Dr. Skousen is an economist at Rollins College, Department of Economics, Winter Park, Florida 32789, and editor of Forecasts & Strategies, one of the largest investment newsletters.
A reprint of “The Perseverance of Paul Samuelson’s Economics” (including Professor Samuelson’s response) is available from FEE for $3.00, postpaid.
“[Austrian economists] feel they’ve been frozen out of mainstream economics and seldom get even a footnote in standard textbooks.”
—Todd G. Buchholz
Austrian economist makes good! I just got published in the Journal of Economic Perspectives, the most widely read economics journal in the country.
The article, “The Perseverance of Paul Samuelson’s Economics,” is a damning review of the 15 editions of Samuelson’s famous textbook. I am still in shock a year after getting an e-mail from the JEP saying they had accepted my paper. Undoubtedly it is a watershed event when the No. 1-read economics journal in the country is willing to publish an article critical of the top Keynesian economist in the world and first American to win the Nobel Prize in economics. One of the co-editors, Brad de Long, said that my study is “one of the best and most exciting papers we published in the second half of the 1990s.” Tim Taylor, the managing editor, said that ten years ago they would not have published it.
Dethroning the King of Keynes
There are two major stories that come out of my study.
First, Samuelson’s Economics—the most popular textbook ever published, with over 4 million sold and translated into 41 languages—taught students a lot of bad economics. Until recently, the MIT professor taught students that high saving rates were bad for the country, federal deficits and progressive tax rates were beneficial, and Soviet central planning could work. In my review of his 15 editions, which cover the entire postwar period, I point out that Professor Samuelson spent whole chapters discussing the failed economics of the Soviet Union and China, while writing little or nothing on the success stories of West Germany, Japan, the East Asian Tigers, or Chile. He had numerous sections in his textbook on “market failure” while offering very little on “government failure.” He constantly highlighted the economics of Keynes, but downplayed the economics of Friedman, Hayek, and other free-market economists.
Samuelson’s Economics: From Keynes to Adam Smith
Not everything was negative in my review of Samuelson’s textbook. On the positive side: Samuelson frequently declared his optimism about the future of capitalism and rejected doomsayers’ predictions of another Great Depression or national bankruptcy. He regularly defended free trade and free markets in agriculture. And he was highly critical of Karl Marx and Marxian economics.
The most amazing discovery I made in my study is that Samuelson, under the influence of co-author William D. Nordhaus (Yale) and recent events, has had a change of heart and is gradually shifting back to classical economics. In more recent editions, he has reversed his position on a number of important issues. In the most recent edition, for example, Samuelson states that Soviet central planning was a “failed” model, that national savings is too low and needs to increase, and that the national debt is excessive. (For more on Samuelson’s transformation, see my article, “Another Shocking Reversal in Macroeconomics,” The Freeman, February 1996.)
The JEP also published a rejoinder by Samuelson, which was surprisingly reserved and anemic in response to my blistering critique. “I am pleading no alibi nor extenuations,” he wrote. “My present-day eyes do discern regrettable lags in sloughing off earlier skins.” He only denied that he was antisaving, one thing he is famous for.
My study of Samuelson’s Economics points to the real need for a college-level textbook on sound economics. That is my primary goal right now. My forthcoming textbook is called Economic Logic and I hope to finish it next year. I’ll keep you posted.
Past Prejudices Against Austrians
Austrian economists have had a long struggle in getting recognized by the profession. The mainstream has shown little interest if not disdain for a school that is laissez faire in government policy and critical of mathematical modeling and empirical econometrics. Following the postwar Keynesian revolution, the economics establishment was unreceptive to the works of Ludwig von Mises and Friedrich Hayek. In the 1960s, Austrian economists depended on the conservative publisher Regnery and the engineering publisher D. Van Nostrand & Co. to get published.
The Future Is Brighter
Gratefully that’s all changing. Today Austrians hold a small but growing number of positions at major universities (George Mason, Auburn, NYU, University of Georgia, California State at Hayward, etc.), get published by major university and academic presses (Cambridge, Chicago, Oxford, NYU, Kluwer, Routledge, and Edward Elgar, among others), and are getting accepted in major journals (Journal of Economic Literature, History of Political Economy, Journal of Macroeconomics, and Economic Inquiry).
Still, other “free-market” schools (the monetarists and the new classicists) have advanced much further because of their mathematical and empirical approach. The Austrian school still largely remains a “book culture,” as Peter Boettke puts it, and needs to devote more efforts to “strategic” publishing in the journals rather than preaching to the choir if it wants to have an impact. Happily, things are looking up.
- Todd G. Buchholz, From Here to Economy: A Shortcut to Economic Literacy (Dutton, 1995), p. 238. Buchholz’s popular history, New Ideas from Dead Economists (Plume, 1990), completely ignores the Austrians because Hayek and Mises weren’t discussed at Harvard.
- Mark Skousen, “The Perseverance of Paul Samuelson’s Economics,” Journal of Economic Perspectives, vol. 11, no. 2 (Spring 1997), pp. 137-152.
- Paul A. Samuelson, “Credo of a Lucky Textbook Author,” Journal of Economic Perspectives, vol. 11, no. 2 (Spring 1997), p. 155.
- Peter J. Boettke, “Alternative Paths Forward for Austrian Economics,” The Elgar Companion to Austrian Economics (Edward Elgar, 1994), pp. 601-15.