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Monday, June 28, 2021

The Insidious Paul Samuelson Effect


the AZEL

PERSPECTIVE

Commentary on Cuba's Future, U.S. Foreign Policy & Individual Freedoms - Issue 56A
 
This Azel Perspective was first published in 2017.

The Insidious Paul Samuelson Effect

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If you took a college introductory economics course in the past fifty years, chances are your textbook was one of the 19 editions of Economics by Paul Samuelson. Since its first edition in 1948, Samuelson’s Economics has sold over four million copies and has been translated into 41 languages.
Paul Samuelson was the most influential academic economist of the second half of the 20th century and his textbook introduced generations of students to the ideas of British economist John Maynard Keynes. Keynes developed the idea that government intervention in economic matters is necessary to serve the public welfare.

Samuelson’s Economics dominated college economic classrooms for two generations. His influence on our thinking regarding the role of government in economic affairs can not be underestimated, as he noted: “I don’t care who writes a nation’s laws…if I can write its economic textbooks.” So what did Professor Samuelson teach us? And what should we unlearn.

Samuelson was a believer in central economic planning. To be accurate, Dr. Samuelson’s views evolved over the years, an evolution that can be traced in the various editions of his textbook. But as late as the 1989, 13th edition (with coauthor William Nordhaus) he asserted: “The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.” Two years later, the Soviet economy collapsed. Conceptually blind, the brilliant Dr. Samuelson never saw it coming.
Samuelson also espoused anti-saving views incorrectly believing that higher saving rates may cause money to ‘leak’ out of the system and shrink the economy.

This anti-saving bias view extended to his support for progressive taxation: “To the extent that dollars are taken from frugal wealthy people rather than from poor ready spenders, progressive taxes tend to keep purchasing power and jobs at a high level…”He aberrantly suggested that progressive taxation may actually incentivize people to work harder in order to get rich.

In editions well into the 1970s, Samuelson held that deficit spending was not a significant problem. He offered a “we owe it to ourselves” argument claiming that the interest on an internal debt is paid by Americans to Americans with no direct loss of goods or services.

 As a believer in an activist government, Samuelson taught that a large government can provide ‘built in’ stabilizers to the economy with policies such as unemployment and welfare compensation, farm aid, and the like. His discussions of the role of government emphasized market failures with little reference to government failures. His enamorment with an activist government led him to claim that harmful government policies are probably rare.

New schools of economic thought and empirical evidence have shown that much of what Dr. Samuelson taught us in Economics was flawed  or plain wrong. Our understanding of savings, central planning, government intervention, deficit spending, progressive taxation, market failures, welfare policies, and much more has evolved or changed radically.

To his credit, Dr. Samuelson was willing to update his textbook in keeping up with intellectual progress, and our understanding of economic affairs. In latter editions, he even suggested that he no longer agreed with some of his earlier analyses. In his words: “What was great in Edition 1 is old hat by Edition 3; and maybe has ceased to be true by Edition 14.”

Unfortunately, most of us, and particularly our political class, who learned about economics with Samuelson’s textbooks, have not kept up with the advances in that dismal science. Consequently,most public policy today is formulated according to the unsound economic principles that we learned from Samuelson in our college years.

The same is true of editorial and op-ed writers that argue, without intellectual discomfort, along the Keynesian motif espoused by the Samuelson textbook. They are unable to shed the false certainty of their youthful learning.

This is the insidious Paul Samuelson effect; questionable public policy, based on disputed economic principles, but defended with conviction by two generations unwilling to unlearn the canards in their college introductory economics course.

Please let us know if you Like Issue 56A - The Insidious Paul Samuelson Effect on Facebook this article.
This article was originally published in English in the PanAm Post and in Spanish in El Nuevo Herald.
 
José Azel, Ph.D.
José Azel left Cuba in 1961 as a 13 year-old political exile in what has been dubbed Operation Pedro Pan - the largest unaccompanied child refugee movement in the history of the Western Hemisphere.  

He is currently dedicated to the in-depth analyses of Cuba's economic, social and political state, with a keen interest in post-Castro-Cuba strategies. Dr. Azel was a Senior Scholar at the Institute for Cuban and Cuban-American Studies (ICCAS) at the University of Miami and has published extensively on Cuba related topics.

In 2012 and 2015, Dr. Azel testified in the U.S. Congress on U.S.-Cuba Policy, and U.S. National Security.  He is a frequent speaker and commentator on these and related topics on local, national and international media.  He holds undergraduate and masters degrees in business administration and a Ph.D. in International Affairs from the University of Miami. 

Dr. Azel is author of Mañana in Cuba: The Legacy of Castroism and Transitional Challenges for Cuba, published in March 2010 and of Pedazos y Vacios, a collection of poems he wrote as a young exile in the 1960's.

José along with his wife Lily are avid skiers and adventure travelers.  In recent years they have climbed Grand Teton in Wyoming, trekked Mt. Kilimanjaro in Tanzania and Machu Pichu in Peru.  They have also hiked in Tibet and in the Himalayas to Mt. Everest Base Camp.

They cycled St. James Way (
El Camino de Santiago de Compostela) and cycled alongside the Danube from Germany to Hungary. They have scuba dived in the Bay Islands off the Honduran coast. 

Their adventurers are normally dedicated to raise funds for causes that are dear to them. 
Watch Joe & Lily summit Kilimanjaro.

Books by Dr. José Azel
Mañana in Cuba is a comprehensive analysis of contemporary Cuba with an incisive perspective of the Cuban frame of mind and its relevancy for Cuba's future.
Buy now

 
Pedazos y Vacíos is a collection of poems written in by Dr. Azel in his youth. Poems are in Spanish.
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