By Shobhana Chandra
(Bloomberg) — Paul Samuelson, Nobel Prize-winning economist and author of the best-selling economics textbook in history, died today at his home in Belmont, Massachusetts. He was 94.
Samuelson's death was announced by the Massachusetts Institute of Technology, where he spent most of his professional life and was a professor emeritus.
Samuelson was a dominating figure in the economics profession in the U.S. from the late 1930s through the 1960s, and his influence on the field is difficult to overstate. His textbook Economics introduced generations of undergraduates to the subject, while his Foundations of Economic Analysis moved economics a long way from the literary exercise it once was to the scientific and mathematical discipline it has become.
Samuelson, or PAS, as he referred to himself, was the first American to receive the Nobel Prize in economics, winning it in 1970 for "raising the level of analysis in economic science."
"The work he did, with no hyperbole, revolutionized numerous fields, including public finance, international trade, and macroeconomics," said Alan Blinder, a former student of Samuelson's who went on to become vice chairman at the Federal Reserve.
Published at 21Even before his Nobel Prize, Samuelson had stacked up a list of accomplishments. He published his first paper when he was 21, he won the David A. Wells prize in 1941 for writing the best doctoral dissertation at Harvard University in economics, and he was awarded the John Bates Clark medal in 1947, given annually by the American Economic Association to the outstanding economist under the age of 40.
Samuelson began teaching at MIT in 1940 and became a full professor six years later. Three of his graduate students, Lawrence Klein, George Akerloff, and Joseph Stiglitz, went on to win Nobel Prizes.
"He had a lively and exciting mind," said Stiglitz, who maintains that many of Samuelson's ideas, especially those concerning trade theory and international economics, continue to grow in influence because of globalization. "Some of the work he did 50 years ago is more important today than it was then."
For non-economists, Samuelson's most important work was his textbook. First published in 1948, the book was widely adopted because it attempted to teach students, in an elementary way, how to analyze everyday questions about the economy, according to Robert Solow, also a Nobel Prize winning economist who wrote several papers and a book with Samuelson.
Economics as Activity"His book had a livelier look, a livelier language and above all, it actually taught economics as an activity, as a way of asking and answering questions," Solow said. "Before that, textbooks were sort of elderly gentlemen discussing economic life."
Now in its 19th edition, almost 4 million copies have been sold, MIT said. The book has been translated into 27 languages, from Albanian to Urdu, according to publisher McGraw-Hill Cos.
"Let those who will write the nation's laws if I can write its textbooks," Samuelson said, recognizing the book's importance in introducing the educated class to economics.
Samuelson was one of his profession's most prolific writers. In addition to five books, he published hundreds of academic papers on topics ranging from the theory of production to consumer choice to international trade and finance.
"I am eclectic only because experience has shown that Mother Nature is eclectic," Samuelson wrote.
Born in Gary, IndianaSamuelson was born in Gary, Indiana, on May 15, 1915, and graduated from Hyde Park High School in Chicago where his father was a druggist. At age 16 he enrolled in the University of Chicago, which was within walking distance of his home. He earned a bachelor's degree in 1935, then moved to Harvard for a master's a year later and a Ph.D. in 1941.
Samuelson's brilliance—as well as his brash and confident nature—were evident early on. At age 19 he audited a graduate course taught by the legendary and imposing Chicago economist Jacob Viner, often pointing out the professor's blackboard errors, according to the biography, Paul Samuelson: On Being an Economist, by Michael Szenberg, Aron Gottesman and Lall Ramrattan. (Jorge Pinto Books, 164 pages).
Samuelson said he was reborn in 1932 when he was first introduced to economics.
"The sleeping beauty of political economy was waiting for the enlivening kiss of new methods, new paradigms, new hired hands and new problems," Samuelson later wrote. He would go on to provide them.
Drawn to KeynesWhile fellow students such as Milton Friedman gravitated to the libertarian ideas of the "Chicago School" of economics, Samuelson was drawn to the theories of British economist John Maynard Keynes, who held that economic stability and growth required government intervention.
Samuelson, who acutely experienced the boom-bust economic effects of World War I and the Great Depression on the steel town he grew up in, considered Keynes his intellectual hero.
Unlike left-leaning economist John Kenneth Galbraith and free-market advocate Friedman, though, Samuelson was best known for his methods and innovations, not his politics.
To many economists, Samuelson's greatest gift to the field was his skill at quantifying concepts. In Foundations, he showed how almost all economic behavior can be understood as maximizing or minimizing utility, subject to a constraint.
'Seminal' Texts"He provided a unified set of principles under which several economic fields could be linked," said Columbia University professor Jagdish Bhagwati, who studied under Samuelson at MIT. "Nearly all economists can fall back on some seminal Samuelson text to rely on in almost anything they're thinking about."
Samuelson also used mathematics to explain more precisely well-known theories. In his factor-price equalization theorem he laid out the conditions to prove Bertil Ohlin's theory that trade can eliminate the wage gap between two countries.
He used equations to help explain the nature of business cycles, and he introduced concepts such as "revealed preference," which showed how consumers react to changes in prices and income.
Because of Samuelson's contributions to finance theory in papers such as "Rational Theory of Warrant Pricing" and "General Proof that Diversification Pays", he is recognized as a founder of modern finance, according to On Being an Economist.
MIT President Susan Hockfield lauded the scope of his academic contributions in a statement released today.
'Transformed Everything'"Paul Samuelson transformed everything he touched: the theoretical foundations of his field, the way economics was taught around the world, the ethos and stature of his department," Hockfield said.
Samuelson's influence and reputation led two presidents, John F. Kennedy and Lyndon B. Johnson, to ask him to join the Council of Economic Advisers. He chose to remain in academia.
Samuelson was "not a person for an everyday routine, for committee meetings and that sort of thing," said Solow, who had an office next to Samuelson's at MIT for 50 years. "He much preferred the role of an idea person."
Lawrence Summers's UncleSamuelson's nephew, Lawrence Summers, President Barack Obama's top economic adviser, said Samuelson relished the distance he kept from Washington.
"Above all else, Paul Samuelson was a scholar," Summers said. "He used to proudly remark that he had never spent a full week in Washington. But through his research, teaching, and writing he had more impact on the economic life of this country and the world than any government economic official and many presidents. We will not see his likes again."
In 1961, Samuelson wrote a paper on the state of the economy for President-elect Kennedy. He was also a consultant with the government at various points in his life. In the 1940s he worked for various war planning and reconstruction boards; he was a member of the President's National Goals Commission from 1959 to 1960 and of a task force on economic education from 1960 to 1961. He also informally advised the Treasury and the Federal Reserve.
From 1966 to 1981 Samuelson wrote a column for Newsweek magazine. He said he started the column because he believed the views of economists on policy issues should be heard by students and by the public, and to some extent, because "he didn't want to leave the stage entirely to" Friedman, who also wrote columns for the magazine, Solow said.
Friedman, who won the Nobel Prize in economics in 1976, stressed the importance of the money supply on growth and business cycles. His views and those of Samuelson, who through his life remained sympathetic to the views of Keynes, balanced each other.
'No Free Lunch'"Money works, but it does not work miracles. There is no free lunch on the monetarist menu," Samuelson wrote in a 1995 edition of his textbook. Beginning in 1985, the book was co- written by Yale University economist William Nordhaus.
Though they often disagreed, Samuelson and Friedman got along well. "Our interactions were always friendly," Friedman said. "It was a question of disagreeing without being disagreeable. On most fundamentals, such as the role of markets we were on the same side. He was as much of an opponent of price fixing as I was."
Others were less enthusiastic. Samuelson's Newsweek analysis of President Richard M. Nixon's economic policies earned him a place on that president's infamous "enemies list."
Free Trade SupporterSamuelson, a Democrat, supported the North American Free Trade Agreement and argued that more trade between the U.S. and Mexico would increase average incomes.
In 2000, he was among 149 economists who signed a letter supporting expanded trade with China. The move helped clear the way for China to enter the World Trade Organization in 2001.
Until the end of his life, Samuelson was willing to change his mind and buck popular economic thinking. In September 2004, at the age of 89, he published a paper in the Journal of Economic Perspectives saying that globalization would not necessarily raise U.S. living standards.
"There is nothing in the theory that says trade is always a win-win-win for every group," he said in an interview at the time. "It's not true that every new productive improvement in China benefits the U.S."
Though he was esteemed and admired most of his life, Samuelson also drew criticism from across the political spectrum, a reflection of his influence.
"In one lifetime, while adhering to the same eclectic liberalism, I have been at first denounced as avant-garde and later castigated as a running jackal of capitalism," he once wrote.
Survivors include his wife of 28 years, Risha Samuelson, six children from his first marriage to the late Marion Crawford Samuelson and 15 grandchildren.
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