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1 PAUL SAMUELSON ON THE HISTORY OF ECONOMIC ANALYSIS Selected Essays As one of the most famous economists of the twentieth century, Paul Anthony Samuelson revolutionized many branches of economic theory. As a diligent student of his predecessors, he reconstructed their economic analyses in the mathematical idiom he pioneered. Out of Samuelson s more than eighty articles, essays, and memoirs, the editors of this collection have selected seventeen. Twelve are mathematical reconstructions of some of the most famous work in the history of economic thought: work by David Hume, Francois Quesnay, Adam Smith, Karl Marx, and others. One is a methodological essay defending the Whig history that Samuelson was sometimes accused of promulgating; two deal with the achievements of Joseph Schumpeter and Denis Robertson; and two review theoretical developments of his own time: Keynesian economics and monopolistic competition. The collection provides readers with a sense of the depth and breadth of Samuelson s contributions to the study of the history of economics. Steven G. Medema is Distinguished Professor of Economics at the University of Colorado Denver. His articles have appeared in journals including the Journal of the History of Economic Thought, History of Political Economy, the Journal of Economic Perspectives, and Economica. His latest book, The Hesitant Hand: Taming Self-Interest in the History of Economic Ideas (2009), was awarded the 2010 ESHET Book Prize. Dr. Medema served as president of the History of Economics Society for term. Anthony M. C. Waterman is a Fellow of St. John s College, Winnipeg, and Professor Emeritus of Economics in the University of Manitoba. He is the author of nine previous books, including Revolution, Economics and Religion (Cambridge University Press), for which he was awarded the Forkosch Prize for Intellectual History in 1992, and Political Economy and Christian Theology since the Enlightenment. He was elected Distinguished Fellow of the History of Economics Society in 2007 and Honorary Member of the European Society for the History of Economic Thought in 2014.

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3 HISTORICAL PERSPECTIVES ON MODERN ECONOMICS General Editor Craufurd D. Goodwin, Duke University This series contains original works that challenge and enlighten historians of economics. For the profession as a whole, it promotes better understanding of the origin and content of modern economics Other books in the series: Floris Heukelom, Behavioral Economics (2014) Roger E. Backhouse, Mauro Boianovsky, Transforming Modern Macroeconomics (2013) Susan Howson, Lionel Robbins (2012) Robert Van Horn, Philip Mirowski, Thomas A. Stapleford (eds.) Building Chicago Economics (2012) Arie Arnon, Monetary Theory and Policy from Hume and Smith to Wicksell (2011) Malcolm Rutherford, The Institutionalist Movement in American Economics, : Science and Social Control (2011) Samuel Hollander, The Economics of Karl Marx (2008) Donald Moggridge, Harry Johnson: A Life in Economics (2008) Filippo Cesarano, Monetary Theory and Bretton Woods: The Construction of an International Monetary Order (2006) Timothy Davis, Ricardo s Macroeconomics: Money, Trade Cycles, and Growth (2005) Jerry Evensky, Adam Smith s Moral Philosophy: A Historical and Contemporary Perspective on Markets, Law, Ethics, and Culture (2005) Harro Maas, William Stanley Jevons and the Making of Modern Economics (2005) David Laidler, Fabricating the Keynesian Revolution: Studies of the Inter-War Literature on Money, the Cycle, and Unemployment (1999) Esther-Mirjam Sent, The Evolving Rationality of Rational Expectations: An Assessment of Thomas Sargent s Achievements (1998) Heath Pearson, Origins of Law and Economics: The Economists New Science of Law, (1997) Odd Langholm, The Legacy of Scholasticism in Economic Thought: Antecedents of Choice and Power (1998)

4 Yuichi Shionoya, Schumpeter and the Idea of Social Science (1997) J. Daniel Hammond, Theory and Measurement: Causality Issues in Milton Friedman s Monetary Economics (1996) William J. Barber, Designs within Disorder: Franklin D. Roosevelt, the Economists, and the Shaping of American Economic Policy, (1996) Juan Gabriel Valdes, Pinochet s Economists: The Chicago School of Economics in Chile (1995) Philip Mirowski (ed.), Natural Images in Economic Thought: Markets Read in Tooth and Claw (1994) Malcolm Rutherford, Institutions in Economics: The Old and the New Institutionalism (1994) Karen I. Vaughn, Austrian Economics in America: The Migration of a Tradition (1994) Lars Jonung (ed.), The Stockholm School of Economics Revisited (1991) E. Roy Weintraub, Stabilizing Dynamics: Constructing Economic Knowledge (1991) M. June Flanders, International Monetary Economics, : Between the Classical and the New Classical (1990) Philip Mirowski, More Heat Than Light: Economics as Social Physics, Physics as Nature s Economics (1990) Mary S. Morgan, The History of Econometric Ideas (1990) Gerald M. Koot, English Historical Economics, : The Rise of Economic History and Mercantilism (1988) Kim Kyun, Equilibrium Business Cycle Theory in Historical Perspective (1988) William J. Barber, From New Era to New Deal: Herbert Hoover, the Economists, and American Economic Policy, (1985) Takashi Negishi, Economic Theories in a Non-Walrasian Tradition (1985)

5 Paul Samuelson on the History of Economic Analysis Selected Essays Edited by STEVEN G. MEDEMA University of Colorado Denver ANTHONYM.C.WATERMAN University of Manitoba, Winnipeg

6 32 Avenue of the Americas, New York, NY , USA Cambridge University Press is part of the University of Cambridge. It furthers the University s mission by disseminating knowledge in the pursuit of education, learning, and research at the highest international levels of excellence. Information on this title: / Cambridge University Press 2015 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2015 Printed in the United States of America A catalog record for this publication is available from the British Library. Library of Congress Cataloging in Publication Data Samuelson, Paul A. (Paul Anthony), [Essays. Selections] Paul Samuelson on the history of economic analysis : selected essays / Steven G. Medema, Anthony M. C. Waterman. pages cm Includes bibliographical references and index. ISBN (alk. paper : hbk) 1. Economics History. 2. Mathematical economics History. I. Medema, Steven G. II. Waterman, Anthony Michael C. III. Title. HB75.S dc ISBN Hardback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party Internet Web sites referred to in this publication and does not guarantee that any content on such Web sites is, or will remain, accurate or appropriate.

7 Contents Acknowledgments page ix Introduction 1 I. Historiography 23 Out of the Closet: A Program for the Whig History of Economic Science. History of Economics Society Bulletin 9No.1(1987): II. Before Adam Smith 37 A Corrected Version of Hume s Equilibrating Mechanisms for International Trade. In John S. Chipman and Charles P. Kindleburger, eds., Flexible Exchange Rates and the Balance of Payments: Essays in Memory of Egon Sohmen. Amsterdam: North-Holland, 1980, pp Quesnay s Tableau Economique as a Theorist would Formulate it Today. In Ian Bradley and Michael Howard, eds., Classical and Marxian Political Economy: Essays in Honor of Ronald L. Meek. New York: St. Martin s Press, 1982, pp III. Wealth of Nations and the Canonical Classical Model 87 The Canonical Classical Model of Political Economy. Journal of Economic Literature 16 (December 1978): A Modern Theorist s Vindication of Adam Smith. American Economic Review 67 (February 1977): IV. David Ricardo 131 A Modern Treatment of the Ricardian Economy: I. The Pricing of Goods and of Labor and Land Services. Quarterly Journal of Economics 73 (February 1959): vii

8 viii Contents A Modern Treatment of the Ricardian Economy: II. Capital and Interest Aspects of the Pricing Process. Quarterly Journal of Economics 73 (May 1959): Mathematical Vindication of Ricardo on Machinery. Journal of Political Economy 96 (April 1988): V. Johann Heinrich von Thünen 193 Thünen at Two Hundred. Journal of Economic Literature 21 (December 1983): VI. Karl Marx 227 Wages and Interest: A Modern Dissection of Marxian Economic Models. American Economic Review 47 (December 1957): Marx as Mathematical Economist: Steady-State and Exponential Growth Equilibrium. In George Horwich and Paul A. Samuelson, eds., Trade, Stability and Macroeconomics: Essays in Honor of Lloyd A. Metzler. New York: Academic Press, 1974, pp VII. Post- Classical Political Economy 303 What Classical and Neoclassical Monetary Theory Really Was. Canadian Journal of Economics 1 (February 1968): A Modern Post-Mortem on Böhm s Capital Theory: Its Vital Normative Flaw Shared by Pre-Sraffian Mainstream Capital Theory. Journal of the History of Economic Thought 23 (September 2001): VIII. Retrospectives on Early Modern Economists 345 Schumpeter as an Economic Theorist. In Helmut Frisch, ed., Schumpeterian Economics. London: Praeger, 1982, pp D. H. Robertson ( ). 77 (November 1963): IX. Revolutions in Twentieth-Century Economics 395 Lord Keynes and the General Theory. Econometrica 14 (July 1946): The Monopolistic Competition Revolution. In R. E. Kuenne, ed., Monopolistic Competition Theory: Studies in Impact. Essays in Honor of Edward H. Chamberlin. New York: John Wiley, 1967, pp Samuelson s Publications in the History of Economic Thought 447 Index 457

9 ACKNOWLEDGMENTS We are grateful to the following organizations, publishers, and copyright holders for granting us permission to reprint the articles included in this collection. The History of Economics Society: Out of the Closet: A Program for the Whig History of Economic Science. History of Economics Society Bulletin 9 No. 1 (1987): 51 60; and A Modern Post-Mortem on Böhm s Capital Theory: Its Vital Normative Flaw Shared by Pre-Sraffian Mainstream Capital Theory. Journal of the History of Economic Thought 23 (September 2001): American Economic Association: The Canonical Classical Model of Political Economy. Journal of Economic Literature 16 (December 1978): ; A Modern Theorist s Vindication of Adam Smith. American Economic Review 67 (February 1977): 42 49; Thünen at Two Hundred. Journal of Economic Literature 21 (December 1983): ; and Wages and Interest: A Modern Dissection of Marxian Economic Models. American Economic Review 47 (December 1957): Elsevier: A Corrected Version of Hume s Equilibrating Mechanism for International Trade. In John S. Chipman and Charles P. Kindleburger, eds., Flexible Exchange Rates and the Balance of Payments: Essays in Memory of Egon Sohmen. Amsterdam: North-Holland, 1980, pp ; and Marx as Mathematical Economist: Steady-State and Exponential Growth Equilibrium. In George Horwich and Paul A. Samuelson, eds., Trade, Stability and Macroeconomics: Essays in Honor of Lloyd A. Metzler. New York: Academic Press, 1974, pp The Econometric Society: Lord Keynes and the General Theory. Econometrica 14 (July 1946): Oxford University Press: A Modern Treatment of the Ricardian Economy: The Pricing of Goods and of Labor and Land Services. ix

10 x Acknowledgements Quarterly Journal of Economics 73 (February 1959): 1 35; A Modern Treatment of the Ricardian Economy: Capital and Interest Aspects of the Pricing Problem. Quarterly Journal of Economics 73 (May 1959): ; and D. H. Robertson ( ). Quarterly Journal of Economics 77 (November 1963): The University of Chicago Press: Mathematical Vindication of Ricardo on Machinery. Journal of Political Economy 96 (April 1988): John Wiley and Sons, Ltd.: What Classical and Neoclassical Monetary Theory Really Was. Canadian Journal of Economics 1 (February 1968): 1 15; and The Monopolistic Competition Revolution. In R. E. Kuenne, ed., Monopolistic Competition Theory: Studies in Impact. Essays in Honor of Edward H. Chamberlin. New York: John Wiley, 1967, pp The estate of Paul A. Samuelson: Quesnay s Tableau Economique as a Theorist Would Formulate It Today. In Ian Bradley and Michael Howard, eds., Classical and Marxian Political Economy: Essays in Honor of Ronald L. Meek. New York: St. Martin s Press, 1982, pp Schumpeter as Economic Theorist. In Helmut Frisch, ed., Schumpeterian Economics. London: Praeger, 1982, pp A special word of thanks goes to the permissions managers who worked so efficiently with us to navigate the permissions process. We would like to thank Scott Parris, Karen Maloney, Adam Levine, Kristin Purdy, and Kate Gavino of Cambridge University Press for shepherding this volume through the publication process. Scott Parris is due a special debt of gratitude for his support and encouragement of this project from its inception. Craufurd Goodwin, the editor of the Historical Perspectives on Modern Economics series in which this volume appears, was a tremendous source of both encouragement and constructive criticism as we assembled this volume and prepared the Introduction. Roger Backhouse and the two anonymous referees employed by the Press provided invaluable feedback along the way and, along with Craufurd Goodwin, led us to modify our conceptualization of this project in a way that has allowed us to produce a stronger end product. Finally, there is no one who has mastered the details of Paul Samuelson s published oeuvre like Janice Murray, his longtime assistant. Janice was a valuable source of information for us as we prepared this volume, and her cheerful interest in helping us in whatever way possible made our work just that much easier. Steven G. Medema Anthony M. C. Waterman