David R. Henderson  

Warsh on Friedman versus Samuelson

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Biography is no substitute for history, much less for theory and history of thought, and journalism is, at best, only a provisional substitute for biography. But one way of understanding what happened in economics in the twentieth century is to view it as an argument between [Paul] Samuelson and [Milton] Friedman that lasted nearly eighty years, until one aspect of it, at least, was resolved by the financial crisis of 2008. The departments of economics they founded in Cambridge and Chicago, headquarters in the long wars between the Keynesians and the monetarists, came to be the Athens and Sparta of their day.
This is from David Warsh, "The Rivals," at Economic Principals, July 12, 2015. Warsh's post is long and, I found, thoroughly engrossing.

It seems clear that Warsh comes down more on Samuelson's side. The above quote hints at that. What does Warsh think was the aspect that "was resolved by the financial crisis of 2008?" It seems that he thinks Samuelson won on that, but he neglects to tell us why or how.

An interesting excerpt:

Friedman, entering as A [I'm not sure why he capitalized the a] graduate student, would have become aware of Samuelson, who already had been identified as a prodigy by, among others, [Aaron] Director [older brother of Rose Director, who later became Rose Friedman], who had taught him his introductory economics course.

One thing I found interesting is the stories of Milton struggling financially in graduate school and Samuelson having a much easier time on scholarships.

Warsh minimizes an early Friedman contribution:

His crowning achievement: having caught a cold, he stayed home and composed a note on some error he had found in A.C. Pigou, professor of economics of Cambridge University, the most eminent economist in the world.

Notice Warsh's use of "some" rather than the more-neutral "an."

Warsh's discussion of Friedman's dissertation, based on joint work with Simon Kuznets, that found that licensing of doctors restricts supply and raises their incomes:

To him [Samuelson], the controversy was faintly ridiculous. "Only MF could argue - argue seriously - that therefore everyone should be able to practice surgery."

Wash doesn't mention that Friedman defended his idea of certification rather than licensing of doctors at length in his Capitalism and Freedom.

On Stigler:

"The economics department in Chicago sought to hire George Stigler, but he alienated the provost during his final interview,"

That's so George.

There's much more.

Comments and Sharing

COMMENTS (5 to date)
Andrew_FL writes:

I'm just trying to figure out how to fit Vienna into that Ancient Greek City-state metaphor.

TMC writes:

I'm not sure you can use the muddled response provided to the 2008 crisis as a evidence that amything "was resolved by the financial crisis of 2008?"

TMC writes:

"Samuelson, on the other hand, never worked in college except as recipient of scholarship aid, and spent his summers at the beach: ā€œI wanted to work summers to pay for my education,ā€ he recalled many years later, but ā€œI had friends who would apply to 800 companies and not get one nibble unless you knew somebody.ā€ This is while Friedman had 2 jobs. Friedman must have known quite a few people, or something like that.

David J writes:

This sounds like a book not worth reading.

ThomasH writes:

I had to scratch my head, too, about the 2008 crisis "resolving" the dispute between Friedman and Samuelson. I'd say both were on the same side of the issue: the need for monetary stimulus (which implies fiscal "stimulus" if governments follow an npv principle) against the liquidationists, gold bugs, deficit hawks and inflation-is-around-the-corner Chicken Little's ("Chickens Little?") who run the ECB and have way too much influence at the Fed. Both would have signed on, I think, to the broad Krugman-Sumner synthesis. :)

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