Interview with Paul Samuelson

Find it here, run by Conor Clarke.  Excerpt:

Milton Friedman. Friedman had a solid MV = PQ
doctrine from which he deviated very little all his life. By the way,
he's about as smart a guy as you'll meet. He's as persuasive as you
hope not to meet. And to be candid, I should tell you that I stayed on
good terms with Milton for more than 60 years. But I didn't do it by
telling him exactly everything I thought about him. He was a
libertarian to the point of nuttiness. People thought he was joking,
but he was against licensing surgeons and so forth. And when I went
quarterly to the Federal Reserve meetings, and he was there, we agreed
only twice in the course of the business cycle.


Isn't a surgeon about the very last thing you need to license?

What would be nuttier, licensing Senators? Licensing Presidents? Maybe licensing economists.

"Mankiw's bestseller, both the macro book and his introductory textbook, I went through the index to look for liquidity trap. It wasn't there!"

are Mankiw and Samuelson ever "off" when it comes to trying to push their books?

The most interesting part of the interview comes at the end. Samuelson still believes that IS/LM is the best way to analyze monetary policy. Translation: there has been no progress in macroeconomics in the past 40 years.

I know I've said this before... somebody get Paul Samuelson a blog!

"licensing parents would be a good place to start."

There's probably two ends of the spectrum that don't need licensing-things everyone can do, and things almost noone can do. In either case, noone is qualified to judge.

People thought he was joking, but he was against licensing surgeons and so forth.

But in the absence of state licensing, there would certainly be private certification organizations. What reason do we have to think that state licensing authorities are necessarily more trustworthy and reliable? Do you really have confidence that incompetent MDs lose their licenses quickly? Based on the stories I hear from my wife, I certainly don't.

Malpractice be damned. Caveat Emptor!

As a mental exercise, I wonder if going from negative savings to zero would qualify as hoarding to a Keynesian.

We've got to start licensing economists.

But in the absence of state licensing, there would certainly be private certification organizations.

Why? How would they get revenue? Why wouldn't they end up like Moody's, etc.? isn't this just libertarian fantasy?

"Brown was also an expert on broader issues of fiscal policy. His 1956 paper on "Fiscal Policy in the Thirties: A Reappraisal" was one of the first applications of the full-employment budget deficit concept. In contrast to the then-prevailing wisdom, the study suggested that fiscal policy had not been particularly expansionary through much of this period, thereby calling into question the extent to which fiscal policy could have contributed to the U.S. economy's recovery from the depths of the Great Depression."

It's interesting the Samuelson remembers Brown's paper as saying almost the opposite of this ....

@ Bernard Yomtov, spot on champ. That was a good point about Moodys. The field of accounting operates with private certification through the CPA. they raise funds by charging members fees. So the logic de-licensing goes like this: in the absence of state licensing, private certification would replace it. This would be more effective than state licensing because surgeons have an very strong incentive to protect their reputation and thus the profession would be self-regulated. But even if you subscribe to this argument, there is still a case for government oversight. for e.g., the accounting profession is monitored by the SEC. And given the inability of the profession to protect their own reputation during the Enron, Worldcom etc scandals, it is only right for there to be government oversight in some way, shape or form. The ratings agencies, as you have rightly pointed out, is another such scandalouos example of market self-regulation gone wrong. Additionally, i think that health is one of those industries that people want the government involved in regulating (leaving aside the question that people also want the government to provide health care as they do in all other rich countries). People just want that assurance from government. That's just how people think, and in a democratic society they have every right to decide what the government should or should not be doing.

This is the quote of the interview: Samuelson on Greenspan: "But the trouble is that he had been an Ayn Rander. You can take the boy out of the cult but you can't take the cult out of the boy."

I cracked up when reading this!


I did not know there really were intelligent people not in politics who
saw no merit NOT licensing doctors. Is Paul S really that stupid?

I guess so, he's been offering really bad advice for years.

Do economists who are not schmoozing politicians really believe such
junk? When they say that savings would hurt the economy do they
really think that it is bad for long term growth? They can't can they?

Do they really believe those studies that come out purporting to show that
subsidizing a local sports franchise will actually be good for the local economy.

I had assumed these guys had merely sold their souls I didn't think they
were blinkered idiots.

Is there anywhere in the world in which a explicit license from government is required for university teaching positions?

Slocum> But in the absence of state licensing, there would certainly be private certification organizations.

Bernard Yomtov> Why? How would they get revenue? Why wouldn't they end up like Moody's, etc.? isn't this just libertarian fantasy?

I must take exception to this line of reasoning. Why wouldn't the state licensing bureau collapse for lack of funding? Why wouldn't it end up like Moody's etc.? Isn't this some collectivist fantasy?

Caveat semper emptor


If the argument is that voluntary certification bodies will be captured by the agencies they certify, what makes you think that the government regulatory agencies won't be similarly captured? Who do you think lobbies for and writes the licensing laws?

At least with voluntary certification, if you disagree with the certification body's standards, you can opt out, and pick someone on your own, or start a competing service. No such option exists with licensing.

The point is not the licensing of surgeons, despite that being a terrible example, the point is that it sounds plausible to most readers, and Samuelson is beating a standard liberal whipping post by finding something he knows sounds scandalous to whip Friedman with. Why not choose drug legalization or prostitution to knock Friedman? Because these wouldn't be as scandalous to a liberal reader. Not only that, he insults him with the universal liberal insult of calling him a libertarian. Not value-free.

John Kenneth Galbraith lived into his nineties.
Paul Samuelson is in them now. Both Keynesians.
Did they have that much in common, their
approach to things being so different?

Friedman did his empirical work on the monopoly rents procured through the licensing of doctors with Simon Kuznets.

These are two of the most famous "empirical" guys in all of economics.

I understand that Samuelson was a "theory" guy ...

Samuelson by using the word surgeon instead of doctor also tried to amp up the scare factor.

Friedman was right that restricting the numbers of doctors increases salaries. On balance, I think that is OK. You want highly qualified people to enter the field. The startup costs to enter medicine are very high and many people would avoid the profession if the expected income was hard to predict.

This is the same for trade unions or even the UAW. A young person learns a set of skills that are unique to a field or employer in return for some security in the future.

One can argue if society gains enough in the tradeoff : higher costs for employees but you attract skilled individuals willing to invest their assets.

So you can disagree with Friedman, but his idea is not nutty.

I fondly recall that Professor Friedman had "MV = PQ" on his CA license plate (he added the "=" with a little bit of black tape).


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