Samuelson: A Foreigner Who Visited Keio University

Surrounding Professor Samuelson. From left: Professor Masao Fukuoka, Professor Eiichi Kiyooka, (one person skipped), Professor Noboru Yamamoto, and at the far right, President Saku Sato.

In October 1971 (Showa 46), Professor Paul Samuelson visited Keio University after being invited through the Keio Gijuku Koizumi Memorial Fund for the Advancement of Education and Research. Although it was a short stay of just over a week, the professor energetically completed a tight schedule during this period.

First, on the 19th, he received an honorary degree at the Mita Enzetsukan (Public Speaking Hall), and afterwards, he gave a commemorative lecture titled "Trends in American Economics" for general Keio students in Room 518 of the West School Building. From his long-standing position of neoclassical synthesis, the professor took up various different schools of thought and presented his own views on them. At the time, I was a fourth-year student in the seminar of Professor Masao Fukuoka, who had studied under Professor Samuelson while studying abroad at Harvard University from 1953 to 1955 and had worked hard to arrange the professor's visit. I still remember that the clarity of the professor's arguments and his versatile wit during the commemorative lecture in the large classroom were truly unrivaled, and the venue was packed beyond capacity.

On the 20th, he gave a lecture titled "The Yen and the Dollar" at Nikkei Hall, co-sponsored by Keio University, Nikkei Inc., and the Japan Center for Economic Research. On the 21st, a "Specialist Seminar" was held, hosted by the Economic Society and inviting theoretical economists from various universities, where he reported on "Stochastic Speculative Prices," one of the themes he was most interested in at the time. In this paper, from the perspective of determining price movements as a solution to stochastic dynamic programming, he rigorously derived a model of non-independent Brownian motion regarding stochastic speculative prices, which is considered the starting point for various current studies in this field.

Professor Samuelson was born in 1915 in Gary, Indiana. He graduated from the University of Chicago in 1935, then entered the graduate school of Harvard University in 1936, and obtained his PhD in 1941. He studied price theory from the Chicago School at the University of Chicago, and after entering Harvard University, he mastered mathematics and physics. He began teaching at the Massachusetts Institute of Technology (MIT) in 1940, became a professor in 1947, and held a professorship at MIT for many years thereafter. MIT has produced figures such as Ben Bernanke, former Chair of the Federal Reserve (FRB), and Nobel Prize winners in Economics such as Professor Joseph E. Stiglitz and Professor Paul Krugman. Professor Lawrence Summers, who was the former President of Harvard University, served as Secretary of the Treasury in the Clinton administration, and served as Director of the National Economic Council (NEC) in the Obama administration, is Professor Samuelson's nephew.

In 1947, he published his major work "Foundations of Economic Analysis" (translated by Ryuzo Sato, Keiso Shobo) and received the John Bates Clark Medal in the same year. In 1948, the first edition of his world-famous textbook "Economics" was published. In this work, Professor Samuelson presented the idea of neoclassical synthesis, which argues for a dichotomy: Keynesian effective demand policies should be implemented during depressions with involuntary unemployment, but once full employment is reached, neoclassical economics, which emphasizes market mechanisms, holds true. This book has since gone through many editions, been translated into more than 40 languages, and has become a bestseller with extraordinary sales figures worldwide.

He served as President of the Econometric Society in 1952 and President of the American Economic Association in 1961. In 1970, he became the first American to receive the Nobel Prize in Economics for his "scientific work through which he has developed static and dynamic economic theory and actively contributed to raising the level of analysis in economic science." It can be said that Professor Samuelson's academic achievement was to raise the level of scientific analysis in economic theory to the highest level by rigorously grounding the language of economics through the use of mathematics and making its logic explicit.

Such analysis using mathematics in economics by Professor Samuelson is said to have become the foundation of modern economics. Academic ideas originated by the professor include Revealed preference, Welfare economics, Gains from trade, Public goods, Factor-proportions trade theory, Exchange rates and the balance of payments, Overlapping generations model, and Random-walk theory, all of which have led to the creation of numerous productive research results thereafter.

He also played an active role as a brain for the U.S. Democratic Party. From a Keynesian standpoint that unemployment should be eliminated by implementing fiscal policy during depressions, he advised the Kennedy administration and others from the perspective of so-called "big government."

Subsequently, disputes arose between Professor Samuelson, who stood for big government, and the Chicago School, which stood for small government. In the situation of stagflation where unemployment and inflation coexisted, people from the anti-Keynesian standpoint rose to prominence. However, after experiencing the Lehman shock, it could be said that the world's major countries are returning to the position of big government, which expands government intervention.

In terms of academic progress, it can be said that the professor's idea of the maximization principle, which assumed the perfect rationality of households and firms, led to the development of information economics that considers modern information asymmetry and incompleteness. Furthermore, the professor's ideas are thought to have been the catalyst for the progress of behavioral economics, which also considers the irrationality and psychological aspects of consumers.

Additionally, the idea of inefficient markets (markets are not perfect) at the root of the professor's neoclassical synthesis later gave birth to the contrasting "efficient market hypothesis," which can be said to have led to the concept of arbitrage.

The first time I heard Professor Samuelson's name was after I entered the Faculty of Economics at the Juku. When choosing a seminar for the transition from Hiyoshi to Mita, I thought it best to first learn essential theories as long as I was pursuing academia, and I applied for Professor Fukuoka's seminar on theoretical economics without hesitation. As preparation for the seminar entrance exam, I desperately studied economic terminology that I hadn't learned at Hiyoshi by comparing the original text of Professor Samuelson's "Economics: An Introductory Analysis (7th Edition)" with the translated version (translated by Shigeto Tsuru, Iwanami Shoten).

After moving to Mita and joining Professor Fukuoka's seminar, I often heard stories about Professor Samuelson from him and read "Foundations of Economic Analysis" for the first time.

To commemorate Professor Samuelson's visit to Keio University, Professor Fukuoka had just published a selection of the professor's essays for general readers titled "Paul Samuelson: Economics and the Modern Age" (Nikkei Inc., 1972). Although it was intended for general readers, Chapter 1, Section 1, "Economic Analysis and the Maximization Principle," was Professor Samuelson's Nobel Prize lecture on the role of the maximization principle in analytical economics, and it was extremely helpful for me at the time to understand the essence of the economic theory I was studying.

After later finding employment at a Japanese university, I went to study abroad at MIT. I feel that the reason I chose MIT as my destination was related to the fact that I had heard the professor's lecture at the Juku when I was a fourth-year undergraduate.

The latter half of the spring semester of the microeconomics core course in graduate school at that time was Professor Samuelson's class. The themes were capital theory, welfare economics, and uncertainty. Most of the required literature consisted of papers I had known while studying under Professor Fukuoka, but in any case, I could not understand the English in the professor's lectures.

The professor was in charge of the required microeconomics class, but when he came to class, he would pull a chair up to the blackboard and, seemingly indifferent to whether students were there or not, sit with his back to the students and write on the corner of the blackboard while mumbling to himself. Calculating how old he was when I was taught by him, I believe he was around 64. I cannot say for certain, but I think the time I took his class was probably the last year he taught the graduate core course.

While the professor's classes were very difficult for me to hear in this way, when I met him in the school building, he was very energetic and appeared robust and sharp.

After returning to Japan from my studies abroad, I researched in the field of applied microeconomics—mainly focusing on urban economics—which was slightly different from the theme I studied during my graduate school days in Japan (theoretical economics). However, looking back at Professor Samuelson's research this time, I am once again struck by how much there is to learn from his research regarding the urban issues I am currently mainly researching.

In this way, Professor Samuelson was a great theoretical economist, but at the same time, he had numerous achievements in the field of applied economics and actively made actual policy recommendations; he was a truly broad and great economist. Policy authorities should implement appropriate economic policies at any given time, keeping in mind Professor Samuelson's words that "public welfare cannot be achieved if either the government or the market is missing" (The New York Times).

A Nobel Prize winner in Economics has not yet emerged from Japan, but I sincerely hope that a winner will emerge in the near future, and if possible, from among researchers associated with the Juku.