dasgupta, David Champernowne, and Michael Farrell.

The Job: The Future of Work in the Modern Era
by Ellen Ruppel Shell
Published 22 Oct 2018

What the Finnish story tells us is that foretelling the future of work is no easier than foretelling the future of anything—“common wisdom” can lead us astray. Clearly, it is time to think—and act—anew. 12 ABOLISH HUMAN RENTALS In our society, labor is one of the few productive factors that cannot legally be bought outright. Labor can only be rented. —PAUL SAMUELSON I have always been fully persuaded that, through co-operation, labor could become its own employer. —LELAND STANFORD Robert Owen, father of the modern worker-cooperative movement, was born in Newtown, North Wales, on May 14, 1771, the sixth of seven children. His father was an ironmonger and his mother the daughter of farmers.

…

And the manufacturing process is critical to the successful commercialization of scientific discoveries and technological innovation. The production process is—in its own right—a driver of innovation, and production workers are—in their own right—knowledge workers. In other words, invention and production are complementary processes, and sending production abroad risks cramping innovation at home. As economist Paul Samuelson once wryly observed: “Invention abroad that gives to [other countries] some of the comparative advantage that had belonged to the United States can induce for the United States permanent lost per capita real income.” Innovation tends to bubble up from a synergy of research, development, and production, and an ongoing conversation among engineers, designers, factory managers, and the customers they serve.

Bourgeois Dignity: Why Economics Can't Explain the Modern World
by Deirdre N. McCloskey
Published 15 Nov 2011

For example: “What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.”8 But in his other published book one can find hundreds of pages in praise also of other virtues, especially temperance or, in the unpublished Lectures on Jurisprudence, justice. And even in the Wealth of Nations, I have noted, unless one is precommitted to seeing its implied hero as merely a confused precursor to Karl Marx’s Mister Money Bags or Paul Samuelson’s Max U, one can find a good deal of ethical judgment more grown-up than “prudence suffices” or “greed is good.”9 “Max U,” remember, is a little joke, referring to the Maximization of Utility under Constraints that Samuelson laid down as the monopolistic principle of modeling in economics in his modestly entitled PhD dissertation and then book, Foundations of Economic Analysis (1947).

…

Max U—McCants writes, are “not to be lightly dismissed as implausible.” But then she lightly dismisses the compassionate explanations, with a scientific method misapprehended, albeit in a way that some economists do misapprehend it—altruism, she says, holds “little predictive power.” She has adopted the ugly little orphan Max U, fathered by the economist Paul Samuelson over in another building at her Massachusetts Institute of Technology. “After a long tradition of seeing European charity largely as a manifestation of Christian values,” McCants is relieved to report, “scholars have begun to assert the importance of self-interest.”5 Her own interpretation of the Amsterdam Municipal Orphanage is that it was “charity for the middling,” a species of insurance against the risks of capitalism.6 The bourgeois said to themselves, as it were, “There but for the grace of God go our own orphaned bourgeois children.

…

Or, Kołakowski continues, “Efficiency as a supreme value calls again for despotism [in central planning], and despotism is inefficient above a certain level of technology,” another point that has eluded the enthusiasts for regulation and planning.10 Thomas Balogh, the Hungarian-origin British economist who advised the Labour politicians after Sputnik, predicted confidently that “Russian output per head will surpass that of Britain in the early 1960s and that of the U.S. in the mid-1970s.”11 Paul Samuelson’s (and later also William Nordhaus’s) textbook in economics gave a chart in every editions from the 1950s on, far into the 1980s, making the identical claim that (according to every edition, using the same chart) in the next fifteen years the Soviet system would result in technological betterment surpassing that of the United States.12 Kołakowski’s subtlety about trade-offs can be expressed in the way the Dutch economist Jan Tinbergen (1903–1994) thought about economic policy.

Theory of Games and Economic Behavior: 60th Anniversary Commemorative Edition (Princeton Classic Editions)
by John von Neumann and Oskar Morgenstern
Published 19 Mar 2007

Reprinted by permission of the American Economic Association from The American Economic Review (December 1945) 35 (5): 909–25. Review, by T. Barna. Reprinted from Economica (May 1946) n.s. 13 (50): 136–38. Review, by Walter A. Rosenblith. Reprinted with permission from Psychometrika (March 1951) 16 (1): 141–46. Heads I Win, and Tails, You Lose, by Paul Samuelson. Reprinted from Book Week by permission of Paul Samuelson. Big D, by Paul Crume. Reprinted with permission from Dallas Morning News (December 5, 1957). Mathematics of Games and Economics, by E. Rowland. Reprinted with permission from Nature (February 16, 1946) 157: 172–73. Copyright © 1946 Macmillan Publishers Ltd. Theory of Games, by Claude Chevalley.

…

KUHN Theory of Games and Economic Behavior BY JOHN VON NEUMANN AND OSKAR MORGENSTERN Afterword, BY ARIEL RUBINSTEIN REVIEWS The American Journal of Sociology, BY HERBERT A. SIMON Bulletin of the American Mathematical Society, BY ARTHUR H. COPELAND The American Economic Review, BY LEONID HURWICZ Economica, BY T. BARNA Psychometrika, BY WALTER A. ROSENBLITH Heads I Win, and Tails, You Lose, BY PAUL SAMUELSON Big D, BY PAUL CRUME Mathematics of Games and Economics, BY E. ROWLAND Theory of Games, BY CLAUDE CHEVALLEY Mathematical Theory of Poker Is Applied to Business Problems, BY WILL LISSNER A Theory of Strategy, BY JOHN MCDONALD The Collaboration between Oskar Morgenstern and John von Neumann on the Theory of Games, BY OSKAR MORGENSTERN Index Credits Introduction HAROLD W.

…

*The axiomatic treatment leaves utility a number determined up to a linear transformation. For a discussion of the relation of transformation groups to psychological scales see the Chapter by S. S. Stevens on “Mathematics, Measurement and Psychophysics” in the forthcoming Handbook of Experimental Psychology (S. S. Stevens, editor). Heads, I Win, and Tails, You Lose PAUL SAMUELSON This classic in the history of intellectual thought is now 20 years old and available in paperback form. Representing the collaboration of a mathematical genius and a gifted economist, the book not only has provided aesthetic delight to thousands of readers and a fertile field for subsequent mathematical research but also it has provided direct stimulus to the related fields of personal probability, decision-making in statistics and operations research, linear programming and more general optimizing.

The Limits of the Market: The Pendulum Between Government and Market
by Paul de Grauwe and Anna Asbury
Published 12 Mar 2017

In the famous  Kitchen Debate between Richard Nixon, then vice president of the United States, and Nikita Khrushchev, then leader of the Soviet Union, Khrushchev declared with great conviction that the Soviet Union would catch up with the US before the end of the century. Many people were indeed convinced that this would happen. The famous American economist Paul Samuelson who received the Nobel Prize in  was also the author of the most popular and influential economics textbook. The  edition included an extrapolation of GDP per capita in the US and in the Soviet Union showing that by  the Soviet Union would have caught up and surpassed the US. In later editions this catch-up moment was pushed further into the future, until the  edition dropped this extrapolation altogether.

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis
by Anatole Kaletsky
Published 22 Jun 2010

Better still, the neoclassical synthesis, in contrast to the classical economics of the nineteenth-century, made room for the post-Depression political realities of welfare safety nets and active demand management to stabilize business cycles, by explaining that the Fordist economic machine needed occasional lubrication, “pump-priming,” and “kickstarting” by a benignly probusiness government. Thus the new paradigm was able to co-opt both the Left and the Right. Conservatives were happy to describe the new orthodoxy as the neoclassical synthesis, while progressives such as Paul Samuelson and Robert Solow felt able to call it neo-Keynesian economics. In this process of accommodation to the postwar ideological consensus, however, the most important insight of macroeconomics was lost: Financial instability was no longer recognized as a natural consequence of uncertainty about the future; financial cycles were now merely aberrations caused by imperfections that could, at least in theory, be ironed out by government intervention.

…

It will purge the rottenness out of the system.” Mellon quotation from Herbert Hoover’s autobiography, The Memoirs of Herbert Hoover: Vol. 3, The Great Depression, 31-32. For more details, see Chapter 11. 4 This accelerator-multiplier concept, first proposed by Sir Roy Harrod, was later refined by Paul Samuelson and Sir John Hicks and became the standard Keynesian business cycle model. 5 Justin Lahart, “In Time of Tumult, Obscure Economist Gains Currency,” Wall Street Journal, August 18, 2007. 6 George Soros, The Soros Lectures: At the Central European University. 7 Alan Greenspan, “The Challenge of Central Banking,” remarks at the Annual Dinner and Francis Boyer Lecture of the American Enterprise Institute for Public Policy Research, Washington, DC, December 5, 1996.

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor
by John Kay
Published 24 May 2004

Economists and Rationality ••••••••••••••••••••••••••••••••••••• The Chicagoan emphasis on rationality is taken to extreme lengths. 1 But it is almost a badge of honor among mainstream economists to seek explanations in rational or self-regarding behavior. Often, this is achieved by stretching the meaning of rationality. The approach is caricatured by Paul Samuelson. 2 "When the governess of infants caught in a burning building reenters it unobserved on a hopeless mission of rescue, casuists may argue 'she did it only to get the good feeling of doing it. Because otherwise she wouldn't have done it."' As Samuelson observes, this "explanation" is "not even wrong."

…

The arguments put forward by Greg Mankiw that I quote on page 201 are more intellectual than those Ronald Reagan, Margaret Thatcher, or either George Bush would espouse, but these politicians draw comfort from the perception that solid academic arguments can be found in support of their positions. And they influence a generation of students. As Mankiw himself observes, quoting Paul Samuelson, the most successful of all writers of economics textbooks: "I don't care who writes a nation's laws, or crafts its advanced treaties, if I can write its economics textbooks." 23 (This is before Mankiw took a position in the Bush administration.) Current Policy Controversies ••••••••••••••••••••••••••••••••••••• But a majority of working economists-including the leaders of the neoclassical tradition, such as Kenneth Arrow and Paul Samuelsonwere, like most social scientists, predominantly liberal.

A Man for All Markets
by Edward O. Thorp
Published 15 Nov 2016

In practice, one needs the ratio of expected profit to worst-case return—dynamically adjusted (that is, one gamble at a time) to avoid ruin. That’s all. Thorp and Kelly’s ideas were rejected by economists—in spite of their practical appeal—because of economists’ love of general theories for all asset prices, dynamics of the world, etc. The famous patriarch of modern economics, Paul Samuelson, was supposedly on a vendetta against Thorp. Not a single one of the works of these economists will ultimately survive: Strategies that allow you to survive are not the same thing as the ability to impress colleagues. So the world today is divided into two groups using distinct methods. The first method is that of the economists who tend to blow up routinely or get rich collecting fees for managing money, not from direct speculation.

…

Unknown to Einstein, his equations describing the Brownian motion of pollen particles were essentially the same as the equations that Bachelier had used for his thesis five years earlier to describe a very different phenomenon, the ceaseless, irregular motion of stock prices. Bachelier employed the equations to deduce the “fair” prices for options on the underlying stocks. Unlike Einstein’s work, Bachelier’s remained generally unknown until future Nobel laureate (1970) Paul Samuelson came across it in a Paris library in the 1950s and had it translated into English. Bachelier’s paper appeared in 1964 in The Random Character of Stock Market Prices, edited by Paul Cootner and published by the MIT Press. Part of my early self-education in finance, this collection of articles applying scientific analysis to finance strongly influenced me and many others.

Adam Smith: Father of Economics
by Jesse Norman
Published 30 Jun 2018

What exactly is ‘mainstream economics’? This apparently straightforward question has proven to be rather contentious, for the word ‘mainstream’ can be used and misused for ideological or professional purposes to define and sideline others as unorthodox, narrow or irrelevant. It is conventionally identified with the work of Paul Samuelson, the third (1955) edition of whose best-selling Economics offered a mathematically rigorous but accessible synthesis combining ‘foundations’ in the microeconomics of companies and markets with a wider picture taken from the Keynesian macroeconomics of GDP, inflation, employment and the rest; it became over many editions the best-selling economics textbook of all time.

…

For Keynes, Smith stood above it; as he wrote in his Essays in Biography, ‘Economists must leave to Adam Smith alone the glory of the Quarto, must pluck the day, fling pamphlets into the wind, write always sub specie temporis, and achieve immortality by accident, if at all.’ And in his insistence on seeing man as a human animal, and on embedding markets within a social and normative context, Keynes was perhaps more Smithian than he acknowledged. Paul Samuelson later took Keynes’s economics and—drawing on work by John Hicks—turned it into the crucially different ‘Keynesian economics’. But in many ways that so-called ‘neoclassical synthesis’ would be better described as a Keynesian synthesis; and even that phrase does insufficient justice to Keynes’s own creativity, realism and willingness to explore behaviour that others took to be economically irrational or mathematically intractable.

Beat the Market
by Edward Thorp
Published 15 Oct 1967

The scientific analysis of securities prices has been pursued in Ameri- 193 can universities with increasing intensity during recent years. Some of the important papers appear in The Random Character of Stock Prices, published by the M. I. T. Press. The last part of the book discusses work in options, including warrants. One of the nation’s leading mathematical economists, Paul Samuelson of M. I. T., has studied warrants for eleven years [15]. This group, undoubtedly aware of the technique of hedging, must eventually recognize the enormous profit potential of the basic system and related methods. We learned just how widespread the concept of hedging was when Ed Thorp addressed the Air Force Eleventh Annual Summer Scientific Conference.

Success and Luck: Good Fortune and the Myth of Meritocracy
by Robert H. Frank
Published 31 Mar 2016

And why do so many of us downplay luck’s importance in the face of compelling evidence to the contrary? One plausible explanation, I’ll argue, is that people with more realistic beliefs about their talents and about luck’s importance may actually find it more difficult to muster the will to overcome the difficult obstacles that litter every path to success. The economist Paul Samuelson once said, “Never underestimate the willingness of a man to believe flattering things about himself.” Samuelson was not a behavioral economist, but he clearly recognized that people’s self-assessments were often higher than warranted by objective evidence. In surveys, for example, more than 90 percent of people describe themselves as above-average drivers.

Masters of Mankind
by Noam Chomsky
Published 1 Sep 2014

Popular control of economic institutions is of course not discussed. 29. Alfred D. Chandler Jr., “The Role of Business in the United States: A Historical Survey,” Daedelus, Winter 1969. 30. Chandler, “The Role of Business in the United States.” The experience prompted the following remark by Paul Samuelson: “It has been said that the last year was the chemist’s war and that this one is the physicist’s. It might equally be said that this is an economist’s war.” New Republic, September 11, 1944. Cited in Robert Lekachman, The Age of Keynes (New York: Random House, 1966). Perhaps we might regard the Vietnam War as another “economist’s war,” given the role of professional economists in helping maintain domestic stability so that the war might be fought more successfully. 31.

The Production of Money: How to Break the Power of Banks
by Ann Pettifor
Published 27 Mar 2017

As the governor of the Bank of England at the time, Mervyn King, explained in 2012, ‘The dominant school of modern monetary policy theory – the New Keynesian model as it is called – lacks an account of financial intermediation, so money, credit and banking play no meaningful role.’2 Yet policies based on this vacuum in economic theory still prevail in all western treasuries and in major university economics departments. Unbelievably, they are informed by the economist Paul Samuelson’s barter-based theory of money and credit: ‘Even in the most advanced industrial economies, if we strip exchange down to its barest essentials and peel off the obscuring layer of money, we find that trade between individuals or nations largely boils down to barter.’3 With money and money-creation helpfully obscured by economists, and regulation trained on meaningless capital adequacy targets, business is better than usual for credit-creating commercial bankers, even while their balance sheets effectively remain under water.

Big Mistakes: The Best Investors and Their Worst Investments
by Michael Batnick
Published 21 May 2018

He was fired as CEO of Wellington Management in 1974 but convinced the board to let him stay on as chairman and president of the Wellington Fund. Abject failure would give birth to the most important financial innovation the world has ever seen, the index fund. In 2005, at a Boston Security Analysis Society event, the great Paul Samuelson said: I rank this Bogle invention along with the invention of the wheel, the alphabet, Gutenberg printing, and wine and cheese: a mutual fund that never made Bogle rich but elevated the long‐term returns of the mutual‐fund owners. Something new under the sun.18 Bogle had taken all of the lessons he learned and focused his attention into a better way of doing business.

The Social Animal: The Hidden Sources of Love, Character, and Achievement
by David Brooks
Published 8 Mar 2011

Physicists and other hard scientists were achieving great things, and social scientists sought to match their rigor and prestige. The influential economist Irving Fisher wrote his doctoral dissertation under the supervision of a physicist, and later helped build a machine with levers and pumps to illustrate how an economy works. Paul Samuelson applied the mathematical principles of thermodynamics to economics. On the finance side, Emanuel Derman was a physicist who became a financier and played a central role in developing the models for derivatives. While valuable tools for understanding economic behavior, mathematical models were also like lenses that filtered out certain aspects of human nature.

…

Denis Diderot. 21 This mode, as Guy Claxton Guy Claxton, The Wayward Mind: An Intimate History of the Unconscious (New York: Little, Brown Book Group, 2006). 22 Lionel Trilling diagnosed Lionel Trilling, The Liberal Imagination: Essays on Literature and Society (New York: New York Review of Books, 2008), ix–xx. 23 “deals with introspection” Robert Skidelsky, Keynes: The Return of the Master (New York: PublicAffairs, 2009), 81. 24 Paul Samuelson applied Clive Cookson, Gillian Tett, and Chris Cook, “Organic Mechanics,” Financial Times, November 26, 2009, http://www.ft.com/cms/s/0/d0e6abde-dacb-11de-933d-00144feabdc0.html. 25 George A. Akerlof and Robert Shiller George A. Akerlof and Robert J. Shiller, Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters (Princeton, NJ: Princeton University Press, 2010), 1. 26 Jim Collins argues Jim Collins, “How the Mighty Fall: A Primer on the Warning Signs,” Businessweek, May 14, 2009, http://www.businessweek.com/magazine/content/09_21/b4132026786379.htm.

Wall Street: How It Works And for Whom
by Doug Henwood
Published 30 Aug 1998

Most of the instruments, despite their apparent novelty, are quite old, their age measured better in centuries than decades. What are these markets, and who populates them? stocks To many people, the stock market is Wall Street, and the New York Stock Exchange (NYSE) is the stock market. A recent edition of Paul Samuelson's warhorse economics text even described the exchange as the "hub" of capitalism, with no further explanation. Geography reinforces this perception; the NYSE stands at the intersection of Broad and Wall, at the spiritual epicenter of Manhattan's financial district. But in fact, stock market trading volume is dwarfed by trading in bonds and foreign exchange, and the NYSE itself accounts for a declining share of stock market volume.

…

The latter trace their pedigree to Michal Kalecki; other ur-figures include Nicholas Kaldor and Joan Robinson. Davidson insists on spelling it "Post Keynesian." He said (personal communication) this was to distinguish his brand of thought from the "brand of neoclassical synthesis Keynesianism" that Paul Samuelson was calling post-Keynesian in the 1970s. The hyphen's absence, said Davidson, is "a matter of product differentiation." Even Davidson, however, is regarded as outre by the mainstream of the economics profession. For a brief overview, see Holt (1996). 4. Fixed capital consists mainly of machinery and buildings; working capital, of materials in the process of production; and liquid capital, of inventories (Keynes CWV, p. 116). 5.

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis
by Martin Wolf
Published 24 Nov 2015

It is necessary for the creditworthy to borrow when those who are no longer creditworthy cannot. If everybody tries to cut down on borrowing and spending at the same time, the result will be a depression: that is the ‘paradox of thrift’ – a phrase first popularized by the late Nobel laureate, Paul Samuelson.68 Yet another explanation was politics. In the US, for both electoral and ideological reasons, the Republican Party was irrevocably opposed to the idea that the government could do anything useful about the economy except by leaving it alone, and so could not tolerate the possibility that the Obama administration might prove the opposite in the aftermath of the biggest economic crisis for eighty years.

…

Richard Koo, The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession (Singapore: John Wiley, 2008). 66. ‘Leaders’ Statement: The Pittsburgh Summit’, http://www.ft.com/cms/s/0/5378959c-aa1d-11de-a3ce-00144feabdc0.html. 67. ‘The G-20 Toronto Summit Declaration’, 26–27 June 2010, http://www.g20.utoronto.ca/2010/to-communique.html. 68. Paul Samuelson, Economics, first edition (New York: McGraw-Hill, 1948). 69. Martin Wolf, ‘The Toxic Legacy of the Greek Crisis’, Financial Times, 18 June 2013, http://www.ft.com/cms/s/0/b31dd248-d785-11e2-a26a-00144feab7de.html. 2. The Crisis in the Eurozone 1. Financial Times, 5 September 2011. 2.

Globalists: The End of Empire and the Birth of Neoliberalism
by Quinn Slobodian
Published 16 Mar 2018

In his writings from the 1930s to the 1980s, Haberler insisted that the open world economy was impor­tant as a means of disciplining potentially inflationary social spending and rash proj­ects of industrialization—­and the potential prob­lems of the developing nations ­were never far from his mind.102 In the 1990s Paul Samuelson remembered Haberler as a “minority voice” for his advocacy of “market disciplines” rather than import substitution and state-­driven development in the 1950s and 1960s.103 Published in October 1958, the Haberler Report could have been written in Geneva twenty-­five years earlier. Far from arguing that liberalization hindered development, it concluded that liberalization had not gone far enough.

…

For his criticism of inflationary policies in developing countries, see Gottfried Haberler, “Inflation,” in The Conservative Papers, ed. Melvyn Laird (Chicago: Quadrangle Books, 1964); Haberler, “The Case for Minimum Interventionism,” in Foreign Aid Reexamined: A Critical Appraisal, ed. James W. Wiggins (Washington, DC: Public Affairs Press, 1958). 103. Paul Samuelson, “Gottfried Haberler (1900–95),” Journal of International Trade and Economic Development 4, no. 3 (1995): 414. 104. GATT, Trends in International Trade: Report by a Panel of Experts (Geneva: GATT, 1958), 119. 105. A. B. Hersey, Associate Adviser, Division of International Finance, Board of Governors of the Federal Reserve, April 6, 1959, Haberler Papers, “GATT Panel” folder; J.

The Finance Curse: How Global Finance Is Making Us All Poorer
by Nicholas Shaxson
Published 10 Oct 2018

Tiebout could not know it then, but his hastily drafted article would eventually become one of the most widely cited articles in economics.4 A phrase in that conversation with Leven – ‘revealed preference’ – ought to twitch the antennae of any mainstream economist. Tiebout was referring to Revealed Preference Theory, which the US economist Paul Samuelson had created in 1938. The basic idea was that while you can’t insert psychological probes directly into people’s minds to figure out their consumer preferences, you can have the next best thing: if you study their buying habits you can reveal their preferences and plug this data into the Chicago School’s elegant mathematical models and graphs.

…

According to William Fischel, an expert on Tiebout and public sector economics at Dartmouth College, Tiebout was making an argument to ‘stop dissing your local government – because this is the one you chose.’ From my telephone interview with Fischel, 22 November 2016. As Tiebout (1956, p.422) put it: ‘Spatial mobility provides the local public-goods counterpart to the private market’s shopping trip.’ For a good summary see Matthew Watson, ‘Paul Samuelson and the Provision of Collective Consumption Goods: A Rejection of Competitiveness Logic’, foolsgold.international, 23 July 2015, to be posted on financecurse.org. 7. Telephone interview with Singleton, 3 November 2016. 8. See for instance Walter Scheidel, ‘The Only Thing, Historically, That’s Curbed Inequality: Catastrophe’, Atlantic, 21 February 2017. 9.

Model Thinker: What You Need to Know to Make Data Work for You
by Scott E. Page
Published 27 Nov 2018

All of these models were developed with specific purposes in mind. One would not apply a model from physics to the economy or a model from economics to the brain any more than one would use a sewing machine to repair a leaky pipe. Taking models out of their disciplinary silos and practicing one-to-many has produced notable successes. Paul Samuelson reinterpreted models from physics to explain how markets attain equilibria. Anthony Downs applied a model of ice cream vendors competing on a beach to explain the positioning of political candidates competing in ideological space. Social scientists have applied models of interacting particles to explain poverty traps, variation in crime rates, and even economic growth across countries.

…

The same logic applies to patterns in stock prices: if they exist, they go away. A market with smart investors will therefore contain few predictable price patterns. If prices exhibit no pattern, what remains must be a random walk (with the caveat that the general upward market trend must be subtracted away). Paul Samuelson wrote an early model that produced a random walk. His model did not require that investors know the value of the stock in all future periods, only that they know the distribution. As Samuelson himself notes, “One should not read too much into the established theorem. It does not prove that actual competitive markets work well.”17 Samuelson’s reticence was not shared by everyone.

Good Economics for Hard Times: Better Answers to Our Biggest Problems
by Abhijit V. Banerjee and Esther Duflo
Published 12 Nov 2019

In our survey, 42 percent of respondents thought low-skilled workers are hurt when the United States trades with China (21 percent thought they are helped), and only 30 percent thought everyone is helped by the fall in prices (27 percent said they thought everyone was hurt).4 So is the public simply ignorant, or might it have intuited something the economists have missed? STAN ULAM’S CHALLENGE Stanislas Ulam was a Polish mathematician and physicist, one of the co-inventors of modern thermonuclear weapons. He had a low opinion of economics, perhaps because he underestimated economists’ capacity to blow up the world, albeit in their own way. Ulam challenged Paul Samuelson, our late colleague and one of the great names in twentieth-century economics, to “name me one proposition in all of the social sciences which is both true and non-trivial.”5 Samuelson came back with the idea of comparative advantage, the central idea in trade theory. “That this idea is logically true need not be argued before a mathematician; that it is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.”6 Comparative advantage is the idea that countries should do what they are relatively best at doing.

…

Ricardo’s insight underlines why there is no way to think of trade without thinking about all the markets together. China could win in any single market and yet there is no way for it to win in every market. Of course, the fact that GNP goes up (both in England and in Portugal) does not mean there are no losers. In fact, one of Paul Samuelson’s most famous papers purports to tell us exactly who the losers are. Ricardo’s entire discussion assumed production required only labor, and all workers were identical, so when the economy became richer everyone benefitted. Once there is capital as well as labor, things are not that simple. In a paper published in 1941, when he was just twenty-five, Samuelson set out the ideas that remain the basis of how we are taught to think about international trade.8 The logic, once you understand it, as is often the case with the best insights, is compellingly simple.

Willful: How We Choose What We Do
by Richard Robb
Published 12 Nov 2019

Peirce, “Fixation of Belief.” 4. Kierkegaard, Fear and Trembling/Repetition, 132–133. 5. There is no direct evidence linking this famous quote to Keynes, although Joan Robinson wrote in the Economic Journal in 1986 that Keynes would say it whenever he was accused of being inconsistent. The Wall Street Journal quoted Paul Samuelson in 1978 attributing a similar remark to Keynes. For an impressively rigorous analysis of the provenance of this quote, see http://quoteinvestigator.com/2011/07/22/keynes-change-mind/ (accessed February 7, 2019). 6. Nyhan et al., “Effective Messages in Vaccine Promotion,” 835. 7. Twain, Tom Sawyer Abroad, 77. 8.

The Gone Fishin' Portfolio: Get Wise, Get Wealthy...and Get on With Your Life
by Alexander Green
Published 15 Sep 2008

It’s true that many people don’t know enough to manage their own money. There is, however, a simple remedy for this. And this book aims to provide it. So don’t let your full-service broker give you a low whistle and a shake of the head. Listen to those with a more independent frame of mind.• Nobel Laureate Paul Samuelson has said, “It is not easy to get rich in Las Vegas, at Churchill Downs, or at the local Merrill Lynch office.” • Investment commentator Ben Stein writes, “Are you by chance a ‘high-net-worth’ individual? That special handling everyone is giving you is merely the anesthetic that precedes the surgical removal of your wallet

The Chomsky-Foucault Debate: On Human Nature
by Noam Chomsky and Michel Foucault
Published 1 Jan 1974

Perhaps I can illustrate this once again with a personal anecdote: In the spring of 1969 a small group of students in economics here in Cambridge wanted to initiate a discussion of the nature of economics as a field of study. In order to open this discussion, they tried to organize a debate in which the two main speakers would be Paul Samuelson, the eminent Keynesian economist at MIT (today a Nobel laureate), and a Marxist economist. But for this latter role they were not able to find anyone in the Boston area, no one who was willing to question the neoclassical position from the point of view of Marxist political economy. Finally I was asked to take on the task, though I have no particular knowledge of economics, and no commitment to Marxism.

The People's Republic of Walmart: How the World's Biggest Corporations Are Laying the Foundation for Socialism
by Leigh Phillips and Michal Rozworski
Published 5 Mar 2019

Hayek’s arguments may have worked to disarm some of Lange’s vision for planning, but they shouldn’t stop contemporary socialists from arguing for democratic planning that is also a process of discovery. Economics, if it is to be of use to those who desire an egalitarian society, needs to leave behind fantasy worlds. Paul Samuelson, one of the most influential mainstream economists of the postwar era and author of the economics textbook used in most graduate programs from the 1950s well into the 1970s, observed that in the idealized vision that animated both sides of the calculation debate, it doesn’t matter whether capital hires labor, or labor hires capital.

Damsel in Distressed: My Life in the Golden Age of Hedge Funds
by Dominique Mielle
Published 6 Sep 2021

Hedge funds that were already big ships were on their way to becoming supertankers. But this growth explosion had grave consequences for liquidity and flexibility. The two original sources of hedge fund competitive “edges” mostly went out the window. The Efficient Market Hypothesis, a cornerstone of modern finance usually associated with a paper by Eugene Fama and Paul Samuelson in 1970, proposes that asset prices fully reflect available information and that, as a result, consistently beating the market is impossible. An important assumption here is that liquidity is perfect, that there always are willing buyers and sellers. As far as I can tell from my twenty years of investing, there are fatal flaws in the application of the theory into practice.

The Wisdom of Finance: Discovering Humanity in the World of Risk and Return
by Mihir Desai
Published 22 May 2017

The original works in this stream of research are well discussed in this pioneering paper: Fama, Eugene. “Efficient Capital Markets: A Review of Theory and Empirical Work.”Journal of Finance 25, no. 2 (May 1970): 383–417. In particular, Fama is generous with his referencing of earlier work, including that of Paul Samuelson, Bill Sharpe, Benoit Mandelbrot, Paul Cootner, Jack Treynor, and others. This lecture is an excellent source on the ideas of efficient markets: Fama, Eugene. “A Brief History of the Efficient Market Hypothesis.” Lecture, Masters of Finance. February 12, 2014. https://www.youtube.com/watch?v=NUkkRdEknjI.

A Mathematician Plays the Stock Market
by John Allen Paulos
Published 1 Jan 2003

This may be why market pundits seem so much more certain than, say, sports commentators, who are comparatively frank in acknowledging the huge role of chance. Efficiency and Random Walks The Efficient Market Hypothesis formally dates from the 1964 dissertation of Eugene Fama, the work of Nobel prize-winning economist Paul Samuelson, and others in the 1960s. Its pedigree, however, goes back much earlier, to a dissertation in 1900 by Louis Bachelier, a student of the great French mathematician Henri Poincare. The hypothesis maintains that at any given time, stock prices reflect all relevant information about the stock. In Fama’s words: “In an efficient market, competition among the many intelligent participants leads to a situation where, at any point in time, actual prices of individual securities already reflect the effects of information based both on events that have already occurred and on events which, as of now, the market expects to take place in the future.”

Why Information Grows: The Evolution of Order, From Atoms to Economies
by Cesar Hidalgo
Published 1 Jun 2015

To achieve its goal, the new economic geography uses a number of theoretical tricks that help make these models tractable. These include the use of Dixit and Stiglitz’s monopolistic competition model (Avinash K. Dixit and Joseph E. Stiglitz, “Monopolistic Competition and Optimum Product Diversity,” American Economic Review 67, no. 3 [1977]: 297–308) or Paul Samuelson’s iceberg costs (Paul A. Samuelson, “The Transfer Problem and Transport Costs, II: Analysis of Effects of Trade Impediments,” Economic Journal 64, no. 254 [1954]: 264–289). Yet the highly stylized nature of the models has limited their empirical validation. In fact, early efforts to calibrate the models found that these have a tendency to agglomerate that was stronger than that observed in the real economy (see, for example, Paul Krugman, “What’s New About the New Economic Geography?

Rethinking Camelot
by Noam Chomsky
Published 7 Apr 2015

Others have argued that Kennedy’s threat was to the business elite and the wealthy, a position hard to square with fiscal policies that overwhelmingly benefited higher income groups, according to an analysis in the National Tax Journal, including the 1962 investment credit (“a bribe to capital formation,” in Paul Samuelson’s phrase) and the Revenue Act of 1964 proposed by Kennedy just before his assassination, which “provided for regressive personal and corporate income tax cuts,” economists Du Boff and Herman observe. Note also that no policies relevant to the various theories about Kennedy-the-reformer were reversed under LBJ; those most opposed by the right were extended.56 Some have brought forth Latin America as the sign of Kennedy’s incipient radicalism.

Strong Towns: A Bottom-Up Revolution to Rebuild American Prosperity
by Charles L. Marohn, Jr.
Published 24 Sep 2019

The U.S. dollar was now as good as gold and would become the world’s reserve currency. To grasp the profound nature of this arrangement, understand that the sale of oil by the Soviet Union to communist China was done in U.S. dollars. Everyone wanting to trade needed dollars, an exorbitant privilege for the last country standing. The Post-War Boom Paul Samuelson, Nobel prize–winning economist and perhaps second only to Keynes in terms of influence on modern economics, wrote an essay in 1943 on employment after the war. He stated the consensus opinion among economists at the time, that there was nothing structurally different about the economy that would prevent the United States from sliding right back into depression once the war ended.

Safe Haven: Investing for Financial Storms
by Mark Spitznagel
Published 9 Aug 2021

Those remaining stray arrows are a fair criticism of the aggressive Kelly betting strategy, as it still has an abundance of risk. That 5th percentile outcome of 0.3 means a 70% loss—so a lot of bad things can still happen between the 5th and 50th percentile of our new shot grouping. Because of this, some have even cynically called it the Kamikaze criterion. The economist Paul Samuelson was particularly contentious of the Kelly criterion, and he mockingly wrote a critique of it using only single‐syllable words—all that he thought his detractors could understand. A typical passage from his paper reads: “We should not make mean log of wealth big…When you lose—and you sure can lose—with N large, you can lose real big.

Thinking, Fast and Slow
by Daniel Kahneman
Published 24 Oct 2011

Allais’s Paradox In 1952, a few years after the publication of von Neumann and Morgenstern’s theory, a meeting was convened in Paris to discuss the economics of risk. Many of the most renowned economists of the time were in attendance. The American guests included the future Nobel laureates Paul Samuelson, Kenneth Arrow, and Milton Friedman, as well as the leading statistician Jimmie Savage. One of the organizers of the Paris meeting was Maurice Allais, who would also receive a Nobel Prize some years later. Allais had something up his sleeve, a couple of questions on choice that he presented to his distinguished audience.

…

Because we are susceptible to WY SIATI and averse to mental effort, we tend to make decisions as problems arise, even when we are specifically instructed to consider them jointly. We have neither the inclination nor the mental resources to enforce consistency on our preferences, and our preferences are not magically set to be coherent, as they are in the rational-agent model. Samuelson’s Problem The great Paul Samuelson—a giant among the economists of the twentieth century—famously asked a friend whether he would accept a gamble on the toss of a coin in which he could lose $100 or win $200. His friend responded, “I won’t bet because I would feel the $100 loss more than the $200 gain. But I’ll take you on if you promise to let me make 100 such bets.”

Money and Power: How Goldman Sachs Came to Rule the World
by William D. Cohan
Published 11 Apr 2011

But Corzine stood up for Steck. “Shut the fuck up,” Corzine said. “He just saved the firm.” Steck became a partner. CHAPTER 13 POWER One of the people Goldman hired as a consultant during its consultant-hiring spree was Lawrence Summers, a Philadelphia-born Harvard economist whose two uncles—Paul Samuelson and Kenneth Arrow—had both won Nobel Prizes in economics. Summers’s parents, Robert and Anita, were also economics professors. During the summer of 1986, when Rubin and Friedman were still the co-heads of Goldman’s fixed-income group, Jacob Goldfield, a precocious and gifted young Goldman trader, suggested to Rubin that he and Summers should meet.

…

In 1991, while he was still an economics professor at Harvard, Summers wrote an influential chapter, “Planning for the Next Financial Crisis,” that appeared in a book published by the National Bureau of Economic Research. Other chapters in the book were written by economists Hyman Minsky, Paul Volcker, William Poole, and Paul Samuelson, Summers’s uncle. “It used to be said that a repeat of the depression of the 1930s was inconceivable now that governments better understood how to manage their economies,” Summers wrote. “Yet, both Latin America and Europe have suffered economic downturns during the 1980s on a scale comparable to the 1930s.

…

“I am not talking about mergers, but acquisitions.” As an example, Corzine could have mentioned Goldman’s May 1997, roughly $100 million acquisition of Commodities Corporation, a $2 billion managed futures, commodities, and currencies hedge fund based in Princeton, New Jersey, that counted among its founders Paul Samuelson, Larry Summers’s uncle. —— INTERNECINE WARFARE ASIDE, in the aftermath of the IPO announcement, Goldman Sachs seemed to be floating on a cloud: the partners were united behind a task (underwriting an IPO) for which they were the world’s experts and behind a cause (themselves) that provided them with all the incentive they could ever need to execute flawlessly.

Ever Since Darwin: Reflections in Natural History
by Stephen Jay Gould
Published 1 Jan 1977

But not a word about urban fear or the politics of sex—just some statements about chimps and the genetics of altruism (although they finally admit that reciprocal altruism probably does not apply—after all, they argue, what future benefit can one expect from a panhandler). In the first negative comment on Sociobiology, economist Paul Samuelson (Newsweek, July 7, 1975) urged sociobiologists to tread softly in the zones of race and sex. I see no evidence that his advice is being heeded. In his New York Times Magazine article of October 12, 1975, Wilson writes: In hunter-gatherer societies, men hunt and women stay at home. This strong bias persists in most [my emphasis] agricultural and industrial societies and, on that ground alone, appears to have a genetic origin.… My own guess is that the genetic bias is intense enough to cause a substantial division of labor even in the most free and most egalitarian of future societies.… Even with identical education and equal access to all professions, men are likely to continue to play a disproportionate role in political life, business and science.

The Global Auction: The Broken Promises of Education, Jobs, and Incomes
by Phillip Brown , Hugh Lauder and David Ashton
Published 3 Nov 2010

If we see the question of offshoring purely in terms of neoclassical theories of free trade, we miss the much larger point about how economic power in terms of capital, knowledge, innovation, and investment is being transformed. Instead of the win-win scenario painted by free trade evangelists, some Americans are losing out. Leading American economists such as Paul Samuelson, Ralph Gomory, and William Baumol have shown that, even within neoclassical trade theory, it is possible to see that there are conditions under which some countries lose while others gain. Their argument is not that all trade is harmful to a country’s interests but that under certain conditions, “the improvement of one country’s productive capabilities is attainable only at the expense of another country’s general welfare.”

Borrow: The American Way of Debt
by Louis Hyman
Published 24 Jan 2012

Another observation could have been made at the micro-economic level. If you ever have had the pleasure of taking Economics 101, you have studied how supply and demand determine markets. Adam Smith first came up with them in Wealth of Nations, but you would have probably learned them from the Nobel Prize–winning economist Paul Samuelson in his economics textbook, aptly named Economics, which he first published in 1948 and which continued to be used—albeit through many editions—until the early twenty-first century. You would have learned that if prices go up, consumer demand will go down. This feedback between price and demand creates stable markets.

10% Less Democracy: Why You Should Trust Elites a Little More and the Masses a Little Less
by Garett Jones
Published 4 Feb 2020

Maybe there really is no free lunch, and maybe having more of one item on the menu means getting less of another. Maybe if my team gets more, your team gets less. That outcome can’t be dismissed: it has a long tradition in economic thought, both technical and popular. Maybe, as then-future Nobel laureates Paul Samuelson and Robert Solow of MIT and James Tobin of Yale had suggested in the 1960s, there was some kind of near-permanent trade-off between low inflation and low unemployment. The government could choose to help out workers by heating up the economy, creating persistently low unemployment at the cost of persistently higher inflation, or it could instead help out the financial class, people with savings accounts and bonds, by keeping a cooler economy with lower inflation at the cost of higher unemployment.

The Knowledge Economy
by Roberto Mangabeira Unger
Published 19 Mar 2019

The diversity available for selection is treated as external to the concerns of economics. Post-marginalist economics simply takes its range and richness and its very existence for granted. It is an onerous failing: the fecundity of a method of competitive selection depends on the variety of the material with which it works. Paul Samuelson described the Ricardian doctrine of comparative advantage as the single most powerful insight of economics. It is all the more powerful for being counterintuitive. As does the whole of trade theory, it presupposes the division of the world into different economies operating under the shield of sovereign states.

How to Predict the Unpredictable
by William Poundstone

When valuations are low, “stocks are on sale” and it’s a great time to buy. Pundits are usually not talking about Shiller’s long-term changes but rather about the market ups and downs happening all the time, even on a daily basis. They propose trading a lot. Many of these experts are sponsored by brokers or mutual funds. Paul Samuelson memorably expressed the opinion of many economists. “Suppose it was demonstrated that one out of twenty alcoholics could learn to become a moderate social drinker,” Samuelson said. Then the wisest course would be to pretend that it wasn’t so. “You will never identify that one in twenty, and in the attempt five in twenty will be ruined.”

Open: The Progressive Case for Free Trade, Immigration, and Global Capital
by Kimberly Clausing
Published 4 Mar 2019

How Do Countries Compete? The gains from trade have been recognized for centuries. These gains hold even if wages differ across countries, and even if one country is more productive than its potential trading partners in making all things. This is the lesson of comparative advantage, an idea economist Paul Samuelson held up as exemplary of an economic insight that is both true and not immediately intuitive. Consider first a simple example of a self-sufficient household with two family members, Karen and Peter. Karen is better at both of the key household tasks, hunting and gathering, but she is four times better than Peter at hunting and only two times better at gathering.

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present
by Jeff Madrick
Published 11 Jun 2012

Many American economists, who up to the Great Depression and even World War II were mostly avowed classical theorists, now quickly converted to Keynesianism. The converts included Alvin Hansen, an influential Harvard professor, who had earlier argued that the nation’s technological advances were simply petering out, and also young newcomers to the profession like Paul Samuelson and John Kenneth Galbraith. To Friedman, any views that promoted government spending as a way to stabilize economies and promote prosperity were not merely wrongheaded but seen as pandering to the majority by promising more social programs. Moreover, government itself had its own greedy expansionist motives, he believed.

…

His talent for popular writing and equally for articulate public speaking, rare for most economists, raised his visibility in the media. In 1964, The New York Times Magazine asked him to write a summary of Goldwater’s economic plans. In 1966, Newsweek offered him a column alternating with renowned Keynesians, notably Paul Samuelson. He made television appearances at a time when financial coverage on TV was scant. In particular, The Wall Street Journal editorialists exalted his theoretical powers and promoted his views time and again. Almost every suggestion Friedman made in Capitalism and Freedom was taken up by serious proponents over the next forty-five years.

The Complacent Class: The Self-Defeating Quest for the American Dream
by Tyler Cowen
Published 27 Feb 2017

Those numbers may to some degree understate real wages, because the methods of collecting inflation statistics do not capture all improvements in the quality of goods since 1969; those quality improvements, such as better-tasting chocolate, improve our lives but are not always easy to measure. Even so, a median wage decline over such a long period of time seems to go far beyond the bounds of what can be explained by statistical error alone. Imagine Milton Friedman and Paul Samuelson sitting around a table in 1969, debating the future of the economy. In their lifetimes, they’d observed roughly a doubling of living standards every generation. Imagine they are assuming that there will be no nuclear war, that communism will fall, and that the world moves significantly closer to near-free trade.

How Much Is Enough?: Money and the Good Life
by Robert Skidelsky and Edward Skidelsky
Published 18 Jun 2012

Under these conditions, free trade can be at the expense of rich country jobs, since wages cannot be sufficiently flexible to maintain continuous full employment in the face of low wage competition. And even if jobs destroyed can always be replaced, the question remains whether the new jobs are as good as the old ones. The offshoring of jobs to China and India has caused the real incomes of many Western workers to fall or stagnate, despite the gains of trade.46 As Nobel Laureate Paul Samuelson put it in an interview, “being able to purchase groceries 20 percent cheaper at Walmart does not necessarily make up for the wage losses” suffered as a result of these goods being made in China.47 Even when trade does produce a surplus of winners over losers so that winners could in principle compensate losers, there is no guarantee that they will.

The Global Minotaur
by Yanis Varoufakis and Paul Mason
Published 4 Jul 2015

It was at this point that successive British governments began clutching at straws – namely, the ‘special relationship’, which turned the UK into a minor executor of US policy in exchange for privileged access to the US market for British multinationals and the linkage of the City of London to Wall Street. 7. Interestingly, Marjolin had spent his formative pre-war years as a Rockefeller fellow at Harvard. In fact, while there, he participated in a reading group dedicated to understanding Keynes’ General Theory. The other two participants were John Kenneth Galbraith (1908–2006) and Paul Samuelson (1915–2009). Galbraith was to spend the war as Roosevelt’s ‘price czar’, determining the prices of all major commodities. Samuelson won the Nobel Prize for Economics and is credited with introducing Keynes (albeit in an oversimplified and, I would argue, toxic form) to Americans. 8. In a radio interview some years ago, linguistics professor and political activist Noam Chomsky pointed out an interesting fact about the Marshall Plan – one that links the United States, France and Holland with European imperialism in Asia.

Frequently Asked Questions in Quantitative Finance
by Paul Wilmott
Published 3 Jan 2007

Richardson later worked on the mathematics for the causes of war. 1923 Wiener Norbert Wiener developed a rigorous theory for Brownian motion, the mathematics of which was to become a necessary modelling device for quantitative finance decades later. The starting point for almost all financial models, the first equation written down in most technical papers, includes the Wiener process as the representation for randomness in asset prices. See Wiener (1923). 1950s Samuelson The 1970 Nobel Laureate in Economics, Paul Samuelson, was responsible for setting the tone for subsequent generations of economists. Samuelson ‘mathematized’ both macro and micro economics. He rediscovered Bachelier’s thesis and laid the foundations for later option pricing theories. His approach to derivative pricing was via expectations, real as opposed to the much later risk-neutral ones.

The Trouble With Billionaires
by Linda McQuaig
Published 1 May 2013

At Harvard, long a bastion of classical economics, a new crop of young economists was transforming the university into a hotbed of Keynesian activism. That new crop included many who would go on to be senior policy advisers and prominent commentators in the postwar years – John Kenneth Galbraith, Paul Samuelson, James Tobin and Robert Solow. Galbraith recalled that while classical economics continued to be taught in Harvard classes by day, ‘in the evening and almost every evening from 1936 onwards almost everyone in ‌the Harvard community discussed Keynes’.12 The ideas were even reaching a popular audience.

Stuffocation
by James Wallman
Published 6 Dec 2013

Through information gleaned from the income accounts, economists assessed the country’s capacity to produce the military goods that were essential in arming the US and its allies. They also designed the financial instruments that paid for them, and they planned the air force’s bomb strikes on Germany, in order to cause the most damage to the Nazi war effort. Their input proved so valuable that the economist Paul Samuelson would later claim that World War II had been “the economists’ war”. That may have been overstating the case, but by the time peace returned, the discipline of economics, and its practitioners, had arrived. In 1946, Congress established the Council of Economic Advisers to the President, cementing the role of economics at the heart of government.

Nine Crises: Fifty Years of Covering the British Economy From Devaluation to Brexit
by William Keegan
Published 24 Jan 2019

In its modern version it was associated with the American economist Milton Friedman, of the Chicago School. We Keynesians always held the view that controlling inflation was much more complicated than Friedman and his disciples maintained. There was a great debate in the columns of Newsweek in the 1970s between Friedman and the eminent American Keynesian Paul Samuelson. Samuelson once said that Milton Friedman was ‘the eighth or ninth wonder of the world depending on how you score the Grand Canyon’. But when the Keynesian approach ran into difficulty, and life became more difficult for policymakers, monetarism came into vogue. It is very much associated with Mrs Thatcher’s government – quite rightly – but there are some who hold that it really began under the Labour government of James Callaghan, when he took over the reins from Harold Wilson and was faced with the 1976 IMF crisis.

A Pelican Introduction: Basic Income
by Guy Standing
Published 3 May 2017

The dignity of the individual will flourish when the decisions concerning his life are in his own hands, when he has the assurance that his income is stable and certain, and when he knows that he has the means to seek self-improvement.9 There were many other advocates around this time, though most seem to have supported a means-tested guaranteed minimum income. They included a string of Nobel Prize-winning economists – James Meade, Friedrich Hayek, Milton Friedman, Jan Tinbergen, James Tobin, Paul Samuelson and Gunnar Myrdal. The idea was also supported by other prominent economists, such as J. K. Galbraith, and by sociologists, most notably New York Senator Daniel Patrick Moynihan, who, although a Democrat, had a strong influence on Nixon’s proposed Family Assistance Plan.10 The fourth wave could be said to have started in a quiet way with the establishment of the Basic Income European (now Earth) Network (BIEN) in 1986.

A Little History of Economics
by Niall Kishtainy
Published 15 Jan 2017

CHAPTER 27 Fill Up the Bath One of the most influential books about economics ever written was Keynes’s The General Theory of Employment, Interest and Money, published in 1936. It’s also one of the most difficult, and economists still argue over exactly what Keynes meant. After the Second World War the followers of Keynes helped make his ideas into the accepted economic thinking. One of them, the American Paul Samuelson (1915–2009), took stock of the book a decade after it came out. He called it badly written, arrogant and full of confusions. Its analysis was obvious, but also completely new. ‘In short,’ Samuelson concluded, ‘it is a work of genius.’ Samuelson, along with another American, Alvin Hansen (1887–1975), and in Britain, John Hicks (1904–89), boiled down Keynes’s big untidy book into a few neat graphs and equations.

The Capitalist Manifesto
by Johan Norberg
Published 14 Jun 2023

Where international summits previously talked about opening up, deregulating and liberalizing (even though it was not always translated into action), language was suddenly blurred and fuzzy code words such as inclusivity, sustainability, strategic autonomy and ‘partnership’ between this and that pushed out concrete reform agendas. Shortly afterwards, a peculiar intellectual swap took place. After the leftist offensive against globalization stumbled, the opposition suddenly migrated to the right. Fighting protectionism is like fighting a skin disease, as the US economist Paul Samuelson once said: no sooner do you cure it in one place than it appears somewhere else. A new generation of conservative politicians now sound very much like Attac did in 2001: the world is dangerous, there is no longer anyone in charge and free trade is destroying local traditions and good jobs. A ‘globalist’, US president Donald Trump explained, is a person ‘frankly not caring about our country so much’.

More Than You Know: Finding Financial Wisdom in Unconventional Places (Updated and Expanded)
by Michael J. Mauboussin
Published 1 Jan 2006

Thaler, Amos Tversky, Daniel Kahneman, and Alan Schwartz, “The Effect of Myopia and Loss Aversion on Risk Taking: An Experimental Test” Loss aversion . . . can be considered a fact of life. In contrast, the frequency of evaluations is a policy choice that presumably could be altered, at least in principle. —Shlomo Benartzi and Richard H. Thaler, “Myopic Loss Aversion and the Equity Premium Puzzle” One or One Hundred In the early 1960s, economist Paul Samuelson offered his lunch colleagues a bet where he would pay $200 for a correct call of a fair coin toss and he would collect $100 for an incorrect call. But his partners didn’t bite. One distinguished scholar replied, “I won’t bet because I would feel the $100 loss more than the $200 gain. But I’ll take you on if you promise to let me make 100 such bets” (emphasis added).

The Bogleheads' Guide to Investing
by Taylor Larimore , Michael Leboeuf and Mel Lindauer
Published 1 Jan 2006

Jane Bryant Quinn, financial columnist for Newsweek and author of Making the Most of Your Money: "Indexing is for winners only." Ron Ross, author of The Unbeatable Market: "Carhart evaluated 1,892 equity funds for the period 1962 to 1993 for the equivalent of 16,109 'fund years.' He concluded, 'The results do not support the existence of skilled or informed mutual fund portfolio managers."' Paul Samuelson, first American to win the Nobel Prize in Economic Science: "The most efficient way to diversify a stock portfolio is with a low fee index fund. Statistically, a broadly based stock index fund will outperform most actively managed equity portfolios." Bill Schultheis, author of The Coffeehouse Investor: "Once you remove yourself from Wall Street's complete and total obsession with trying to beat the stock market average and accept the fact that approximating the stock market average is a rather sophisticated approach to the whole thing, building a successful common stock portfolio becomes an immensely gratifying experience."

The End of Theory: Financial Crises, the Failure of Economics, and the Sweep of Human Interaction
by Richard Bookstaber
Published 1 May 2017

Non-Ergodicity: The Relevance of History, or Each Time It’s Different To obtain a reliable probability distribution about the course of a crisis, we’d have to draw a random sample from that future universe, and analyze that sample from the future to calculate statistically reliable characteristics of this future population. Because drawing a sample from the future is not possible, economists taking this approach assume that the future is drawn from the same distribution as the past. This justifies using historical data, and this assumption requires ergodicity. Paul Samuelson (1969, 184–85) wrote that if economists hope to remove economics from the realm of history and move it into the “realm of science” we must impose the “ergodic hypothesis.” Ergodicity is at the core of economics because it is the only way we can apply probabilities in a sensible way. When uncertainty is introduced to economic models, it is done with the formal machinery of probability theory.

The Financial Crisis and the Free Market Cure: Why Pure Capitalism Is the World Economy's Only Hope
by John A. Allison
Published 20 Sep 2012

Every month, I read a difficult book (typically one that was not directly business-related) and referred the best books to our senior leadership team. I took the time for two weeks of education each year. Typically, one week would be related to economics and the other week would be devoted to studying philosophy. I particularly studied Austrian economics. Since most business leaders my age studied Keynesian economics from Paul Samuelson’s incredibly misleading college textbook, they were far easier for the Fed to mislead. A deep understanding of the Austrian economic school is a tremendous competitive advantage in making long-term economic decisions. (You should read Human Action by Ludwig von Mises.) Because we believe that the way to achieve optimal organizational performance is to allow individual employees to use their minds effectively, we operate with a highly decentralized organizational structure.

Inventing the Future: Postcapitalism and a World Without Work
by Nick Srnicek and Alex Williams
Published 1 Oct 2015

In the education system, children learn the basic ideas of a society, respect for (in fact, submission to) the existing order, and the skills necessary to distribute them along different segments of the labour market.58 Transforming the educational system of intellectuals is therefore a key task in building a new hegemony.59 It is not for nothing that the Nobel Prize–winning economist Paul Samuelson wrote that: ‘I don’t care who writes a nation’s laws, or crafts its advanced treatises, if I can write its economics textbooks.’ Projects focused on changing this institutional element of society could focus on three broad goals: pluralising the teaching of economics, reinvigorating the study of leftist economics and expanding popular economic literacy.

The Darwin Economy: Liberty, Competition, and the Common Good
by Robert H. Frank
Published 3 Sep 2011

Richard Thaler and Cass Sunstein, Nudge, New Haven, CT: Yale University Press, 2007, p. 251. 11. Thomas C. Schelling, Micromotives and Macrobehavior, New York: W. W. Norton, 1978. 12. Karl Marx, Capital, New York: Modern Library, 1936, pp. 708–709. 13. See, for example, the title essay in my 2004 book, What Price the Moral High Ground? Princeton, NJ: Princeton University Press. 14. Paul Samuelson, “A Note on the Pure Theory of Consumers’ Behaviour,” Economica 5, 1938: 61–71. Chapter Four: Starve the Beast—But Which One? 1. Ronald Utt, “The Bridge to Nowhere: A National Embarrassment,” Heritage Foundation, October 20, 2005. 2. Project on Government Oversight, http://www.pogo.org/pogo-files/reports/ national-security/defense-waste-fraud/ns-wds-19990901.html. 3.

Capitalism: Money, Morals and Markets
by John Plender
Published 27 Jul 2015

The financial system is simply excluded from their calculations. Going back over a much longer period, economics has incorporated an extraordinarily crude conception of human nature, with its belief in a perfectly rational, utility-maximising, autonomous individual. More recently, the attempt initiated by the American economist Paul Samuelson in the 1940s to emulate the certainty of the physical sciences led economists to dispense completely with human nature in building their models. They also employ a simplifying concept known as ‘the representative agent’, which assumes, in effect, that everyone in the economy is the same. Another blind spot lies in economists’ tendency to downplay the importance of the institutional context of economies in their model building.

The Power of Passive Investing: More Wealth With Less Work
by Richard A. Ferri
Published 4 Nov 2010

Malkiel laid out several advantages for the formation of an index fund that matched the market’s return, and even made a plea to mutual fund companies to sponsor an index fund, noting that “fund spokesmen are quick to point out you can’t buy the market averages. It’s time the public can.”1 Malkiel was not the lone voice pleading for index funds in the early 1970s. Several other prominent voices called out for passive options. One voice was MIT’s Paul Samuelson. He wrote a short and punchy 1974 article in the Journal of Portfolio Management entitled “Challenge to Judgment.” Samuelson struck at the heart of professional money managers by stating, “. . . the best of money managers cannot be demonstrated to be able to deliver the goods of superior portfolio-selection performance. . . .

The Great Convergence: Information Technology and the New Globalization
by Richard Baldwin
Published 14 Nov 2016

The basic point is simplicity itself. If the firms from a nation, say Austria, transfer technology abroad in a way that increases the international competition facing Austrian exports, then the Austrians working in Austria may well lose. The point has been made many times by many people—most famously by Nobel Prize winner Paul Samuelson in his 2004 article “Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization.” As Samuelson puts it in his rotund phrasing, “This invention abroad that gives to China some of the comparative advantage that had belonged to the United States can induce for the United States permanent lost per capita real income.”

I Love Capitalism!: An American Story
by Ken Langone
Published 14 May 2018

Today the parents can’t even get the grades; it’s against the law for the school to give them. I don’t get it. I know what I did with my sons. If I couldn’t see their grades, they could pay for their own education. When the bill comes, I told them, you sign the check. I’m done. Anyway, I had a course in economics—Economics 101. The textbook was Paul Samuelson’s book. It met Tuesdays and Thursdays, in sections, then every Saturday all the classes met together in the auditorium with the professor. Every once in a while, on Saturday, this guy—Russell Headley was his name—would give us a blue exam book and a generic question and say, “Tell me about this.”

Winning Now, Winning Later
by David M. Cote
Published 17 Apr 2020

Rubin had argued that many outcomes are possible in a given situation, and you have to anticipate and prepare for eventualities that seem unlikely but that could prove extremely damaging should they materialize. If I had to bet $100, I would have put it on the side of the optimists. But we still needed to prepare for the unlikely (in my mind) scenario that the recession would hit Honeywell hard. As Paul Samuelson famously remarked, the market has predicted nine of the last five recessions, so you don’t want to overdo it. That being said, it makes a lot of sense to stay on your economic toes. TAKE EARLY ACTION As a preventative measure, we sold our Consumable Solutions business in July 2008 to B/E Aerospace for $1.05 billion.

Global Inequality: A New Approach for the Age of Globalization
by Branko Milanovic
Published 10 Apr 2016

(We should also not forget that a complementarity in skills exists between some migrants and the local population in the recipient country, resulting in higher incomes for the local population.)30 Second, we can be quite sure that migrants would consider mild discrimination or unevenness in treatment in recipient countries to be preferable to remaining in their countries of origin by looking at their revealed preference (to use Paul Samuelson’s term): their very willingness to migrate reveals their belief that migration would increase their welfare. The arguments against unevenness in treatment therefore seem weak. It is indeed true that if we lived in a different world where there was much greater willingness of the populations and governments in the rich countries to accept the idea of free migration of labor, the first-best solution would be precisely to allow such migration and to treat all residents equally, regardless of their origin.

The Unknowers: How Strategic Ignorance Rules the World
by Linsey McGoey
Published 14 Sep 2019

George Stigler, a right-wing Chicago School economist who clearly didn’t share Robinson’s politics, acknowledged that Clark’s theory was treated as ‘naïve’ for much of the early 20th-century, with scholars like Frank Knight pointing out in the 1920s that, far from being ‘ethically just,’ the ‘paramount defect of the competitive system is that it distributes income largely on the basis of inheritance and luck.’15 The economist Paul Samuelson would later reiterate Knight’s concern, remarking: ‘To my astonishment I find that the arbitrariness of J.B. Clark’s views on the deservingness of competitively determined rewards is not universally recognized.’16 But Samuelson’s comment is a little naïve too: he assumes his peers follow the evidence impartiality, but economists over the years are not as ideologically pristine as he supposes.

Private Equity: A Memoir
by Carrie Sun
Published 13 Feb 2024

Many of the people who had first come to mind, like Bill Belichick, I was told, had already spoken at Carbon. I started over. What did Boone like? * * * — THE SPEAKER DID not say yes at first. He gave us the answer many men give when asked to volunteer family time: “Let me ask my wife.” His name came to me when I was thinking about revealed preferences. As Nobel Prize–winning economist Paul Samuelson wrote: “The individual guinea-pig, by his market behaviour, reveals his preference pattern.” Boone loved games. He especially loved people who changed the game on others. He hated waiting for anyone, wasting time, traffic, lines, and crowds. And yet, at least once a week for about half the year, he drove to and from a hamlet on Long Island during evening rush hour to play in a hockey league.

Expected Returns: An Investor's Guide to Harvesting Market Rewards
by Antti Ilmanen
Published 4 Apr 2011

Summers’ commentary during the 2007–2009 crisis, and his academic work 20 years earlier, emphasized the destabilizing potential of various positive-feedback loops (vicious or virtuous cycles) that occasionally overwhelm normal self-stabilizing forces in a market economy. An equity market bubble is an extreme form of aggregate market overvaluation. Paul Samuelson once conjectured that the stock market is microefficient but macroinefficient—that relative prices are close to being correct but that the overall market level is prone to overvaluations or undervaluations. The limits-to-arbitrage literature buttresses “Samuelson’s dictum”. Recall the greater risk in arbitraging away overall market valuation: given a lack of close substitutes for a position in the market index, directional equity market or bond market risk cannot be effectively hedged or diversified away.

…

Indeed, it is a mathematical fact that if stock returns have zero autocorrelation (i.e., if they are a random walk) the volatility of average annual returns falls with a longer horizon, and if stock returns are a random walk with upward drift (i.e., positive expected return) the likelihood of negative cumulative returns falls with a longer horizon. Critics counter that the volatility of cumulative returns and the magnitude of potential losses increases with the time horizon. Kritzman (2000) reminds us of Paul Samuelson’s mathematical result that under certain conditions expected utility maximizers should hold a constant share of their wealth in risky assets irrespective of their investment horizon. Merely having a longer horizon does not make investors more risk tolerant as long as they have constant relative risk aversion, asset returns follow a random walk, and future wealth depends only on investment returns—not on human capital.

Understanding Asset Allocation: An Intuitive Approach to Maximizing Your Portfolio
by Victor A. Canto
Published 2 Jan 2005

The person (or company) upon whom a tax is levied can well experience no loss in net income if he passes the tax forward onto consumers or backward onto suppliers. Likewise, a person upon whom no tax has been levied can well suffer large net income losses as a consequence of taxes levied on others. (This analysis was correct, and I will soon get to the results.) In the words of Noble Laureate Paul Samuelson, Even if the electorate has made up its mind about how the tax burden shall be borne by individuals, the following difficult problems remain: Who ultimately pays a particular tax? Does its burden stay on the person on whom it is first levied? One cannot assume that the person Congress says a tax is levied on will end up paying that tax.

The Upside of Inequality
by Edward Conard
Published 1 Sep 2016

The former Federal Reserve chairman Ben Bernanke is also skeptical that investment merely waits for demand. Though he acknowledges there is a surplus of savings, he points out that it is unreasonable to expect a lack of investment opportunities to constraint growth. Bernanke reasons: It’s hard to imagine that there would be a permanent dearth of profitable investment projects. As Larry’s uncle Paul Samuelson taught me in graduate school at MIT, if the real interest rate were expected to be negative indefinitely, almost any investment is profitable. For example, at a negative (or even zero) interest rate, it would pay to level the Rocky Mountains to save even the small amount of fuel expended by trains and cars that currently must climb steep grades.

My Life as a Quant: Reflections on Physics and Finance
by Emanuel Derman
Published 1 Jan 2004

Like the ancient Greeks' mythological centaur, part horse and part man, a call option is a hybrid, too-part stock and part bond. From this point of view, I came to regard the BlackScholes formula as a simple and sensible way of interpolating from the known market prices of a stock and a bond to the fair value of the hybrid. Several economists, Paul Samuelson among them, had come almost imperceptibly close to obtaining the Black-Scholes formula before Black and Scholes by means of this kind of reasoning. When you want to estimate the price of fruit salad, you average the prices of the fruit the mixture contains. In a similar vein, I thought of the option formula as a prescription for estimating the price of a hybrid by averaging the known market prices of its ingredients.

Freakonomics: A Rogue Economist Explores the Hidden Side of Everything
by Steven D. Levitt and Stephen J. Dubner
Published 11 Apr 2005

But if anyone ever needs a reason to be deeply skeptical of Wikipedia’s dependability, I urge you to click on the entry for “List of Economists,” which is introduced thusly: “This is an alphabetical list of well-known economists. Economists are scholars conducting research in the field of economics.” It is true that the list includes George Akerlof and Paul Samuelson and Jeffrey Sachs and even Steve Levitt. But if you want to see how truly pathetic Wikipedia can be, check out the sixth “economist” listed under “D”: that’s right, yours truly. Although some of my best friends are economists, I am very much not. (Note: soon after I posted this entry, a reader was helpful/mischievous enough to quickly amend the Wikipedia entry, deleting my name.)

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth
by Michael Jacobs and Mariana Mazzucato
Published 31 Jul 2016

The economics of the sweatshop, rooted in the ‘ideal’ of ‘perfect’ competition, provides the intellectual rationale for both an unregulated free-market economy in the American conservative tradition of Milton Friedman and an interventionist policy to mitigate market imperfections and confront market failures in the American liberal tradition of Paul Samuelson. Both figuratively and literally, the theory of the firm in perfect competition manifests the poverty of neoclassical economics. The Marxian theory of the productive firm To construct an economic theory of the productive enterprise, it is useful—and I would argue essential—to go back to Karl Marx’s explanation of the sources of surplus value laid out in his 1867 treatise, Das Kapital.9 In arguing that the sources of productivity cannot be found in the process of market exchange but rather are found in the process of production, Marx originated a critique of the theory of the market economy that remains as relevant today as it was in the nineteenth century.

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World
by Sandra Navidi
Published 24 Jan 2017

Ever restless and on the lookout for new challenges, pushing boundaries and climbing to new heights, Summers has had several exceedingly successful careers and held some of the most important positions in the U.S. government. His platinum resume was practically preordained in his DNA, as he is the son of two economists and the nephew of two Nobel laureates in economics, Paul Samuelson and Kenneth Arrow. His father taught at Yale University, and Samuelson had been an adviser to President Kennedy. Meteoric Rise Summers’s stellar professional rise occurred with lightning speed. He was accepted into the Massachusetts Institute of Technology at age sixteen and received tenure at Harvard University at only twenty-eight years old.

Rockonomics: A Backstage Tour of What the Music Industry Can Teach Us About Economics and Life
by Alan B. Krueger
Published 3 Jun 2019

The emotional bond between musicians and their audiences is what sells records and concert tickets, and enables musicians to have an outsized influence on social causes. The “soft power” of music can topple autocrats and soothe souls. As Bono has said, “Music can change the world because it can change people.”46 * Fletcher’s actual quote was less poetic, but the sentiment was the same. Centuries later, the great economist Paul Samuelson would have his own riff on this line: “I don’t care who writes a nation’s laws—or crafts its advanced treatises—if I can write its economics textbooks.” CHAPTER 3 The Supply of Musicians There’s a reason they call it playing, not working. —Max Weinberg Max Weinberg, the longtime drummer for Bruce Springsteen and the E Street Band, has told me on more than one occasion that performing music is great fun; there’s a reason musicians call it playing and not working, he says.

Reimagining Capitalism in a World on Fire
by Rebecca Henderson
Published 27 Apr 2020

A reimagined capitalism—a reformed economic and political system—has five key pieces, none sufficient on its own, but each building on the other and each a vital part of a reinforcing whole. We can begin to see what this looks like in practice through the story of the transformation of a single firm. The chapter title is from Paul Samuelson, who later attributed it to Keynes. “When the Facts Change, I Change My Mind. What Do You Do, Sir?” Quote Investigator, May 19, 2019, https://quoteinvestigator.com/2011/07/22/keynes-change-mind. 2 REIMAGINING CAPITALISM IN PRACTICE Welcome to the World’s Most Important Conversation Neo: I know you’re out there.

Were You Born on the Wrong Continent?
by Thomas Geoghegan
Published 20 Sep 2011

I’d tell kids to read about Germany just to see how a social democracy (which we don’t have) would push our productive capacity into highly skilled jobs and also keep business from disinvesting in such jobs. After all, things could and probably will get even worse in the U.S., in terms of job loss. Our great economists who used to laud free trade (Paul Samuelson, Alan Blinder) are right to think that things are tanking here. But one good thing about a high-cost social democracy like Germany (or France or Sweden) is that it penalizes business when it disinvests. To shut down a plant is easy in the U.S. It’s a big pain in a social democracy, though. The employer has to come up with a “closing plan.”

Living in a Material World: The Commodity Connection
by Kevin Morrison
Published 15 Jul 2008

This trend underlined two things about commodities: firstly, the commodity markets alone are too small for fund managers who want to grow their funds to tens of billions of dollars; and secondly, the trading skills learnt in commodity trading are a solid grounding for trading in other financial markets. Jones, Kovner and Kooyker all worked at various stages of their careers with the same organization, Commodities Corporation, which at the time was a privately owned commodity fund set up by Paul Samuelson, the Nobel laureate. Samuelson, who is in his 90s and is still active at the Massachusetts Institute of Technology where he is Emeritus Professor of Economics, told me how Commodities Corporation was started with one of his former students Helmut Weymar,5 who was the chief cocoa buyer for Nabisco, the US biscuit and snack maker.

The Road to Ruin: The Global Elites' Secret Plan for the Next Financial Crisis
by James Rickards
Published 15 Nov 2016

Evidence of obsolescence accumulates slowly through elite policy failures. Those failures are now too numerous to deny. If elite consensus is so flawed, why has the consensus persisted so long? In truth, it hasn’t. Neo-Keynesian economics has held sway for just seventy years since its inception by MIT’s Paul Samuelson in 1947. Monetarism has been intellectually dominant for about sixty years since it emerged from the University of Chicago under Milton Friedman in the 1960s. Eugene Fama’s efficient markets hypothesis percolated in academic studies in the 1960s, yet only started to exert market influence in the 1970s with the options pricing model of Fischer Black, Myron Scholes, and Robert Merton.

Is the Internet Changing the Way You Think?: The Net's Impact on Our Minds and Future
by John Brockman
Published 18 Jan 2011

But while markets may drive exploration, the actual settlement of the frontier at times requires the commitment of individuals questing for personal freedom, and here the New World of the Internet shines. It is widely assumed that my generation failed to produce towering figures like Francis Crick, P. A. M. Dirac, Alexander Grothendieck, or Paul Samuelson because something in the nature of science had changed. I do not subscribe to that theory. Suffice it to say that issues of academic freedom have me longing to settle among the noble homesteaders now gathering on the efficient frontier of the marketplace of ideas. My intellectual suitcases have been packed for months now, as I try to screw up the courage and proper “efficient frontier mentality” to follow my own advice to the next generation: “Go virtual, young man.”

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown
by Simon Johnson and James Kwak
Published 29 Mar 2010

.… The more placid days of the past were gone forever.”39 There was still no coherent program or ideology that laid out what the financial services industry should look like and what its relationship to the government should be. But that was changing. At the time, a movement was growing in the halls of America’s leading universities that would help transform the financial sector. This movement was the discipline of academic finance, pioneered by economists such as Paul Samuelson, Franco Modigliani, Merton Miller, Harry Markowitz, William Sharpe, Eugene Fama, Fischer Black, Robert Merton, and Myron Scholes, most of whom went on to win the Nobel Prize. These scholars brought sophisticated mathematics to bear on such problems as determining the optimal capital structure of a firm (the ratio between debt and equity), pricing financial assets, and separating and hedging risks.40 Academic finance had a tremendous impact on the way business is done around the globe.

The Physics of Wall Street: A Brief History of Predicting the Unpredictable
by James Owen Weatherall
Published 2 Jan 2013

Bachelier had always been fascinated by probability theory, the mathematics of chance (and, by extension, gambling). If he could just imagine the French financial markets as a glorified casino, a game whose rules he was about to learn, it might not seem so scary. He repeated the mantra — just an elaborate game of chance — as he pushed forward into the throng. “Who is this guy?” Paul Samuelson asked himself, for the second time in as many minutes. He was sitting in his office, in the economics department at MIT. The year was 1955, or thereabouts. Laid out in front of him was a half-century-old PhD dissertation, written by a Frenchman whom Samuelson was quite sure he had never heard of.

The Devil's Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . And Are Ready to Do It Again
by Nicholas Dunbar
Published 11 Jul 2011

There I met two more Nobel-winning finance professors—Robert Merton and Myron Scholes—who took Miller’s idea to its logical conclusion at a hedge fund called Long-Term Capital Management (LTCM). Scholes had benefited directly from Miller’s mentorship as a University of Chicago PhD candidate, while Merton had studied under Paul Samuelson at MIT. What made Merton and Scholes famous (with the late Fischer Black) was their contemporaneous discovery of a formula for pricing options on stocks and other securities. Again, the key idea was based on arbitrage, but this time the formula was much more complicated. The premise: A future or forward contract is very similar (although not identical) to the underlying security, which is why one can be used to synthesize exposure to the other.

Phishing for Phools: The Economics of Manipulation and Deception
by George A. Akerlof , Robert J. Shiller and Stanley B Resor Professor Of Economics Robert J Shiller
Published 21 Sep 2015

Bradford De Long, Andrei Shleifer, Lawrence H. Summers, and Robert J. Waldmann, “The Size and Incidence of the Losses from Noise Trading,” Journal of Finance 44, no. 3 (1989): 688 and 690. 19. Gabaix and Laibson, “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,” p. 514. 20. Paul Samuelson, the MIT professor who wrote the leading textbook and set the tone of most standard economics in the post–World War II period, viewed “revealed preferences” as being at the heart of the theory of consumption. Regarding a formula derived from them, he wrote: “The importance of this result can hardly be overemphasized [sic].

Postcapitalism: A Guide to Our Future
by Paul Mason
Published 29 Jul 2015

The Austrian economist Joseph Schumpeter produced his own theory of business cycles, popularizing the term ‘Kondratieff Wave’. But once capitalism stabilized after 1945, long-wave theory seemed redundant. Economists believed state intervention could flatten out even the minor ups and downs of capitalism. As for a fifty-year cycle, the guru of Keynesian economics, Paul Samuelson, dismissed it as ‘science fiction’.3 And when the New Left tried to revive Marxism as a critical social science in the 1960s, they had little time for Kondratieff and his waves; they were looking for a theory of capitalist breakdown, not survival. Only a few diehards, mainly investors, remained obsessed with Kondratieff.

Rise of the Robots: Technology and the Threat of a Jobless Future
by Martin Ford
Published 4 May 2015

Those workers, in turn, went out and spent their ever-increasing incomes, further driving demand for the products and services they were producing. As that virtuous feedback loop powered the American economy forward, the profession of economics was enjoying its own golden age. It was during the same period that towering figures like Paul Samuelson worked to transform economics into a science with a strong mathematical foundation. Economics gradually came to be almost completely dominated by sophisticated quantitative and statistical techniques, and economists began to build the complex mathematical models that still constitute the field’s intellectual basis.

A Pelican Introduction Economics: A User's Guide
by Ha-Joon Chang
Published 26 May 2014

The possibility that one country is more efficient than another in producing the same product is already reflected in the term advantage. For a more detailed exposition of the theory, see Chapter 3, ‘My Six Year Old Son Should Get a Job’, in my book Bad Samaritans. * The theory is named after Eli Heckscher and Bertil Ohlin, the two Swedish economists who developed the idea, and Paul Samuelson, the American economist (and the author of the most famous economics textbook in the twentieth century), who perfected it. * Despite the fact that it was going to hurt US workers in industries like automobile and textiles, many Neoclassical economists advocated the NAFTA, the free-trade agreement with Mexico and Canada, on the ground that the national gains from increased trade are more than enough to compensate those (and other) losers.

The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy
by Stephanie Kelton
Published 8 Jun 2020

Indexing wages (or other spending) in the job guarantee program to the inflation target—as opposed to the actual inflation rate—would provide an automatic boost to expenditures when actual inflation was running below, say, 2 percent. 45. Council of Economic Advisers: Walter Heller, Kermit Gordon, James Tobin, Gardner Ackley, and Paul Samuelson, recorded interview by Joseph Pechman, August 1, 1964, John F. Kennedy Library Oral History Program, www.jfklibrary.org/sites/default/files/archives/JFKOH/Council%20of%20Economic%20Advisers/JFKOH-CEA-01/JFKOH-CEA-01-TR.pdf. 46. Space.com staff, “May 25, 1961: JFK’s Moon Shot Speech to Congress,” Space.com, May 25, 2011, www.space.com/11772-president-kennedy-historic-speech-moon-space.html. 47.

The Dealmaker: Lessons From a Life in Private Equity
by Guy Hands
Published 4 Nov 2021

And I also learnt that one good paragraph is far better than any number of OK paragraphs, and that one good argument is far better than three totally correct pages of recycled facts. By the time the exams rolled around again I had made sufficient progress to secure an interview at Keble College to read philosophy, politics and economics (PPE). It didn’t go well. I was asked about Paul Samuelson’s economic theory and I floundered: it was very definitely not part of the Linden Park syllabus. Assuming that I had failed miserably, I rang Mr Rendall from a call box in despair. He was both sympathetic and practical. Sometimes, he said, colleges would take students who had put them down as their second choice.

Human Compatible: Artificial Intelligence and the Problem of Control
by Stuart Russell
Published 7 Oct 2019

The work of von Neumann and Morgenstern is in many ways the foundation of modern economic theory: John von Neumann and Oskar Morgenstern, Theory of Games and Economic Behavior (Princeton University Press, 1944). 18. The proposal that utility is a sum of discounted rewards was put forward as a mathematically convenient hypothesis by Paul Samuelson, “A note on measurement of utility,” Review of Economic Studies 4 (1937): 155–61. If s0, s1, . . . is a sequence of states, then its utility in this model is U(s0, s1, . . .) = ∑tγtR(st), where γ is a discount factor and R is a reward function describing the desirability of a state. Naïve application of this model seldom agrees with the judgment of real individuals about the desirability of present and future rewards.

Rage Inside the Machine: The Prejudice of Algorithms, and How to Stop the Internet Making Bigots of Us All
by Robert Elliott Smith
Published 26 Jun 2019

As a result, over the last 250 years, we have conceived of and created an economy in the image of a giant factory or machine that runs on the classical economic model of self-regulating markets, governed by supposedly natural laws of production and exchange, where prices and profits tend to a general equilibrium, famously captured by Scottish economist and philosopher Adam Smith’s (1723–90) metaphor of the ‘invisible hand’. We talk of ‘market mechanisms’, ‘supply’ and ‘demand’, and the image we hold in our heads of what the economy looks like was captured by economist Paul Samuelson in his 1948 Circular Flow diagram, whereby labour and capital go in one end and goods and services come out the other. Engineer and economist Bill Phillips even built a hydraulic machine called MONIAC (the Monetary National Income Analogue Computer), complete with transparent water tanks and circular pipes, to demonstrate how money flowed around Samuelson’s system like fluids in a hydraulic mechanism.

Licence to be Bad
by Jonathan Aldred
Published 5 Jun 2019

TRUST NO ONE 1 The RAND Hymn, 1961, quoted in Nasar, S. (1998), A Beautiful Mind (London: Faber), 104. 2 Nasar, 71. 3 Fortune, March 1951. 4 Life, 25 February 1957. 5 Keynes, J. (1978), The Collected Writings of John Maynard Keynes, eds. E. Johnson and D. Moggridge (Royal Economic Society), vol. 10, 173–4. 6 Letter to Morgenstern, 8 October 1947, explaining von Neumann’s refusal to review Paul Samuelson’s Foundations of Economic Analysis. Quoted in Morgenstern (1976), ‘The Collaboration between Oskar Morgenstern and John von Neumann on the Theory of Games’, Journal of Economic Literature, 14 (3), 810. 7 Morgenstern’s diary, April–May 1942. Quoted in Leonard, Robert J. (1995), ‘From Parlor Games to Social Science: Von Neumann, Morgenstern, and the Creation of Game Theory 1928–1944’, Journal of Economic Literature, 33 (2), 730. 8 Nasar, 94. 9 Ibid. 10 Quoted in Heims, S. (1980).

The Great Reversal: How America Gave Up on Free Markets
by Thomas Philippon
Published 29 Oct 2019

Hairdressers are paid more in rich countries. Hence, haircuts cost more in rich countries than in poor countries. That’s pretty obvious, but it has deep implications, as we shall see. It even has a name: the Balassa-Samuelson effect, after Hungarian economist Béla Balassa and Nobel Prize winner Paul Samuelson, who described the phenomenon in the 1960s. Let us now think about the other extreme of the market: luxury goods that are built in one place and shipped around the world, such as luxury cars. All the Ferraris sold around the world are assembled in Italy. And they are so expensive that pure local distribution costs are a relatively small fraction of the ultimate price tag.

The AI Economy: Work, Wealth and Welfare in the Robot Age
by Roger Bootle
Published 4 Sep 2019

He argued: “one great advantage of making idleness economically possible is that it would afford a powerful motive for making work not disagreeable; and no community where most work is disagreeable can be said to have found a solution of economic problems.” And elsewhere he wrote: “The morality of work is the morality of slaves, and the modern world has no need of slaves.”10 Among economists, supporters of some version of the concept have included John Stuart Mill, John Kenneth Galbraith, James Tobin, and Paul Samuelson. Some of these names are associated with the liberal Left, and, in general, that is indeed where most support for UBI has come from. Accordingly, it may come as a surprise to learn that, among economists, some of the keenest advocates of capitalism have also supported the idea of UBI. For instance, it has been advocated by none other than the Anglo-Austrian economist Friedrich von Hayek, author of The Road to Serfdom and the opponent of Keynes and Keynesianism, and Milton Friedman, the high priest of monetarism, author of Free to Choose and Capitalism and Freedom and a strong advocate of the market economy.

Capitalism, Alone: The Future of the System That Rules the World
by Branko Milanovic
Published 23 Sep 2019

For the United Kingdom in the period 1770–2010, Piketty found that the share of capital oscillated between 20 and 40 percent of national income. In France, between 1820 and 2010, it varied even more widely: from less than 15 percent in the 1940s to more than 45 percent in the 1860s. The percentages became more stable after World War II, however, reinforcing belief in Bowley’s Law. Paul Samuelson, for example, in his influential Economics, included Bowley’s Law among the six basic trends of economic development in advanced countries (although he did allow for some “edging upward of labor’s share”) (Samuelson 1976, 740). However, since the late twentieth century, the share of capital income in total income has been rising.

The Data Detective: Ten Easy Rules to Make Sense of Statistics
by Tim Harford
Published 2 Feb 2021

• Leon Festinger, Henry Riecken, and Stanley Schachter, When Prophecy Fails1 Irving Fisher was one of the greatest economists who ever lived.2 “Anywhere from a decade to two generations ahead of his time,” opined the first Nobel laureate economist, Ragnar Frisch, in the late 1940s, more than half a century after Fisher’s genius first lit up his subject. Paul Samuelson, who won the Nobel Memorial Prize the year after Frisch, said that Irving Fisher’s 1891 PhD thesis “was the greatest doctoral dissertation in economics ever written.” That’s what Fisher’s peers thought. The public loved him, too. A hundred years ago, Irving Fisher was the most famous economist on the planet.

The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor
by David S. Landes
Published 14 Sep 1999

Finally, I want to thank my wife, Sonia, who has sweetly put up with years of heaping books, offprints, papers, letters, and other debris. Even multiple work studies have not been big enough, and only the computer has saved the day. Now for the cleanup. Introduction No new light has been thrown on the reason why poor countries are poor and rich countries are rich. —PAUL SAMUELSON, in 19761 In June of 1836, Nathan Rothschild left London for Frankfurt to attend the wedding of his son Lionel to his niece (Lionel’s cousin Charlotte), and to discuss with his brothers the entry of Nathan’s children into the family business. Nathan was probably the richest man in the world, at least in liquid assets.

…

Argentine industry, then, was not a driver but a passenger of growth. When a time of troubles returned after World War II, it left the vehicle. Labor, whether in industry or agriculture, was not happy and took to those ideological nostrums—anarchism before World War I, Perónism after World War II—that are the revenge of the powerless. The economist Paul Samuelson attributed this alienation to the discrepancy between economic backwardness and social indifference on the one hand, political precocity on the other.31 The people wanted what neither economy nor state could give. Today, Argentina is painfully finding its way back from political oppression and brutality, military adventurism, and economic depression.

The Four Pillars of Investing: Lessons for Building a Winning Portfolio
by William J. Bernstein
Published 26 Apr 2002

While not mutually owned by its shareholders like Vanguard, it functions essentially as a nonprofit and offers fees nearly as low as Vanguard’s. In 1976 came the first retail index fund. By this time, Bogle had learned of the failure of active fund management from several sources: the study by Michael Jensen we mentioned in Chapter 3, the writings of famed economist Paul Samuelson and money manager Charles Ellis, and, of course, from his own painful experience at Wellington. (Incidentally, Samuelson’s economics textbook was the source of Bogle’s initial troubles at Princeton. Had he scored a few points lower in that introductory course, he’d have lost his scholarship and been forced out of school.

The Undoing Project: A Friendship That Changed Our Minds
by Michael Lewis
Published 6 Dec 2016

At the end of the lunch, Amos invited Redelmeier to visit him in his office. It didn’t take long before Amos was bouncing ideas about the human mind off Redelmeier, as he had bounced them off Hal Sox, to listen for an echo in medicine. The Samuelson bet, for instance. The Samuelson bet was named for Paul Samuelson, the economist who had cooked it up. As Amos explained it, people offered a single bet in which they have a 50-50 chance either to win $150 or lose $100 usually decline it. But if you offer those same people the chance to make the same bet one hundred times over, most of them accept the bet. Why did they make the expected value calculation—and respond to the odds being in their favor—when they were allowed to make the bet a hundred times, but not when they are offered a single bet?

A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation
by Richard Bookstaber
Published 5 Apr 2007

My dissertation turned to a subject area of mutual interest to finance and economics: the transmission of information through the markets, with Merton as one of my advisers. 207 ccc_demon_207-242_ch10.qxd 2/13/07 A DEMON 1:47 PM OF Page 208 OUR OWN DESIGN The MIT campus at that time contained the preeminent economics department in the country. The cornerstone was Paul Samuelson, one of the first Nobel Prize winners in economics and the man responsible for bringing mathematical rigor and scientific analysis to the discipline. As an undergraduate at the University of Chicago in the early 1930s, with the country mired in the Depression, Samuelson moved from the study of physics to economics.

Value of Everything: An Antidote to Chaos The
by Mariana Mazzucato
Published 25 Apr 2018

He changed our thinking about how government can create value in the bad times, through counter-cyclical policies; but he, and his followers, had much less to say about how it can do so in good times as well. Even as Keynesianism and the post-war boom were at their height, dissenting voices could be heard. With great ingenuity, the American Paul Samuelson (1915-2009) - one of the most influential economists of the second half of the twentieth century, a professor at the Massachusetts Institute of Technology and the first American to win the Nobel Prize in Economics - attempted to prove that neoclassical theory could explain how the economy behaved in normal times, except when recessionary periods made monetary policy have little effect: i.e. when increasing the money supply does not lower interest rates and only adds to idle balances rather than spurring growth (what is known as the ‘liquidity trap').

The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention
by William Rosen
Published 31 May 2010

* David Warsh points out, in his own Knowledge and the Wealth of Nations (which has inspired much of this chapter), that Smith’s book was the first of only four dominant textbooks the field has ever known; the only one until Ricardo’s Principles of Political Economy and Taxation, which was followed by Alfred Marshall’s Principles of Economics and eventually by Paul Samuelson’s Economics. The pattern of successively shorter titles seems finally to be at an end. * In fact, the same process works in reverse, though at the expense of the pyramid metaphor. Not only does a larger population result in more inventions, the wealth created by those inventions permits even more population growth, and yet another Malthusian trap

Unconventional Success: A Fundamental Approach to Personal Investment
by David F. Swensen
Published 8 Aug 2005

The Bush administration’s proposal to allow “individuals to voluntarily invest a portion of their Social Security taxes in personal retirement accounts” imposes an even greater responsibility on the individual investor.2 Partial privatization of Social Security causes individuals to decide where to invest a portion of retirement assets, adding another obligation to the already-too-large burden on ill-equipped individual investors. Nobel laureate Paul Samuelson expresses concern regarding privatization of Social Security: In all likelihood post-Bush ideology will permit future workers to withdraw part of their Social Security credits in private self-managed accounts. Why? Because that will work out well for the greatest numbers? No. It is virtually guaranteed to work out expensively for most people.

Other People's Money: Masters of the Universe or Servants of the People?
by John Kay
Published 2 Sep 2015

Neither the deposit nor the investment channel today offers any but the most confident and parsimonious saver a substantial prospect of a real return. This is an outcome that is unlikely to be either politically or economically sustainable. The role of the asset manager Investment should be like watching grass grow or paint dry. attributed to Paul Samuelson The modern investment bank has retreated from search, the creation and discovery of new investment opportunities, into trading with other people’s money for the benefit of its senior employees. Insurance companies and pension funds have withdrawn from the stewardship function of investment management and have become providers of administrative services.

The Man From the Future: The Visionary Life of John Von Neumann
by Ananyo Bhattacharya
Published 6 Oct 2021

‘The economics department just hated Oskar,’ says economist Martin Shubik, who arrived at Princeton in 1949 expressly to study game theory, ‘not nearly just alone because they couldn’t understand what was going on, but there was a certain aristocratic touch to Oskar, and … that was an extra reason for the hate.’67 Economist Paul Samuelson, a future Nobel laureate, was watching from his berth at MIT. Morgenstern was ‘very Napoleonic’, he later told the historian Robert Leonard, given to making ‘great claims’ that he did not have the wherewithal to prove.68 The main reason for the disdain, though, was that game theory had not yet proved its worth for dealing with economic questions.

Hedgehogging
by Barton Biggs
Published 3 Jan 2005

Young economists at Harvard, Yale, and Cambridge embraced it, ccc_biggs_ch21_285-304.qxd 298 11/29/05 7:19 AM Page 298 HEDGEHOGGING while the older traditionalists, seeing their religion under attack, were deeply disturbed by its radical nostrums, and rejected it as heresy.Arthur Pigou said: “We have watched an artist firing arrows at the moon. Whatever be thought of his marksmanship, we can admire his virtuosity.” Paul Samuelson 10 years later wrote: “It is a badly written book, poorly organized. . . . It is arrogant, bad-tempered, polemical, and not overly-generous in its acknowledgements. . . . It abounds in mares’ nests and confusions. . . . Flashes of insight and intuition intersperse tedious algebra. When it is finally mastered, we find its analysis to be obvious and at the same time new.

Rationality: What It Is, Why It Seems Scarce, Why It Matters
by Steven Pinker
Published 14 Oct 2021

Kahan 2015; Kahan, Wittlin, et al. 2011. 63. Nyhan & Reifler 2019; Pennycook & Rand 2020a; Wood & Porter 2019. 64. Baron 2019; Pennycook, Cheyne, et al. 2020; Sá, West, & Stanovich 1999; Tetlock & Gardner 2015. 65. Like most pithy quotes, apocryphally; credit probably should go to fellow economist Paul Samuelson: https://quoteinvestigator.com/2011/07/22/keynes-change-mind/. 66. Pennycook, Cheyne, et al. 2020. The first three items were added to the Active Open-Mindedness test by Sá, West, & Stanovich 1999. 67. Pennycook, Cheyne, et al. 2020. For similar findings, see Erceg, Galić, & Bubić 2019; Stanovich 2012.

The End of Alchemy: Money, Banking and the Future of the Global Economy
by Mervyn King
Published 3 Mar 2016

That will greatly reduce the benefits from trade. Ultimately it may mean that there is no possibility of trade between individuals. An efficient outcome requires that contracts are enforced. 49 O’Neill (2002), Reith Lectures, No. 1. 50 The idea of an economy comprising ‘overlapping generations’ was analysed by the great economist Paul Samuelson (1958). 51 The view that money can help to overcome the constraint of the double coincidence of wants and the implied restriction to exchange by barter was set out in detail by Carl Menger (1892), and was modelled explicitly by Nobuhiro Kiyotaki and Randall Wright (1989). 52 Kiyotaki and Moore (2002).

The End of Work
by Jeremy Rifkin
Published 28 Dec 1994

And, even if re-education and retraining on a mass scale were implemented, not enough high-tech jobs will be available in the automated economy of the twenty-first century to absorb the vast numbers of dislocated workers. THE SHRINKING PUBLIC SECTOR For the past sixty years, increased government spending has been the only viable means "to cheat the devil of ineffective demand" says economist Paul Samuelson. 69 Technological innovation, rising productivity, growing technological unemployment, and ineffective demand have characterized the American economy since the 1950S, forcing the federal government to adopt a strategy of deficit spending to create jobs, stimulate purchasing power, and boost economic growth.

The Future of the Professions: How Technology Will Transform the Work of Human Experts
by Richard Susskind and Daniel Susskind
Published 24 Aug 2015

Elinor Ostrom, ‘Beyond Markets and States: Polycentric Governance of Complex Economic Systems’, Nobel Prize Lecture, 8 Dec. 2009 <http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2009/ostrom_lecture.pdf> (accessed 25 March 2015), and Joseph Stiglitz, ‘Knowledge as a Public Good’, in Global Public Goods: International Cooperation in the 21st Century, ed. Inge Kaul, Isabelle Grunberg, and Marc Stern (1999) <doi: 10.1093/0195130529.003.0015> (accessed 25 March 2015). 2 See Paul Samuelson, ‘The Pure Theory of Public Expenditure’, Review of Economics and Statistics, 36: 4 (1954), 387–9, and ‘Diagrammatic Exposition of a Pure Theory of Public Expenditures’, Review of Economics and Statistics, 37: 4 (1955), 350–6. 3 Economists call goods with both of these two characteristics, non-rival and non-excludable, ‘public goods’.

Inside the House of Money: Top Hedge Fund Traders on Profiting in a Global Market
by Steven Drobny
Published 31 Mar 2006

The founder of Commodities Corporation (CC), Helmut Weymar, is said by many to be the father of the commodity stream of global macro. Weymar, an M.I.T. PhD and former star cocoa trader for Nabisco, founded CC along with his mentor and legendary trader Amos Hostetter, wheat speculator Frank Vannerson, and his former professor, Nobel Prize winner Paul Samuelson, with the goal of providing an ideal environment where traders could take risk without worrying about administration and other distractions.The management of CC had a solid understanding of risk taking and offered an incredibly open framework in which traders thrived. CC incubated or served as an important early source of funding for some of the best known global macro managers of all time, including Bruce Kovner (Caxton), Paul Tudor Jones (Tudor Investment Corporation), Louis Bacon (Moore Capital), Michael Marcus, Grenville Craig, Ed Seykota, Glen Olink, Morry Markowitz, and Willem Kooyker (Blenheim Capital), to name a few.

Sacred Economics: Money, Gift, and Society in the Age of Transition
by Charles Eisenstein
Published 11 Jul 2011

In other words, you, dear reader, would love to maximize your utility by spending all your money right now, but are induced not to because you know that you’ll be able to have even more later, thanks to interest. This is known in economics as the time preference postulate. Time preference—our supposed preference for immediate consumption—is crucial to the discounted utility model developed by Paul Samuelson in the 1930s that lies at the foundation of most mainstream economic theory today. It is also crucial to many modern “refutations” of Keynes. Moreover, in the lone mathematical economics paper I discovered addressing demurrage-based currencies, the time preference postulate was the key variable in constructing a (specious) demonstration that such currency harms the public welfare.34 The Keynesian logic I have deployed minimizes time preference.

Between Human and Machine: Feedback, Control, and Computing Before Cybernetics
by David A. Mindell
Published 10 Oct 2002

The group included the physicist George Valley, who would later help transform the Whirlwind computer into the SAGE air defense system, as associate chairman. Nathaniel Nichols headed a servo group. Ralph Phillips headed a special subsection for mathematics and theory, which included the mathematician Walter Pitts and economist and future Nobelist Paul Samuelson, and R. P. Scott headed a subsection for systems. With this organization Ivan Getting believed he could finally achieve true blind firing for BuOrd. Getting’s vision entailed a new role for his laboratory, as Brown’s had for his Servo Lab. Getting argued that BuOrd was failing at blind firing because it lacked a central, coordinating technical body that could oversee the integration of the system and “there was no attempt made to integrate the radar and the computer into a functioning whole.”

Money Free and Unfree
by George A. Selgin
Published 14 Jun 2017

For instance, falling wages are likely to accompany falling prices (since wages are the price of labor). Should wages fail to adjust . . . then jobs could be lost as employers struggle to keep up with falling revenues. Elsewhere, Dr. Econ (FRBSF 1999b) observes that “Periods of deflation typically are associated with downturns in the economy,” quoting, with obvious approval, Paul Samuelson and William Nordhaus’s (1998) assertion that occasions “in which prices fall steadily over a period of several years, are associated with depressions.” The trouble with this perspective is that it fails to recognize the existence of two very different sorts of deflation. “Bad” deflation happens when an insufficient level or growth rate of aggregate demand leads to a decline in equilibrium prices unconnected to any improvement in an economy’s productivity.

People, Power, and Profits: Progressive Capitalism for an Age of Discontent
by Joseph E. Stiglitz
Published 22 Apr 2019

Robinson, Why Nations Fail: The Origins of Power, Prosperity, and Poverty (New York: Crown Business, 2013). 4.Modern economic science had long established that without active government intervention, trade between countries with large wage differences would result in the lowering of wages in the advanced country. It had provided ample warning of what in fact has happened. (The results were first established by Paul Samuelson and Wolfgang Stolper in 1941 (“Protection and Real Wages,” Review of Economic Studies 9, no. 1 [1941]: 58–73). See also Samuelson, “International Trade and the Equalisation of Factor Prices,” Economic Journal 58, no. 230 [1948]: 163–84. Thus, trade between the US and China has fundamentally different consequences than trade between two regions with roughly equal wages, such as Europe and the US.

The Marginal Revolutionaries: How Austrian Economists Fought the War of Ideas
by Janek Wasserman
Published 23 Sep 2019

He produced dozens of articles, pamphlets, and books disseminated by AEI. He became one of the leading denouncers of “stagflation,” a portmanteau word he despised nearly as much as the phenomenon itself.32 Despite the turn to political advocacy, Haberler’s reputation survived intact. The Nobel laureate Paul Samuelson, a former student and colleague and perhaps the best-known (American-style) liberal economist, extolled Haberler’s contributions to the Austrian tradition and the economics profession: “Of the three great Austrian economists who elevated world and American economics—Joseph Schumpeter, Friedrich Hayek and Gottfried Haberler—it was Haberler who was the ‘economist’s economist,’ a creative and eclectic advocate of free trade.”

Narrative Economics: How Stories Go Viral and Drive Major Economic Events
by Robert J. Shiller
Published 14 Oct 2019

These people then spend much of their additional income, which in turn generates income for other people who sell to them or work for companies that sell to them. They in turn spend much of this extra income, thus generating another round of income increases for yet other people, and so on in multiple rounds of expenditure. The Keynesian theory can be tweaked to add some investment dynamics, as Paul Samuelson showed in 1939 with his multiplier-accelerator model, thus creating hump-shaped responses in national income as a result of an economic stimulus. These hump-shaped responses resemble the epidemic curves we have seen. We can view the Keynes-Samuelson model as an epidemic model of sorts, where the contagious element is income.

Investing Amid Low Expected Returns: Making the Most When Markets Offer the Least
by Antti Ilmanen
Published 24 Feb 2022

And while we do find some areas of supportive evidence for value-based or momentum-based factor timing, none of the documented style factor timing results were highly robust across subperiods and asset classes. Overall, the verdicts on the additivity, reliability, and practical usefulness of strategic factor diversification and tactical factor timing appear very different, in each case favoring the former. Thus, sin (only) a little when timing asset class or style premia. Notes 1 Economist Paul Samuelson (1994) suggested that if you are tempted to do market timing, you can yield to the temptation, but cautiously: “sin – but only a little.” We share his sentiment. Zero market timing may not be right, but overconfident aggressive market timing is almost certainly wrong. There are no old market timers in the Forbes billionaires list. 2 Apart from our study, Boudoukh-Israel-Richardson (2019, 2020) highlights various econometric problems in long-horizon predictability regressions.

Seven Crashes: The Economic Crises That Shaped Globalization
by Harold James
Published 15 Jan 2023

Larry Summers was a late-twentieth-century equivalent to Keynes at the beginning of the century: indeed his background might well be described by the words that Keynes’s biographer Robert Skidelsky applied to Cambridge, “the arrogance of a place.” Like Keynes, he came from an academic dynasty: his parents were both economists, Robert Summers (originally Samuelson) and Anita Summers. Two of Summers’s uncles, Paul Samuelson and Kenneth Arrow, also economists, won Nobel Prizes. Summers himself won the John Bates Clark Medal given to the best economist under forty. Like Keynes, he moved easily between academic life and the world of policy, and, also like Keynes, he was constantly enveloped by controversy. He worked in numerous areas of economics, notably public finance, labor economics, and macroeconomics, and also thought consistently about the discipline, its methodology and orientation.

Inflated: How Money and Debt Built the American Dream
by R. Christopher Whalen
Published 7 Dec 2010

Such was the state of the U.S. economy in 1981 that, for the next several years, the Reagan White House wisely and expediently let Volcker take the heat on inflation, while advancing the conservative political agenda on Capitol Hill. The Kemp–Roth tax cuts, deregulation of the oil industry, and a tough attitude toward organized labor were all part of breaking the embedded public psychology of inflation. Paul Samuelson explained that many observers of the post-WWII period missed the importance of inflation in the American narrative, a story that was fundamental to the career of Paul Volcker and many other financial professionals with whom he worked: We have arrived at the end of a roughly half-century economic cycle dominated by inflation, for good and ill.

The Fissured Workplace
by David Weil
Published 17 Feb 2014

The situation becomes more complicated if each party can create an advantage through volitional policy (for example, educating its workforce; investing in research and development; devoting significant national resources to developing comparative advantage in an industry), although the overall benefits from trade between those with higher and lower productivity arising from those policies still hold. Several articles by eminent economists rekindled the debate on the gains from trade. In 2004 the Nobel laureate Paul Samuelson examined in an essay late in his life situations where an increase in the productivity of a trading partner reduces its partner’s gains from trade relative to the status quo. Samuelson modeled a situation where one country (for example, China) rapidly creates new comparative advantage in a good that its trading partner (for example, the United States) historically had specialized in producing.

Turning the Tide
by Noam Chomsky
Published 14 Sep 2015

Another business historian, Joseph Monsen, notes that enlightened corporate managers, far from fearing government intervention in the economy, view “the New Economics as a technique for increasing corporate viability.”82 For a variety of reasons, the device that best serves the needs of existing power and privilege is what is sometimes called “military Keynesianism”: the creation of a state-guaranteed market for high technology rapidly-obsolescing waste production, meaning armaments. Their Keynesian advisers assured Truman and Kennedy that military production was unproblematic. Leon Keyserling endorsed the warlike—in fact, rather hysterical—conclusions of NSC 68, and Paul Samuelson informed President Kennedy that military spending, “if deemed desirable for its own sake can only help rather than hinder the health of our economy in the period immediately ahead.”83 Although Reagan professes a “conservative” ideology, in fact he and his advisers are committed partisans of Keynesian methods to stimulate production through the military system and to increase demand by cutting taxes.

Multitude: War and Democracy in the Age of Empire
by Michael Hardt and Antonio Negri
Published 1 Jan 2004

It is still possible when economic intervention, either through welfare (even in its crisis) or warfare (in its crude effectiveness), has invested all the contradictory forces that constitute social life? Keynesianism, putting an end to the naturalist illusion, opened an insolvable problem that political economy would have to face. By the 1970s Keynes’s rethinking of economics was showing negative results. With the expansion of the cold war, Keynesianism was first scaled back by Paul Samuelson to resemble the old mainstream neoclassical doctrine, and then Milton Friedman and the Chicago School arrived to undermine it completely, proposing to establish certain measures of equilibrium by confiding every power of regulation to money, that is, to the market. We were thus taken back, one might say, to the science of economics—but what a strange science!

More: The 10,000-Year Rise of the World Economy
by Philip Coggan
Published 6 Feb 2020

Whenever reform went too far, and looked like challenging communist power or doctrine, it was crushed, as in East Germany in 1953, Hungary in 1956 or Czechoslovakia in 1968. Many observers were seduced by the military might of the eastern bloc, and its success in heavy industry and the space race, into thinking that it was stronger than it was. Paul Samuelson was one of the most esteemed American economists of the era, but he consistently overestimated the potential of the Soviet economy. In the 1961 edition of his textbook for undergraduates, he predicted that Soviet national income would overtake the US in 1984 or 1997; in the 1980 edition, he went for 2002 or 2012.51 The resource riches of the Soviet Union did prove a boon, particularly when oil prices rose sharply in the 1970s.

On Language: Chomsky's Classic Works Language and Responsibility and Reflections on Language in One Volume
by Noam Chomsky and Mitsou Ronat
Published 26 Jul 2011

Perhaps I can illustrate this once again with a personal anecdote: In the spring of 1969 a small group of students in economics here in Cambridge wanted to initiate a discussion of the nature of economics as a field of study. In order to open this discussion, they tried to organize a debate in which the two main speakers would be Paul Samuelson, the eminent Keynesian economist at MIT (today a Nobel laureate), and a Marxist economist. But for this latter role they were not able to find anyone in the Boston area, no one who was willing to question the neo-classical position from the point of view of Marxist political economy. Finally I was asked to take on the task, though I have no particular knowledge of economics, and no commitment to Marxism.

The-General-Theory-of-Employment-Interest-and-Money
by John Maynard Keynes
Published 13 Jul 2018

The essential story laid out in The General Theory is that liquidity preference determines the rate of interest; given the rate of interest, the marginal efficiency of capital determines the rate of investment; and employment is determined by the point at which the value of output is equal to the sum of investment and consumer spending. “[G]iven the propensity to consume and the rate of new investment, there will be only one level of employment consistent with equilibrium” (28). Let me address one issue in particular: did Paul Samuelson, whose 1948 textbook introduced the famous 45-degree diagram to explain the multiplier, misrepresent what Keynes was all about? There are commentators who insist passionately that Samuelson defiled the master’s thought. Yet it is hard to see any significant difference between Samuelson’s formu- xxxviii Introduction by Paul Krugman lation and Keynes’s own equation for equilibrium employment, right there in Chap. 3: ϕ(N) − χ(N) = D2 (29).

How to Be a Liberal: The Story of Liberalism and the Fight for Its Life
by Ian Dunt
Published 15 Oct 2020

They were not alone. They were not defined exclusively by their self-interest. They relied on one another. Keynes outlined his ideas in a book called The General Theory of Employment, Interest and Money. It was published on 4th February 1936. ‘It is a badly written book, poorly organised,’ Paul Samuelson, an economist at the Massachusetts Institute of Technology, concluded. ‘It is arrogant, bad-tempered, polemical, and not overly generous in its acknowledgements. Flashes of insight and intuition intersperse tedious algebra. An awkward definition suddenly gives way to an unforgettable cadenza.

Lifespan: Why We Age—and Why We Don't Have To
by David A. Sinclair and Matthew D. Laplante
Published 9 Sep 2019

And that could be only part of our woes. THE HUNDRED-YEAR POLITICIAN If there has been a consistent driving force that has made our world a kinder, more tolerant, more inclusive, and more just place, it is that humans don’t last long. Social, legal, and scientific revolutions, after all, are waged, as the economist Paul Samuelson often noted, “one funeral at a time.” The quantum physicist Max Planck also knew this to be true. “A new scientific truth does not triumph by convincing its opponents and making them see the light,” Planck wrote shortly before his death in 1947, “but rather because its opponents eventually die, and a new generation grows up that is familiar with it.”26 Having witnessed a few different sorts of revolutions during my life—from the fall of the Berlin Wall in Europe to the rise of LGBTQ rights in the United States to the strengthening of national gun laws in Australia and New Zealand—I can vouch for these insights.

Market Wizards: Interviews With Top Traders
by Jack D. Schwager
Published 7 Feb 2012

At the time, he was also trading some money for Commodities Corporation. Amos told me that I would be well advised to consider joining Commodities Corporation as a trader. At the time, their theory was that they were going to hire all these great econometricians to be traders. They had people like Paul Samuelson on the board. They brought up the idea of hiring me at a meeting. The first question was, “What articles has he written; in what journals has he been published?” I had a B.A. in liberal arts and that was it. The punch line was, “He just trades.” Everybody thought that was very funny. But weren’t they in business to make money trading?

Why Nations Fail: The Origins of Power, Prosperity, and Poverty
by Daron Acemoglu and James Robinson
Published 20 Mar 2012

As late as 1977, a leading academic textbook by an English economist argued that Soviet-style economies were superior to capitalist ones in terms of economic growth, providing full employment and price stability and even in producing people with altruistic motivation. Poor old Western capitalism did better only at providing political freedom. Indeed, the most widely used university textbook in economics, written by Nobel Prize–winner Paul Samuelson, repeatedly predicted the coming economic dominance of the Soviet Union. In the 1961 edition, Samuelson predicted that Soviet national income would overtake that of the United States possibly by 1984, but probably by 1997. In the 1980 edition there was little change in the analysis, though the two dates were delayed to 2002 and 2012.

Who Stole the American Dream?
by Hedrick Smith
Published 10 Sep 2012

“But when U.S. companies build semiconductor plants and R&D facilities in Asia rather than in the U.S., then that is a shift in productive capability, and neither economic theory nor common sense asserts that shift is automatically good for the U.S. even in the long run.” The longtime dean of American economists, Paul Samuelson, a Nobel laureate from MIT, was so irked by orthodox economists that at eighty-nine he waded into the debate and accused the free market economists of purveying a “polemical untruth” about America reaping net benefits from trade. “There are no such neat net benefits, but rather there are now new, net harmful U.S. terms of trade,” Samuelson asserted.

Turing's Cathedral
by George Dyson
Published 6 Mar 2012

“Unifications of fields which were formerly divided and far apart,” they counseled in their introduction, “are rare and happen only after each field has been thoroughly explored.” Game theory was adopted first by military strategists, and the economists followed. Von Neumann “darted briefly into our domain,” commented mathematical economist Paul Samuelson, looking back after fifty years, “and it has never been the same since.”17 Klári remembers John being “as inept with his hands as he was adroit with his mind,” and as a chemistry student he was considered a danger to glassware in the lab. He was drawn to “impossible” questions—predicting the weather, understanding the brain, explaining the economy, constructing reliable computers from unreliable parts.

The Price of Inequality: How Today's Divided Society Endangers Our Future
by Joseph E. Stiglitz
Published 10 Jun 2012

ACKNOWLEDGMENTS I HAVE BEEN WORKING, AS I NOTED, ON THE ORIGINS AND consequences of inequality since my days as a graduate student, and in the almost fifty years since beginning my studies, I have accumulated enormous intellectual debts, too many to enumerate. Robert Solow, one of my thesis advisers, and with whom I wrote an early paper on distribution and macroeconomic behavior, had written his own thesis on inequality. The influence of Paul Samuelson, another of my thesis advisers, will be apparent in the discussion of globalization in chapter 3. My first published papers on the subject were written with my fellow graduate student George Akerlof, with whom I shared the 2001 Nobel Prize. At the time I went to Cambridge University, as a Fulbright scholar in 1965–66, the distribution of income was a major focus of debate, and I owe debts to the late Nicholas Kaldor, David Champernowne, and Michael Farrell, and especially to Sir James Meade and Frank Hahn.

The Alchemists: Three Central Bankers and a World on Fire
by Neil Irwin
Published 4 Apr 2013

Apart from political pressure, Burns’s actions were influenced by some fundamental economic misunderstandings. It was an era of supreme confidence in the ability of wise policymakers to fine-tune the economy, as well as a time that any amount of unemployment seemed unacceptable, even when the trade-off was higher inflation. Two of the greatest economists of their generation, Paul Samuelson and Robert Solow, argued that even 3 percent unemployment—stunningly low by any historical standard—was a “nonperfectionist’s goal.” Inflation had averaged only 2 percent from 1950 to 1968, but in pursuit of exceptionally low unemployment, the Federal Reserve began tolerating prices rising at a faster pace—first 4.7 percent inflation in 1968, then 5.9 percent in 1969.

Why Stock Markets Crash: Critical Events in Complex Financial Systems
by Didier Sornette
Published 18 Nov 2002

The random walk model thus explains quite well the way typical returns in the stock market change with time and with time scale. However, it does not explain the large fluctuations that are not “typical,” as can be seen in Figures 2.4 and 2.5. The concept that price variations are inherently unpredictable has been generalized and extended by the famous economist and Nobel prize winner Paul Samuelson [357, 358]. In a nutshell, Bachelier [25] and Samuelson and an army of economists after them have observed that even the best investors on average seem to find it hard in the long run to do better than the comprehensive common-stock averages, such as the Standard & Poors 500, or even better than a random selection among fundamentals of f i n a n c i a l m a r k e t s 41 stocks of comparable variability.

The Rise and Fall of Nations: Forces of Change in the Post-Crisis World
by Ruchir Sharma
Published 5 Jun 2016

The credit markets also send false signals on occasion, but for the most part they have been a fairly reliable bellwether. Despite their periodic bouts of euphoria and panic, stock markets also have a track record of anticipating economic trends. Back in 1966 the Nobel Prize–winning economist Paul Samuelson quipped that the stock market had “predicted nine out of the last five recessions,” and writers aiming to disparage the predictive power of markets have often cited him. But Samuelson was no more impressed by professional economists, who in fact have a worse record than markets. In a 2014 note Ned Davis Research showed that despite a few big misses, in which the market tanked in anticipation of a recession that never came, the market has been a consistently good predictor of both good and bad times for the economy.

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order
by Benn Steil
Published 14 May 2013

So just as an increased demand for gold does not itself diminish the purchasing power impinging on the market, an increased demand for money does not itself do so. Did it matter whether Keynes was right or wrong about money? “Had Keynes begun … with the simple statement that he found it realistic to assume that modern capitalistic societies had money wage rates that were sticky and resistant to downward movements,” the great economist Paul Samuelson argued in 1964, “most of his insights would have remained just as valid.”96 This is the logical basis on which much Keynesian analysis today is undertaken—not on Keynes’s theorizing about the unique menace of money (to which Keynes clung tenaciously). “Most people who admire Keynes,” Joseph Schumpeter wryly observed, “take from him what is congenial to them and leave the rest.”97 For his part, Rueff argued that Keynes’s monetary and fiscal policy prescriptions had no sound basis.

The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations
by Sebastian Mallaby
Published 24 Apr 2006

In this, they reflected the spirit of their times. Poverty was even worse then than it is now: in India, life expectancy for the poor was twenty-five years, and 90 percent of the population aged ten or older was illiterate.8 But this was seen as a fact of life rather than an urgent challenge. In 1948, Paul Samuelson published the first edition of his classic economics textbook. It contained less than three sentences on development.9 And yet, even in the 1940s, it was easy to see how time would soon expand the economists’ horizons. The link between security and poverty logically applied to developing countries as well as the developed ones; and the statesmen of the time could see this.

Evidence-Based Technical Analysis: Applying the Scientific Method and Statistical Inference to Trading Signals
by David Aronson
Published 1 Nov 2006

They are good for the economy because rational prices send vital signals of asset values that, in turn, encourage the efficient allocation of scarce resources, such as capital and labor. This fosters economic growth.10 However, prices in an efficient market are unpredictable rendering all forms of TA useless. According to Paul Samuelson, financial market prices Price Negative News Event Rational Price Positive News Event FIGURE 7.1 Efficient market’s response to positive and negative news. Time 336 METHODOLOGICAL, PSYCHOLOGICAL, PHILOSOPHICAL, STATISTICAL FOUNDATIONS follow a random walk because of the actions of many intelligent/rational investors.

Antifragile: Things That Gain From Disorder
by Nassim Nicholas Taleb
Published 27 Nov 2012

Say a country is good at both wine and clothes, better than its neighbors with whom it can trade freely. Then the visible optimal strategy would be to specialize in either wine or clothes, whichever fits the best and minimizes opportunity costs. Everyone would then be happy. The analogy by the economist Paul Samuelson is that if someone happens to be the best doctor in town and, at the same time, the best secretary, then it would be preferable to be the higher-earning doctor—as it would minimize opportunity losses—and let someone else be the secretary and buy secretarial services from him. I agree that there are benefits in some form of specialization, but not from the models used to prove it.

Derivatives Markets
by David Goldenberg
Published 2 Mar 2016

Black–Scholes derived from Bachelier, illustrating the important connection between these two models; 34. modeling non-constant volatility: the deterministic volatility model and stochastic volatility models; 35. why Black–Scholes is still important; 36. and a final synthesis chapter that includes a discussion of the different senses of risk-neutral valuation, their meaning and economic basis, and a complete discussion of the dynamics of the hedge portfolio in the BOPM, N=1. I would like to thank the giants of the derivatives field including: Louis Bachelier, Fischer Black, John Cox, Darrell Duffie, Jonathan Ingersoll, Kiyoshi Itô, Robert Merton, Paul Samuelson, Myron Scholes, Stephen Ross, Mark Rubinstein, and many others. I sincerely hope that the reader enjoys traveling along the path to understanding Derivatives Markets. David Goldenberg Independent researcher, NY, USA ACKNOWLEDGMENTS I would like to thank everyone at Routledge for their hard work on this book.

Basic Income: A Radical Proposal for a Free Society and a Sane Economy
by Philippe van Parijs and Yannick Vanderborght
Published 20 Mar 2017

Some, it Â�will be said, Â�will seize upon the income and Â�won’t work. So it is now with more limited welfare, as it is called. Let us accept some resort to leisure by the poor as well as by the rich.”↜83 In 1968, consistently with his revised conviction, Galbraith supported, along with James Tobin, Paul Samuelson, and Robert J. Lampman, a petition signed by over one thousand economists calling for the US Congress to adopt “a system of income guarantees and supplements.”↜84 In the meantime, academics had been joined by other components of American civil society. Thus, at its inaugural convention in August 1967, the National Welfare Rights OrganÂ�ization (NWRO) Â�adopted as its first goal: “Adequate income: a system that guarantees enough money for all Americans to live dignified lives above the level of poverty.”↜85 And in his last book, Where Do We Go From Â�Here?

Buffett
by Roger Lowenstein
Published 24 Jul 2013

The buoyant spirit was mockingly captured by Abbie Hoffman, who visited the exchange that summer and threw dollar bills from the gallery while floor clerks scurried for the loot. On the West Coast, customers at Kleiner Bell stood in front of the ticker tape cheering “Go, go, go.” The Dow roared back to the low 900s. As if on cue, Congress held—what else?—hearings. In August, Paul Samuelson, the Massachusetts Institute of Technology economist, appeared before the very Senate Banking Committee that Ben Graham had faced a decade earlier. This time the subject was the rampant growth of mutual funds. Samuelson testified that fifty thousand mutual fund salesmen—one for every seventy investors—were combing the country.

The Price of Time: The Real Story of Interest
by Edward Chancellor
Published 15 Aug 2022

The great Swedish economist Gustav Cassel, author of The Nature and Necessity of Interest, dismissed the ‘absolute absurdity of thinking’ that the rate of interest could ever fall to zero or less.45 The invitation to waste capital, Cassel said, would be overwhelming. Although Irving Fisher supported Gesell’s proposal in the Great Depression, he believed that zero or negative interest was ‘practically almost impossible’. Negative interest, said Fisher, could only work if money was turned into a ‘perishable commodity, like fruit’.46 The Nobel laureate Paul Samuelson likewise believed that the concept of a negative interest rate was absurd. The MIT economist suggested that if negative rates were maintained for long enough it might become profitable to level the Rockies to save on the fuel used by vehicles climbing steep gradients.47 UCLA economist Axel Leijonhufvud thought that if long-term rates turned more negative than short-term rates it could only be a sign of a decaying world.48 The world would be turned on its head.

Slouching Towards Utopia: An Economic History of the Twentieth Century
by J. Bradford Delong
Published 6 Apr 2020

Many outside the USSR—for example, the left-wing Marxist economist Paul Sweezy—had confidently predicted that Leninist socialism and government planning would deliver a more efficient allocation of productive forces and a faster rate of economic growth than any other possible system. Even many who feared the destructive potential of Leninist socialism agreed that the USSR and its satellites were likely to forge ahead in total and per capita production. Paul Samuelson—no Leninist—wrote the leading post–World War II American economics textbook. Up until the late 1960s, its forecasts showed the USSR economy surpassing the US economy in production per head well before 2000. That the Soviet Union might produce superior production and equality, if not prosperity, even if it remained inferior as to freedom and choice, seemed a possibility even into the 1960s.

Debt: The First 5,000 Years
by David Graeber
Published 1 Jan 2010

One interesting corollary is that, as a result, economists have come to see the very question of the presence or absence of money as not especially important, since money is just a commodity, chosen to facilitate exchange, and which we use to measure the value of other commodities. Otherwise, it has no special qualities. Still, in 1958, Paul Samuelson, one of the leading lights of the neoclassical school that still predominates in modern economic thought, could express disdain for what he called “the social contrivance of money.” “Even in the most advanced industrial economies,” he insisted, “if we strip exchange down to its barest essentials and peel off the obscuring layer of money, we find that trade between individuals and nations largely boils down to barter.”4 Others spoke of a “veil of money” obscuring the nature of the “real economy” in which people produced real goods and services and swapped them back and forth.5 Call this the final apotheosis of economics as common sense.

Understanding Power
by Noam Chomsky
Published 26 Jul 2010

Well, there was pent-up consumer demand—a lot of people had made money and wanted to buy refrigerators and stuff. But by about 1947 and ’48, that was beginning to tail off, and it looked like we were going to go back into another recession. And if you go back and read the economists, people like Paul Samuelson and others in the business press, at that point they were saying that advanced industry, high-technology industry, “cannot survive in a competitive, unsubsidized free-enterprise economy”—that’s just hopeless. 8 They figured we were heading right back to the Depression, but now they knew the answer: government stimulation.

Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State
by Paul Tucker
Published 21 Apr 2018

Typically, Welfarism pays no heed to the possibility that people derive welfare from, for example, democracy for its own sake (intrinsic value) as distinct from any role that democracy might play in delivering states of the world (instrumental value) (Sen, “Utilitarianism and Welfarism”). On the value to some people of (democratic) processes, see Anderson, “Critical Review.” 9 Following Nobel Prize winner Paul Samuelson, a social welfare function aggregates the welfare—strictly, the preference orderings—of individuals in some way. In selecting between the set of potentially available efficient states (and so its distribution of endowments), society is driven by its preferred social welfare function or, put another way, by how it wants to weigh different individuals’ well-being.

The Meritocracy Trap: How America's Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite
by Daniel Markovits
Published 14 Sep 2019

The number of financial patents awarded annually has also increased starkly since midcentury, although changes in patent law confound efforts to read innovation directly off patent numbers. Financial patents remained relatively unused until the State Street decision in 1998. State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998). (For instance, Bob Merton and Paul Samuelson did not patent their work on infinitely lived options in the 1960s.) After that, financial patents rose markedly until 2014, when the Supreme Court narrowed the availability of patents for such financial products in its Alice decision. Alice Corp. v. CLS Bank International, 134 S.Ct. 2347 (2014).

America in the World: A History of U.S. Diplomacy and Foreign Policy
by Robert B. Zoellick
Published 3 Aug 2020

Recently retired general Maxwell Taylor, a Kennedy friend, wrote a book with the warning that Eisenhower’s fiscal frugality had starved the military of the men, material, and modern capabilities needed to withstand the monstrous Soviet forces. President Eisenhower had scrapped a visit to Japan because of anti-American riots. Even the economic foundations of America’s power seemed rickety: In Paul Samuelson’s 1961 edition of his ubiquitous Economics textbook, the MIT professor explained that Soviet growth rates “have been considerably greater than ours”; he included a graph that projected that the gap between the U.S. market and the Soviet planned economy could disappear.12 Kennedy also pointed to America’s failure to compete in the Third World, a fast-expanding arena.

The Atlantic and Its Enemies: A History of the Cold War
by Norman Stone
Published 15 Feb 2010

By 1980 the empire indeed had its problems, and this time round the United States would not co-operate in keeping it going. The curious thing about this period is Reagan’s perception in 1981 that as regards the USSR the ‘last pages are even now being written’. People ostensibly far better educated took a quite different view - for instance, James Schlesinger and Paul Samuelson, quite apart from the vast majority of sovietologists, who still viewed things through the Vietnam prism. NSD(ecision) D(irective) of March 1982 (repeated in 1983) meant to ‘neutralize’ Soviet control of eastern Europe and there was a deliberate attack on the Soviet economy; in January 1983 the ambition was even to change the USSR fundamentally.

The Quest: Energy, Security, and the Remaking of the Modern World
by Daniel Yergin
Published 14 May 2011

One of his closest friends, Ulam would exchange both mathematical insights and intricate Yiddish jokes with him. Ulam would tease von Neumann for being too practical, for trying to apply mathematics to all sorts of problems. Once he told von Neumann, “When it comes to the application of mathematics to dentistry, maybe you’ll stop.” The economist Paul Samuelson said von Neumann had “the fastest mind” he had ever encountered. The head of Britain’s National Physical Laboratory called him “the cleverest man in the world.” A peer summed up what many who worked with him thought: “Unquestionably the nearest thing to a genius I have ever encountered.”27 That chance meeting on the Aberdeen railroad platform in August 1944 would propel von Neumann to become the “father of computing.”

Nixonland: The Rise of a President and the Fracturing of America
by Rick Perlstein
Published 1 Jan 2008

The Dow was down 29 percent since the end of 1968 to under 700 and counting, unemployment was up 1.5 points to 4.8, 78 percent of business executives blamed Nixon, and Edmund Muskie, the talk of the pundits for ’72, was quoted in the Wall Street Journal on April 3: “In the 1920s it took Republicans eight years to go from prosperity to unemployment and now they’ve learned to do it in one year.” Paul Samuelson, the MIT economist, in his Newsweek column, really hit Nixon where it hurt: “If Mr. Nixon were to announce defeat in Vietnam and cutting of our losses, the market would jump 50 points.” April 3 and 4 were movie nights. On Friday, at Camp David, Nixon took in Laurence Olivier in Hamlet. The next night, at the White House, alongside Pat, Julie, and son-in-law David Eisenhower, an increasingly impotent president enjoyed the exploits of a more decisive hero.

The Snowball: Warren Buffett and the Business of Life
by Alice Schroeder
Published 1 Sep 2008

Inevitably, therefore, he became the target of a group of finance professors who were at that very moment attempting to prove that someone like Buffett was a mere accident who should not be paid attention, much less worshipped. These academics had started by positing the reasonable but not necessarily obvious truth that if a whole lot of people were trying to be better than average, they would become the average. Paul Samuelson, an MIT economist, revived and circulated the 1900 work of Louis Bachelier, who observed that the market is made up of speculators who cohere into a whole that operates according to a “random walk.”38 A professor from the University of Chicago, Eugene Fama, took Bachelier’s work and tested it empirically in the modern-day market, which he described as “efficient.”