By Jeff Harding.
Paul Samuelson died yesterday at the age of 94 as I am sure you have heard. He was very successful in his field, having won a Nobel in economics and his economics textbook, Economics: An Introductory Analysis, sold over 4 million copies. I used his textbook in Econ 101.
His contribution to economics was to make it a science, much as physics, by bringing mathematical analysis as the prime means of empirical research and as a means to the truth. He even applied the law of thermodynamics to the study of economic equilibrium. He was very influential and mentored many of today’s economic leaders, including his nephew, Larry Summers, and Ben Bernanke.
There is one problem with his work: he was wrong. He did more to undermine the study of economics as a means to truth than anyone else. His textbook penetrated the globe and still is representative of the predominate school of economics. He was a Keynesian, or Neo-Keynesian, who believed that you could accurately predict human behavior and originate economic technocratic policies through “science.” It gave rise to econometrics and the influence of schools like MIT which perpetuate these fallacies.
It is a shame that instead of following Mises and Hayek, the world went Samuelson’s way. Samuelson never “won” the debate over epistemology with Hayek or Mises because, as far as I know, he never knew of or addressed the significance of these issues. Now we are reaping the rewards of the limits of mathematical analysis as the generations of economists in charge of business and government policy have blindly followed this false science.
As a tribute to Hayek, I urge you to read his Nobel acceptance speech on the limits of so-called science as it applies to the social sciences. It is a devastating rebuke of Samuelson’s econometrics.