Paul Samuelson, who died on Sunday at the age of 94 was widely credited as the man who gave economics its scientific, quantitative foundation?his Nobel citation in 1970 cited that very contribution. But that never led him to approve of the kind of quantitative economics and finance of the 1990s and 2000s, which created the many complex derivatives that lay at the base of the global financial crisis. He was sure that these derivatives created by ?people like him? were beyond the comprehension of the CEOs who used them. But Samuelson, perhaps the only economist who lived, learnt and commented on the two biggest economic crises of the last 100 years was too smart to blame it on derivatives alone. A longstanding critic of supply side economics, he was sharply critical of the era of huge US deficits first unleashed by President Ronald Reagan and then exacerbated by George W Bush, a deficit he warned was unsustainable without precipitating a crisis. In fact, in an interview in 2008, he predicted a future collapse of the dollar if deficits were not reined in. Even into his 90s he was right on the pulse diagnosing the causes of the most serious economic crisis since the Great Depression.
Two things always stood out about Paul Samuelson in his long career as an economist, both of which provide important lessons to newer generations of economists. One, he was perhaps the last of the great economists who was a ?generalist??he wrote extensively on a diverse range of issues: macroeconomics, microeconomics, trade, finance etc. Perhaps that?s one of the reasons he was able to put together the best book on the principles of economics?called just Economics, the book has probably been read by every student of undergraduate economics in all corners of the world. But because he had such a broad intellectual range, he had the kind of understanding and instincts that more specialised economists often lack. Second, he was never easily pigeonholed into a particular ideology. Even though a lifelong Keynesian and a critic of monetarism, he was hardly suspicious of the market. In fact, he made his name in academia by marrying Keynes with classical economics to evolve the mainstream neoclassical school. And he never sought a position in government?he only advised Presidents Kennedy and Johnson without joining the system. He was thus able to maintain his academic integrity without sacrificing even a bit at the altar of political expediency. At a time when the economics profession is going through its worst low in terms of credibility, the life and work of Paul Samuelson provides a path to regeneration.
