Paul Samuelson, fully Paul Anthony Samuelson

Samuelson, fully Paul Anthony Samuelson

American Economist, Winner of Nobel Prize in Economics, Author, Professor of Economics at MIT

Author Quotes

A new system, that is what requires emphasis. Classical economics could withstand isolated criticism. Theorists can always resist facts: for facts are hard to establish and are always changing anyway, and ceteris paribus can be made to absorb a good deal of punishment. Inevitably, at the earliest opportunity, the mind slips back into the old grooves of thought, since analysis Is utterly impossible without a frame of reference, a way of thinking about things, or, in short, a theory.

I don't believe we're converging on ever-improving forecasting accuracy.

Of course, the great depression of the thirties was not the first to reveal the untenability of the classical synthesis. The classical philosophy always had its ups and downs along with the great swings of business activity. Each time it had come back. But now for the first time, it was confronted by a competing system?a well-reasoned body of thought containing among other things as many equations as unknowns; in short, like itself, a synthesis: and one which could swallow the classical system as a special case.

The very name of my subject, economics, suggests economizing or maximizing. But Political Economy has gone a long way beyond home economics. Indeed, it is only in the last third of the century, within my own lifetime as a scholar, that economic theory has had many pretensions to being itself useful to the practical businessman or bureaucrat. I seem to recall that a great economist of the last generation, A. C. Pigou of Cambridge University, once asked the rhetorical question, ?Who would ever think of employing an economist to run a brewery?? Well, today, under the guise of operational research and managerial economics, the fanciest of our economic tools are being utilized in enterprises both public and private.

You shouldn't spend much time on your investments. That will just tempt you to pull up your plants and see how the roots are doing, and that's very bad for the roots. It's also very bad for your sleep.

A respect for evidence compels me to incline toward the hypothesis that most portfolio decision makers should go out of business -- take up plumbing, teach Greek, or help produce the annual GNP by serving as corporate executives. Even if this advice to drop dead is good advice, it obviously is not counsel that will be eagerly followed. Few people will commit suicide without a push.

I don't care very much for the People Magazine approach to applied economics.

Politicians like to tell people what they want to hear - and what they want to hear is what won't happen.

There are very few people or organizations who have any presumptive edge over a low-cost, no-load set of indices, particularly on a risk corrected basis. People used to say that you're settling for mediocrity. Isn't it interesting that the best brains on Wall Street can't achieve mediocrity?

A thousand to ten thousand money managers all look about equally good or bad. Each expects to do 3% better than the mob. Each has put together a convincing story. After the fact, hardly ten out of ten thousand perform in a way that convinces an experienced student of inductive evidence that a long-term edge over indexing is likely. ..., it may be the better part of wisdom to forsake search for needles that are so very small in haystacks that are so very large.

I don't care who writes a nation's laws. or crafts its advanced treatises, if I can write its economics textbooks.

Repeatedly I have denied the great-man or great-work notion of science. Every drop helps, the old farmer said, as he spat into the pond. One does the best one can on the most pressing problem that presents. And, if after you have done so, your next moves are down a trajectory of diminishing returns, then still it is optimal to follow the rule of doing the best that there is to do. Besides, at any time a Schumpeterian innovation or Darwinian mutation may occur to you, plucking the violin string of increasing return.

There is really nothing more pathetic than to have an economist or a retired engineer try to force analogies between the concepts of physics and the concepts of economics. How many dreary papers have I had to referee in which the author is looking for something that corresponds to entropy or to one or another form of energy. Nonsensical laws, such as the law of conservation of purchasing power, represent spurious social science imitations of the important physical law of the conservation of energy; and when an economist makes reference to a Heisenberg Principle of indeterminacy in the social world, at best this must be regarded as a figure of speech or a play on words, rather than a valid application of the relations of quantum mechanics.

An American economist of two generations ago, H. J. Davenport, who was the best friend Thorstein Veblen ever had (Veblen actually lived for a time in Davenport?s coal cellar) once said: ?There is no reason why theoretical economics should be a monopoly of the reactionaries.? All my life I have tried to take this warning to heart, and I dare call it to your favorable attention.

I have always considered it a priceless advantage to have been born as an economist prior to1936 and to have received a thorough grounding in classical economics. It is quite impossible for modern students to realize the full effect of what has been advisably called "The Keynesian Revolution" upon those of us brought up in the orthodox tradition. What beginners today often regard as trite and obvious was to us puzzling, novel, and heretical. To have been born as an economist before 1936 was a boon?yes. But not to have been born too long before!

Scientists are as avaricious and competitive as Smithian businessmen. The coin they seek is not apples, nuts, and yachts; nor is it coin itself, or power as that term is ordinarily used. Scholars seek fame. The fame they seek?is fame with their peers ? the other scientists whom they respect and whose respect they strive for.

This message (that attempting to beat the market is futile) can never be sold on Wall Street because it is in effect telling stock analysts to drop dead.

As funds accumulate in active life, purchases can be made in the indicated proportions (or, more accurately, can be made so as to keep the totals rebalanced to those proportions). Sales (in retirement, for educational expenses, for extraordinary consumption purposes) can be guided by the same balancing considerations.

I made a deal of money in the late 1940s on the bull side, ignoring Satchel Paige?s advice to Lot?s wife, ?Never look back.? Rather I would advocate Samuelson?s Law: ?Always look back. You may learn something from your residuals. Usually one?s forecasts are not so good as one remembers them; the difference may be instructive.? The dictum ?If you must forecast, forecast often,? is neither a joke nor a confession of impotence. It is a recognition of the primacy of brute fact over pretty theory. That part of the future that cannot be related to the present?s past is precisely what science cannot hope to capture.

Social Security is squarely based on what has been called the eighth wonder of the world -- compound interest. A growing nation is the greatest Ponzi game ever contrived.

To prove that Wall Street is an early omen of movements still to come in GNP, commentators quote economic studies alleging that market downturns predicted four out of the last five recessions. That is an understatement. Wall Street indexes predicted nine out of the last five recessions! And its mistakes were beauties.

Bliss was it in that dawn to be alive, but to be young was very heaven!

I must confess that my own first reaction to the General Theory was not at all like that of Keats on first looking into Chapman's Homer. No silent watcher, I, upon a peak in Darien. My rebellion against its pretensions would have been complete. Except for an uneasy realization that I did not at all understand what it was about. And I think I am giving away no secrets when I solemnly aver? upon the basis of vivid personal recollection?that no one else in Cambridge, Massachusetts, really knew what it was about for some twelve to eighteen months after its publication. Indeed. until the appearance of the mathematical models of Meade, Lange. Hicks, and Harrod, there is reason to believe that Keynes himself did not truly understand his own analysis.

That's what I would like to do until the end of time, to go on scribbling my articles on the third floor of the Sloan Building, in between playing tennis and drinking coffee at my other study in the Concord Avenue branch of Burger King.

Two factors explain our success. One, MIT's renaissance after World War II as a federally supported research resource. Two, the mathematical revolution in macro- and micro-economic theory and statistics. This was overdue and inevitable, MIT was the logical place for it to flourish.

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American Economist, Winner of Nobel Prize in Economics, Author, Professor of Economics at MIT