Economist Paul Samuelson Remembered

Nobel Prize-winning economist Paul Samuelson died Sunday at the age of 94. Samuelson was a public intellectual, author of a fundamental economics textbook, and an inspiration to generations of economists who came out of the Massachusetts Institute of Technology. Nobel-winning economist Paul Krugman, a former Samuelson student, remembers Samuelson.

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ROBERT SIEGEL, host:

The economist Paul Samuelson, who died yesterday at the age of 94, is quoted having said this: I don't care who writes a nation's laws or crafts its advanced treatises if I can write its economics textbooks.

Paul Samuelson wrote the textbook "Economics," which was a global blockbuster. It was published in 1948, updated many times since. It was the bestselling U.S. textbook for decades and it was translated into 20 languages. And then there was his scholarly work. When the Nobel Prize for Economics was established, Paul Samuelson won the second prize ever awarded in 1970.

And his academic contribution: He taught economics at MIT where he elevated the economics faculty to world-class standing; an academic home to several future Nobel Laureates. Among them, Paul Krugman of Princeton University and The New York Times, who joins us now. Welcome to the program.

Professor PAUL KRUGMAN (Economics and International Affairs, Princeton University; Columnist, The New York Times): Hi there.

SIEGEL: How important was Paul Samuelson's contribution to the study and practice of economics?

Prof. KRUGMAN: Oh, economics as we know it is largely something that Paul Samuelson created. He took a field that was somewhat vague and scatterbrained and through his work, he transformed it into, you know, a very impressive, if not always totally accurate discipline. No, amazing.

SIEGEL: He was a gifted mathematical economist.

Prof. KRUGMAN: Yeah, although what's interesting, looking back, is yes, he certainly used math, and he played a big role in the mathematization of economics, turning it into something, which he discussed in terms of equations. But he never allowed the math to take over. It was always math in the service of ideas.

SIEGEL: He was a Keynesian who lived to see Keynesian economics go from heresy to state religion to, I guess, state religion under attack. How did his own thinking evolve over the years?

Prof. KRUGMAN: He remained pretty much committed to the view. I mean, his starting point was, we've just been through this Great Depression, he came of age during the depression, and the first thing that economics has to do is provide an answer. How can such things happen and how can we stop them from happening again? And only once you've done that can we start to talk about all the wonders of free markets.

SIEGEL: I want to play a clip of Paul Samuelson on the "NewsHour" on PBS, speaking of the present financial crisis, in which he said that Wall Street's shenanigans this time are much worse than they were in the Great Depression.

(Soundbite of TV program, "NewsHour")

Professor PAUL SAMUELSON (Economics, Massachusetts Institute of Technology; Author, "Economics"): Fiendish, Frankenstein monsters of financial engineering have been created - a lot of them at MIT, some of them by people like me.

SIEGEL: What was he speaking of there?

Prof. KRUGMAN: Well, he was talking about the reliance on finance models - and modern finance theory is one of those things that Paul Samuelson largely started - were used to justify these complicated financial products to claim that bankers knew what they were doing. And in the end, of course, it turned out that they didn't. And so we had a house of cards that fell down with catastrophic consequences.

SIEGEL: When you say that he more or less founded that, he founded any number of subspecialties of economics.

Prof. KRUGMAN: If you didn't know that all of his papers were written by one person, if they didn't have the same writing style, you'd think he was 15 economists. He was just incredibly prolific and hit fundamental ideas, created fundamental ideas over and over again.

SIEGEL: Was he an encouraging, nurturing teacher to graduate students like yourself? Or was he impatient? How would you describe him?

Prof. KRUGMAN: No, that's what's the amazing thing. He was incredibly down to earth. I took one of the introductory courses in graduate school from him and it was not at all an overbearing course. He was trying to get the tools across to these aspiring economists in person, totally unpretentious. I've never seen - I've seen economists with not a hundredth of his achievement be far more royalist than he was.

SIEGEL: And I suppose he blazed the trail that you're still on. That is, I remember - never having taken an economics course - reading Paul Samuelson's column in Newsweek all the time. He was a commentator.

Prof. KRUGMAN: Yes, he was a public intellectual; a commentator. He sparred with Milton Friedman for many years. I have to say that I almost think that Paul Samuelson was too happy a man to be fully effective as a public intellectual, because there was always more fire in Friedman's columns. But he certainly was able to write for the general public.

And the only thing I would like to add is that you can really read Samuelson, read that 1948 textbook extremely profitably to make sense of the crisis we're in right now. Reading what he had to say about the limits of monetary policy 60 years ago, puts a lot of recent analysis by famous economists to shame.

SIEGEL: Well, Paul Krugman, thank you very much for talking with us.

Prof. KRUGMAN: Thanks a lot.

SIEGEL: Paul Krugman, professor of economics and international affairs at Princeton University and a columnist for The New York Times, speaking with us about the late Paul Samuelson.

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