Epstein: "Are We All Keynesians Now?"
Monday morning's papers announced the death of Paul Samuelson, who by any reckoning counts as one of the premier economists of the 20th century. Samuelson took the economic community by storm in the early 1940s with his systematic effort to mathematize basic economic theory. His 1947 book The Foundations of Economic Analysis is ample testimony to the power and originality of his mind.
It is even more remarkable how quickly he could shift gears: The next year he authored the first edition of his famous introductory textbook, Economics, which held a dominant position for over 30 years. He was awarded the second Nobel in economic sciences in 1970. Samuelson set a standard of academic excellence and practical wisdom that few in the economics profession did, or could, achieve.
As a lawyer by training, I am not equipped to comment on all his technical achievements. It is striking, however, that many of the issues of his youth have surged back to the fore in more recent years. Michael Weinstein's superb detailed obituary in the New York Times makes explicit reference to the running differences between Samuelson and another giant of economics, Milton Friedman, which started when they met at the University of Chicago in 1933. Friedman was a graduate student and Samuelson, three years his junior, was an undergraduate.
In ways that seem hauntingly familiar, the debate between these two men was forged during the Great Depression by the single question of what went wrong. What combination of policies and practices could generate the 25% unemployment rates that persisted through much of the 1930s? Samuelson was the defender of the Keynesian position that government intervention in the market was necessary to ensure full employment. Friedman was the defender of the free market, and he thought that state intervention made things worse, not better.