American Economist, Winner of Nobel Prize in Economics, Author, Professor of Economics at MIT
Paul Samuelson, fully Paul Anthony Samuelson
American Economist, Winner of Nobel Prize in Economics, Author, Professor of Economics at MIT
Canny investing suggestions: 1. Decide what proportions of wealth in common stocks, money market funds, and longer-term bonds your own risk tolerance leaves you comfortable with (e.g., 60% in stocks, 25% in money market funds, 15% in bonds). There is no scientific way to determine what is optimal for these fractions. 2. Put 80% to 100% of your targeted equity portfolio in a no-load version of an index fund (e.g., Vanguard's Index Trust for the S&P 500 and possibly its smaller-stock tier; or Wells Fargo's similar vehicles; 10% to 25% in similar foreign market vehicles also makes sense.). The full management and other inclusive fees ought to be as low as three-tenths of 1% of principal per year - in contrast to the usual 1% to 2% in the mutual fund, pension, and trust worlds. 3. Lean-cost bond and money funds are similarly indicated.
I spent the four years I was an undergraduate working on the beach. And it wasn't because I was lazy; it was because my freshman class would go to a hundred different employers and wouldn't get a nibble.
The beauty of social insurance is that it is actuarially unsound. Everyone who reaches retirement age is given benefit privileges that far exceed anything he has paid in -- exceed his payments by more than ten times (or five times counting employer payments)! How is it possible? It stems from the fact that the national product is growing at a compound interest rate and can be expected to do so for as far ahead as the eye cannot see. Always there are more youths than old folks in a growing population. More important, with real income going up at 3% per year, the taxable base on which benefits rest is always much greater than the taxes paid historically by the generation now retired.
Various experts, here and abroad, believe that the immediate postwar inflationary climate has now been converted into an epoch of price stability. One hopes this cheerful diagnosis is correct. However, a careful survey of the behavior of prices and costs shows that our recent stability in the wholesale price index has come in a period of admittedly high unemployment and slackness in our economy. For this reason it is premature to believe that the restoration of high employment will no longer involve problems concerning the stability of prices.
Econometrics may be defined as the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference.
I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he would say ?uh, oh what you have done? and James Buchanan argues in those terms. I have to say that I see merit in that view.
The General Theory caught most economists under the age of 35 with the unexpected virulence of a disease first attacking and decimating an isolated tribe of south sea islanders. Economists beyond 50 turned out to be quite immune to the ailment. With time, most economists in between began to run the fever, often without knowing or admitting their condition.
We have long been a nation of over-indulgence. Many of us think nothing of spending $300 on a pair of shoes or $500 on a purse, while others can barely make ends meet. Now, as the economy takes a turn for the worse, more and more of us are seeing the benefits of living frugally. But how do you go from living the "high life" to living on a budget without going insane? Here are some frugal living tips to help you tighten the belt without choking your lifestyle.
Economics never was a dismal science. I should be a realistic science.
I think, without question, that unemployment of more than 6 per cent is something to be concerned about. You don't push the panic button, but you don't relax and enjoy it either... I myself don't believe in a numbers game in which you give a maximum tolerable percentage, because I think, truly, it does vary with the times... I would hesitate to specify the figure today, but I will say this: it would be, in my mind, less than a 4 per cent figure - that is, for the period ahead. I would not, realistically, think we could hope for a 2 per cent figure in the near future, as certain European countries have been able to do. But I do think that if we are pretty zealous in this matter and insist upon getting low figures - say, 3.5 per cent - then our very success in accomplishing that may lead to a new epoch just beyond when we could hope to go below 3 per cent...
The General Theory is an obscure book, so that would be anti-Keynesians must assume their position largely on credit unless they are willing to put in a great deal of work and run the risk of seduction in the process. The General Theory seems the random notes over a period of years of a gifted man who in his youth gained the whip hand over his publishers by virtue of the acclaim and fortune resulting from the success of his Economic Consequences of the Peace.
What good does it do a black youth to know that an employer must pay him $2 an hour if the fact that he must be paid that amount is what keeps him from getting a job?
Economists are not yet agreed how serious this new malady of inflation really is. Many feel that new institutional programs, other than conventional fiscal and monetary policies, must be devised to meet this new challenge. But whatever the merits of the varying views on this subject, it should be made manifest that the goal of high employment and effective real growth cannot be abandoned because of the problematical fear that re-attaining prosperity in America may bring with it some difficulties; if recovery means a reopening of the cost-push problem, then we have no choice but to move closer to the day when that problem has to be successfully grappled with.
If you looked at a transcript afterward, it might seem clear that you had won the debate on points. But somehow, with members of the audience, you always seemed to come off as elite, and Milton seemed to have won the day.
The history of the twentieth century - America's century! - has been pretty much a history of rising prices... inflation is itself a problem. But the legitimate and hysterical fears of inflation are - quite aside from the evil of inflation itself - likely, in their own right, to be problems. In short, I fear inflation. And I fear the fear of inflation. Avoiding inflation is not an absolute imperative, but rather is one of a number of conflicting goals that we must pursue and that we may often have to compromise. Even if the military outlook were serene - and it is not - modern democracies must expect in the future to be much of the time at, or near, the point where inflation is a concern. Our greatest economic problem will be to face that concern realistically, to weigh inflation's quantitative evil against the evils of actions taken against it, to develop methods of adjusting to the residue of inflation which attainment of the 'golden mean' might involve. The challenge is great but the prognosis is cheerful.
When the economy was going up, [Milton Friedman and I] both gave the same advice, and when the economy was going down, we gave the same advice. But in between he didn't change his advice at all.
Economists have much to be humble about.
Instead of burning out like a fad the General Theory is still gaining adherents and appears to be in business to stay. Many economists who are most vehement in criticism of the specific Keynesian policies?which must always be carefully distinguished from the scientific analysis associated with his name?will never again be the same after passing through his hands. It has been wisely said that only in terms of a modern theory of effective demand can one understand and defend the so called "classical" theory of unemployment. It is perhaps not without additional significance. in appraising the long-run prospects of the Keynesian theories, that no individual, having once embraced the modern analysis, has?as far as I am aware?later returned to the older theories. And in universities where graduate students are exposed to the old and new income analyses. I am told that it is often only too clear which way the wind blows. Finally, and perhaps most important from the long-run standpoint, the Keynesian analysis has begun to filter down into the elementary textbooks; and, as everybody knows, once an idea gets into these, however bad it may be, it becomes practically immortal.
The investor who runs a portfolio of five to fifty asset items is (usually) being self-indulgent. The hobby can be an expensive one over forty years of the individual's life cycle. Blowing a thousand dollars a year at the gaming tables of Las Vegas might be a comparative bargain, but of course the gratifications to the ego may be less for many temperaments that are not so much desirous of taking risks as of proving an ability to beat life's odds by personal cleverness.
With respect to the level of total purchasing power and employment, Keynes denies that there is an invisible hand channeling the self-centered action of each individual to the social optimum. This is the sum and substance of his heresy. Again and again through his writings there is to be found the figure of speech that what is needed are certain "rules of the road" and governmental actions, which will benefit everybody, but which nobody by himself is motivated to establish or follow. Left to themselves during depression, people will try to save and only end up lowering society's level of capital formation and saving; during an inflation, apparent self-interest leads everyone to action which only aggravates the malignant upward spiral
Fashion always plays an important role in economic science: new concepts become the 'mode and then are pass‚. A cynic might even be tempted to speculate as to whether academic discussion is itself equilibrating: whether assertion, reply, and rejoinder do not represent an oscillating divergent series, in which?to quote Frank Knight's characterization of sociology?"bad talk drives out good."
Investing should be dull. It shouldn't be exciting. Investing should be more like watching paint dry or grass grow. If you want excitement, take $800 and go to Las Vegas... It is not easy to get rich in Las Vegas, at Churchill Downs, or at the local Merrill Lynch office.
The Keynesian system is indispensable to an understanding of conditions of over-effective demand and secular exhilaration; so much so that one anti-Keynesian has argued in print that only in times of a great war boom do such concepts as the marginal propensity to consume have validity. Perhaps, therefore, it would be more nearly correct to aver the reverse: that certain economists are Keynesian fellow-travelers only in boom times, falling off the band wagon in depression. If time permitted. it would be instructive to contrast the analysis of inflation during the Napoleonic and first World War periods with that of the recent War and correlate this with Keynes' influence. Thus, the "inflationary gap" concept, recently so popular, seems to have been first used around the Spring of 1941 in a speech by the British Chancellor of the Exchequer, a speech thought to have been the product of Keynes himself.
With the assistance of mathematics, I can see a property of the ninety-nine dimensional surfaces hidden from the naked eye. If an increase in the price of fertilizer alone always increases the amount the firm buys of caviar, from that fact alone I can predict the answer to the following experiment which I have never seen performed and upon which I have no observations: an increase in the price of caviar alone will increase the amount the firm buys of fertilizer. In thermodynamics such reciprocity or integrability conditions are known as Maxwell Conditions; in economics they are known as Hotelling conditions in honor of Harold Hotelling?s 1932 work.
For better or worse, US Keynesianism was so far ahead of where it started. I am a cafeteria Keynesian. You know what a cafeteria catholic is?