FOUNDATIONS OF ECONOMIC ANALYSIS SAMUELSON PDF
sppn.info: Samuelson, Paul Anthony sppn.infope: application/pdf sppn.info: Foundations Of Economic Analysis. Identifier. Econ Foundations of Economic Analysis Text: .. Chapter 4: Marginal Analysis and a Theory of the Consumer. Paul Samuelson and Robert. Paul Samuelson's Foundations of Economic Analysis played a major role in defining how economic theory was undertaken for many years after the Second.
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Economics / Paul A. Samuelson, William D. Nordhaus. Unemployment and the Foundations of Aggregate Supply . A. Economic Analysis of Costs. Get this from a library! Foundations of economic analysis.. [Paul A Samuelson]. Foundations of Economic Analysis. Paul Anthony Samuelson (Professor of Eco- ON LEAVE: Professor of Economics and Mathematics.
Finally, Part I illustrates that there are meaningful theorems in economics, which apply to diverse fields. Part II concentrates on aggregation of economic units into equilibrium of the system. But the symmetry conditions required for direct maximization of the system, whether a market or even the simplest model of the business cycle, are lacking, in contrast to an economic unit or its corresponding aggregate.
What can be hypothetically derived or rejected in some cases is a stable equilibrium of the system. This is an equilibrium of the system such that, if a variable disturbs equilibrium, the system converges to equilibrium. Stability of equilibrium is proposed as the principal source of operationally meaningful theorems for economic systems p.
Analogies from physics and biology are conspicuous, such as the Le Chatelier principle and correspondence principle , but they are given a nontrivially generalized formulation and application. They and mathematical constructions, such as Lagrangian multipliers , are given an operational economic interpretation.
The generalized Le Chatelier principle is for a maximum condition of equilibrium: where all unknowns of the function are independently variable, auxiliary constraints "just-binding" in leaving initial equilibrium unchanged reduce the response to a parameter change.
Thus, factor-demand and commodity-supply elasticities are hypothesized to be lower in the short run than in the long run because of the fixed-cost constraint in the short run. Alternatively, the hypothesis of stability imposes directional restrictions on the movement of the system Samuelson, pp.
The correspondence is between comparative statics and the dynamics implied by stability of equilibrium. The starting point of the analysis is the postulate of maximizing behavior.
Foundations of Economic Analysis
He introduced Samuelson to the Le Chatelier Principle, governing the way in which chemical equilibrium changes when a system is subject to external changes. It was possible to work out certain results concerning chemical interactions without knowing anything about the substances concerned simply by knowing that the system was in equilibrium.
The Le Chatelier principle, though derived in chemistry, could be generalised to apply to any equilibrium system, whether chemical, thermodynamic or economic. Generality lay in the underlying mathematical structure. In both cases results were derived from the assumption that a system was in equilibrium but the nature of that equilibrium was very different: in the case of individual agents, the equilibrium was defined by optimum conditions; in the case of dynamic systems, it was stability conditions.
The correspondence principle involved using the assumption of stability to derive comparative static results, the justification for this being that comparative static analysis of how an equilibrium changed when parameters changed would be of little value if the equilibrium were not stable.
Deriving such results was central to his project of operationalising economic theory. However, in that theories of the individual rested on static, optimising behaviour whereas theories of the market were dynamic and did not involve optimisation.
In that sense, and contrary to the goals of economists such as Patinkin, Samuelson failed to link static and dynamic theories.
He derived results from equilibrium systems but it was not a single system: in the terminology adopted after the war, macroeconomics was not reducible to microeconomics. Had Samuelson believed that all economic models could be derived from optimisation, the correspondence principle might have been unnecessary, because second order conditions for an optimum would have been sufficient to ensure stability.
However, he did not believe this. As a student of Haberler and Leontief, he will have been familiar with with index number and aggregation problems and at the wartime National Resources Planning Board his major research topic had been how the distribution of income across households affected consumption: he knew that heterogeneity mattered. This was presented as if it were a distinct system from the ones that he had previously analysed.
Although it would have been a short step from the maximisation found in the early chapters of Foundations to a theory of rational choice in which it is taken as axiomatic that human agents conform to certain norms of rationality, Samuelson chose not to make that step.
Foundations did not offer anything more than a methodological unification of economic theory, for there was no presumption that the whole of economics could be derived from a common theory. Generality involved finding a common mathematical structure, enabling results from one problem be be applied to other problems.
Though this would be an exaggeration, one might argue that the application of the Le Chatelier principle to economics unified it no more than it unified economics and physics. Samuelson and the Neoclassical Synthesis The previous sections already establish at least two notions of what it means to have a general theory of economics. In this textbook, Samuelson made no claim to be providing a general theory of economics. Societies might face limits on what they could produce, and the dynamics of population might be similar in all societies, but he did not suggest was sufficient to construct a general theory.
Neoclassical synthesis: by means of appropriately reinforcing monetary and fiscal policies, our mixed-enterprise system can avoid the excesses of boom and slump and can look forward to healthy, progressive growth. In short, mastery of the modern analysis of income determination genuinely validates the basic classical pricing principles; and—perhaps for the first time—the economist is justified in saying that the broad cleavage between microeconomics and macroeconomics has been closed.
These definitions clearly echo the view Keynes proposed in the final chapter of the General Theory that was discussed earlier. Indeed, if he held the views expressed in Foundations, they could not be. It took wise policy, guided by one type of economics, to render another type of economics relevant. Samuelson claimed that this neoclassical synthesis represented a consensus viewpoint, accepted by most American economists. His accounts of households, firms, government, labor markets and so on were rooted on the contemporary United States.
He drew extensively on data created during the New Deal era by government agencies and by economists who would generally be considered closer to institutionalism than to neoclassical economics. Such a perspective is not surprising for someone who was introduced to economics through the textbooks of Richard Ely and Sumner Slichter, and who admitted to being profoundly influenced by reading John Maurice Clark. However, the strongest link with institutionalism came through his second mentor, Alvin Hansen.
They met after Hansen came to Harvard in the fall of after which they quickly became very close.
Samuelson, Keynes and the Search for a General Theory of Economics
During the war years, when Samuelson worked part-time at the National Resources Planning Board, they remained close, debating fiscal policy, and in they produced a joint report. In his macroeconomics, Samuelson, still a young economist aged 25 in , was very much a disciple of Hansen. This challenges the common view that Hansen was by then a Keynesian, having famously converted to Keynes in between the two reviews he wrote of the General Theory in Investment was driven by technology, population dynamics and structural factors rather than by the short term expectational factors stressed by Keynes.
It can be argued that Hansen came to accept Keynes, perhaps after reading his article in the Eugenics Review Keynes because he realised that key Keynesian ideas could be incorporated into his own theory. Thus Hansen—Samuelson multiplier—accelerator model should be seen not an as application of Keynesian theory but as the incorporation of the multiplier into a pre-existing theory of the cycle.
Paul A. Samuelson. Foundations of Economic Analysis
For most of the war years, Hansen and Samuelson both distanced themselves from Keynes, offering very un-Keynesian explanations of investment and the cycle, though taking on board the multiplier. In the previous displayed quotation, Samuelson sought to distance the theory of income determination from Keynesianism.
The neoclassical synthesis was thus a political consensus. The neoclassical synthesis validated the case for free trade, undermining the argument that tariff protection was needed to cure unemployment for it was more efficient to use monetary and fiscal policy for this purpose ibid.
It made it possible to solve the challenging problems of international economics ibid. Translated into 20 languages, it was selling 50, copies a year a half century after it first appeared.
Samuelson said. His textbook taught college students how to think about economics. His technical work — especially his discipline-shattering Ph.
Between the two books, Mr. Samuelson redefined modern economics.
The textbook introduced generations of students to the revolutionary ideas of John Maynard Keynes , the British economist who in the s developed the theory that modern market economies could become trapped in depression and would then need a strong push from government spending or tax cuts, in addition to lenient monetary policy, to restore them.
Many economics students would never again rest comfortably with the 19th-century view that private markets would cure unemployment without need of government intervention. That lesson was reinforced in , when the international economy slipped into the steepest downturn since the Great Depression , when Keynesian economics was born. When the Depression began, governments stood pat or made matters worse by trying to balance fiscal budgets and erecting trade barriers.
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But 80 years later, having absorbed the Keynesian teaching of Mr. Samuelson and his followers, most industrialized countries took corrective action, raising government spending, cutting taxes, keeping exports and imports flowing and driving short-term interest rates to near zero. Lessons for Kennedy Mr.
Samuelson explained Keynesian economics to American presidents, world leaders, members of Congress and the Federal Reserve Board, not to mention other economists. Kennedy , whose first minute class with Mr. Samuelson, after the election, was conducted on a rock by the beach at the family compound at Hyannis Port, Mass.
Before class, there was lunch with politicians and Cambridge intellectuals aboard a yacht offshore. Samuelson headed an economic task force for the candidate and held several private sessions on economics with him.
Many would have a bearing on decisions made during the Kennedy administration. Photo Paul A. Samuelson at M. After the election, he told the young president-elect that the nation was heading into a recession and that Kennedy should push through a tax cut to head it off.
Kennedy was shocked. Samuelson recalled, quoting the president. His successor, Lyndon B. Johnson , carried out the plan, however, and the economy bounced back. Adding Bite to Academia In the classroom, Mr. Samuelson was a lively, funny, articulate teacher.The reason has to be sought in his economics.
It also lies beneath the claims of the new classical macroeconomics to offer a more general theory. This is the sense in which Samuelson constructed a general theory in Foundations. Generality involved finding a common mathematical structure, enabling results from one problem be be applied to other problems.
Not only does this focus result in the futile spinning of mental wheels by mathematical pseudoeconomists, but it has pernicious consequences for policy formulation because, as James M.
Samuelson set off an intellectual commotion by pointing out that the economy of a country like the United States could be hurt if productivity rose among the economies with which it traded. His successor, Lyndon B.
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