DON'T EXPECT RECOVERY BEFORE 2012 -- WITH 8% INFLATION - Paul Samuelson
Paul Samuelson, 93, was awarded the Nobel Prize in Economics in 1970 and is professor emeritus at MIT. He was a student of Joseph Schumpeter at Harvard, and his nephew is former Harvard president Larry Summers, now President-elect Barack Obama's top economic adviser. Samuelson's 1948 classic, "Economics: An Introductory Analysis," is one of the best-selling economic textbooks of all time. He spoke with Global Economic Viewpoint editor Nathan Gardels on Tuesday about Obama's economic recovery plan.
Nathan Gardels: You have outlived Milton Friedman, who died in 2006. And now your Keynesian ideas have also outlived his radical free-market ideology. Is economics back to where you started?
Paul Samuelson: You are right. I am old enough to have seen the cycle come full circle. My experience is more valuable now than it was even a year ago, since I first became actively engaged in economic policy on Jan. 2, 1932, at the rock bottom of the Great Depression, when I was an adviser to the Federal Reserve Bank in Washington. In subsequent years, I was principal economic adviser to President-elect John F. Kennedy in 1960 and recruited the team for his Council of Economic Advisers.
I became a centrist early on. Of course, the central planning system of the socialist states we still contested with ideologically in those days was idiotic, but that didn't mean government doesn't play a critical role.
And today we see how utterly mistaken was the Milton Friedman notion that a market system can regulate itself. We see how silly the Ronald Reagan slogan was that government is the problem, not the solution. This prevailing ideology of the last few decades has now been reversed.
Everyone understands now, on the contrary, that there can be no solution without government. The Keynesian idea is once again accepted that fiscal policy and deficit spending has a major role to play in guiding a market economy. I wish Friedman were still alive so he could witness how his extremism led to the defeat of his own ideas.
Nathan Gardels: You have outlived Milton Friedman, who died in 2006. And now your Keynesian ideas have also outlived his radical free-market ideology. Is economics back to where you started?
Paul Samuelson: You are right. I am old enough to have seen the cycle come full circle. My experience is more valuable now than it was even a year ago, since I first became actively engaged in economic policy on Jan. 2, 1932, at the rock bottom of the Great Depression, when I was an adviser to the Federal Reserve Bank in Washington. In subsequent years, I was principal economic adviser to President-elect John F. Kennedy in 1960 and recruited the team for his Council of Economic Advisers.
I became a centrist early on. Of course, the central planning system of the socialist states we still contested with ideologically in those days was idiotic, but that didn't mean government doesn't play a critical role.
And today we see how utterly mistaken was the Milton Friedman notion that a market system can regulate itself. We see how silly the Ronald Reagan slogan was that government is the problem, not the solution. This prevailing ideology of the last few decades has now been reversed.
Everyone understands now, on the contrary, that there can be no solution without government. The Keynesian idea is once again accepted that fiscal policy and deficit spending has a major role to play in guiding a market economy. I wish Friedman were still alive so he could witness how his extremism led to the defeat of his own ideas.
posted by temporal at 3/03/2009
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