Home > Uncategorized > Samuelson dies- but his economic errors live on (from Paul Davidson)

Samuelson dies- but his economic errors live on (from Paul Davidson)

Paul Davidson writes:

Perhaps a slightly different view  (vis-à-vis the N.Y. Times obit) of Samuelson’s role in  economics could be gleaned from both Pasinetti’s and my contributions to the Festschrift in honor of Samuelson entitled “Samuelsonian Economics and The Twenty-First Century” edited by M. Szenberg, L. Ramarattan and A.A. Gottesman (Oxford University Press, 2006). 

In essence, my piece provides evidence (including Samuelson’s own words) that Samuelson gave “Keynesianism” a bad  rap by indicating that he did not understand the paradigm of the GENERAL THEORY and therefore Samuelson insisted the economy  was merely a Walrasian system that experienced unemployment only because of the short-run rigidity of wages and prices in his neoclassical synthesis Keynesianism.

 In this neoclassical synthesis Samuelson failed to understand the role  of financial markets in maintaining liquidity of financial assets in a real world monetary economy.  No wonder that students of Saumelson, including Nobel Prize winners, are responsible for the “quants” taking control of Wall street in the 1990s and early 21 century which led to the financial crisis that created the current economic turbulence. [Even the collapse of Long Term Capital Management in the late 1990’s didn’t seem to indicate the error of both classical economics and its neoclassical synthesis alternative.]

  1. December 14, 2009 at 7:31 pm

    With time, I believe the mathematical “problem solving” orientation of twentieth-century economics will be viewed as piece-meal and insufficient, especially as we look at the viability of the market-mechanism itself in the wake of the financial crisis. Relatedly, Samuelson’s “mathematization” of economics treats the discipline as though it were a science–ignoring the inherent limits to prediction of a human system, whether social, political or economic. For more, pls see http://euandus3.wordpress.com/2009/12/14/paul-samuelson-the-20th-century-economist-has-passed/

  2. Ken Zimmerman
    December 15, 2009 at 2:08 am

    Tell me something, Paul. In your mind what is the purpose of economics? Is it just an effete club for smart folks who need a job but don’t really understand how to get one or what to do with it once they have it? Or is it a mathematics society, for folks who just ooze equations? I never found it very useful or pragmatic. I went so far as to earn a graduate degree in it trying to convice myself it had some purpose and use. I failed at convincing myself. I find post-Keynesian economics more useful and somewhat pragmatic, but even it seems distant from the actual actions and actors that move markets and economic decision making. And the “neoclassical synthesis” is a complete mystery to me. Am I missing something? Economic sociology and especially economic anthropology seem more relevant and useful. And then there’s Samuelson. He just seemed to keep missing the boat and being promoted each time. This seems bizarre to me.

  3. Pablo M. Podhorzer
    December 15, 2009 at 3:00 pm

    Economic sociology seems to take the post from the old classic Politcal Economy. ES is what we could call THE Economic Science, or “Economics”. For what is ECONOMICS without society? What is admirable is not the suppossed achievements of the Economists but that they can obtain benefits from their dubious theories for so long (at least 30 or 40 years after they have been proved wrong).

  4. Ken Zimmerman
    December 15, 2009 at 7:59 pm

    Thank you, all. I was educated as a mathematician, among other things. Economists’ use of mathematics frightens and often amuses most mathematicians. In that regard I want to point out something often overlooked by economists as well as others who “use” mathematics. Many events can be “represented” by mathematical terms. That is not the same as saying these events are either explained or can be predicted.

  5. Stan Druben
    December 16, 2009 at 8:56 pm

    A brief new book, THE CONCEPT OF CAPITALISM, by Prof. Emeritus Bruce R. Scott, Harvard Business School, suggests a different way of looking at capitalism, one that may provide a framework matching Paul Davidson’s view of Keynesianism. The author challenges the notion that capitalism can be equated with a stand-alone marketplace. (CONCEPT is essentially a chapter of Scott’s CAPITALISM, ITS ORIGINS AND EVOLUTION AS A SYSTEM OF GOVERNANCE, scheduled for publication in 2010.) In this NPR interview http://www.hereandnow.org/2009/11/rundown-113/, Prof. Scott sketches his idea.

    BTW, I’m looking forward to reading Paul Davidson’s THE KEYNES SOLUTION, which I’ve just purchased.

  6. Merijn Knibbe
    July 23, 2010 at 7:20 am

    Read this one, from Hal Varian, in the same ‘Samuelsonian economics’ mentioned by Paul Davidson (see above). After showing that in the past seventy years, ‘revealed preference’ has been an important theoretical idea, he states that: ‘We anticipate that in the future, revealed preference analysis will make a significant contribution to empirical economics as well (Varian 2006).’

    Seventy years, and still no meaningfull measurements. That’s a tragedy.

    Shouldn’t we install a prize of 1.000.000 euro for any economist who, after more than twoo hundred years of vain endeavour, succeeds in the meaningfull definition and measurement of ‘One Bentham’, or one unit of ‘utility’?

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