Liberal Neoclassical Economic Samuelson

Liberal Neoclassical Economics, Neo Classical Economic Theory

Paul A. Samuelson Biography and Economics (1947,1948, 1955)

Although liberal neoclassical economists fully embraced, advocated, and defended the three fundamental ideological tenets of neoclassicism (i.e. marginal productivity theory, invisible hand/pareto efficiency, and automaticity), unlike conservative neoclassical economists, liberals insisted on the necessity of government intervention. However, liberals believed that the government should intervene into the economy in only four areas: (1) use of fiscal and monetary policy to mitigate the inherent instability of capitalism, (2) to regulate imperfect competition, especially monopolies, (3) to provide sufficient public goods, and (4) to control negative externalities, such as pollution.

Paul A. Samuelson has had the most influence on liberal economics as just about anyone (just as Milton Freidman has been known as a champion of conservative laissez-faire thought). Samuelson basically accepted and defended the three basic tenets of neoclassical economics. However, he wrote extensively about the importance of government intervention in the areas just mentioned in his publications Foundations of Economic Analysis (1947), and Economics (1948). In 1955, Samuelson offered his "grand neoclassical synthesis," which attempted to reconcile or integrate Keynesian and neoclassical economic ideology. Samuelson concluded that with some help, the basic ideological tenets of neoclassicism could be defended. For example, automaticity could be insured via government fiscal and monetary policy and "pareto" efficient allocations could similarly be achieved if government stepped in to correct problems with imperfect competition.

Overall, Samuelson's defense of utilitarianism or neoclassical ideological tenets could be considered shortsighted because of several reasons. Some critics have said, for instance, that government has had a tendency to promote interests of oligopolies instead of to regulate them. Others have claimed that Keynesian policy has been used to promote both militarism and imperialism as tools which could potentially result in bigger crises. Some critics assert that government has never attempted to equitably nullify externalities and that government has meanwhile neglected more pressing problems such as wealth and income inequality.