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Paul Samuelson and the State

Here’s a letter that I sent earlier today to The Economist:


You eloquently celebrate the life of the late economist Paul Samuelson (“Economic Focus,” Dec. 19).  But it bears pointing out that, for all of his undoubted brilliance, Mr Samuelson did not examine government with the same rigorous skepticism that he brought to his examination of markets.  Consider your own accurate summary of his view of financial markets: “Yet Mr Samuelson also understood that beyond the ivory tower the conditions necessary for efficient markets rarely existed; they needed regulating.”

Mr Samuelson jumped to this conclusion about the need for regulation far too cavalierly.

Neither as a matter of logic nor of history do market imperfections necessitate government regulation.  Even on purely economic grounds, regulation might do more harm than good – a fact downplayed by Mr Samuelson.  Mr Samuelson’s healthy skepticism of dreamy ivory-tower notions of market efficiency was strangely accompanied by his own dreamy ivory-tower notions of government efficiency.

Donald J. Boudreaux