A Textbook Centered on National Income

In the summer of 1945, Samuelson began work on the book that was to make him a household name among the college students who were to study economics in increasingly large numbers.

Samuelson remembered the book as being the result of a conversation with his MIT department chair, Ralph Freeman, shortly after he had returned from working full time in the Radiation Laboratory.² “Entering my office and closing the door,” Freeman made a proposal:

Eight hundred MIT juniors must take a full year of compulsory eco­nomics. They hate it. We've tried everything. They still hate it. We even

a. When William Nordhaus took over, the character of the book changed significantly. By then the textbook market had changed, being much larger and with more competition than when the first edition was published.

did a departmental joint product. It was the worst editorial experience of my life. After our senior colleague turned in his chapter, I had to say, “Floyd, this is not a chapter on public finance. It's a chapter against pub­lic finance.” Paul, will you go on half time for a semester or two? Write a text the students will like. If they like it, yours will be good econom­ics.

There was, however, another reason for wanting the course rewritten. Writing to Compton, Freeman stressed that the reason was not the inad­equacy of current teaching materials, but the need to revise the course to fit into the new humanities course that MIT was introducing.⁴ This involved studying English in the first year, modern history in the second, and social sciences, including economics, in the third year. Included within the social sciences was Economic Principles, the course for which Samuelson was being asked to rewrite the course materials. Far from making use of the training that scientists and engineers were receiving in mathematics, those courses were all intended to emphasize written and oral expression.⁵ This feature of the program was stressed in the MIT President’s Report, which stated that the emphasis on “good writing and expression” would “con­tinue to be emphasized in other subjects throughout the remainder of the four-year program.”⁶ Through the book that would interest MIT’s science and engineering students, all of whom learned mathematics, Samuelson was tasked with producing a text that was well written and not one that focused on mathematics. Freeman cited the need to have Samuelson write new teaching materials when he asked Compton to inquire whether it would be possible to release Samuelson from his duties in the Radiation Laboratory without taking him away from important war work.

Though Samuelson credits Freeman with inviting him to write the book to meet the needs of the MIT department, he soon had the idea of writing something for a wider audience; in July 1945, a few days before he officially left the Radiation Laboratory, McGraw-Hill had sent him a draft contract for a book to be titled Elementary Economics Handbooks During the 1945—46

b. The phrase “against public finance” hints at the possibility that there may have been

a political element involved.

c. Samuelson’s last few months at the Radiation Laboratory were spent working on the Bush report, so he may have remembered the conversation with Freeman as having taken place after he left the Radiation Laboratory, even though he was still on its payroll. academic year, he worked on the book, and as soon as chapters were finished, they were duplicated and distributed to students.⁸ Though these materials were put together under the title Modern Economics: An Introductory Analysis,⁹ it was clearly unfinished and he was unwilling for it to be used outside MIT. However, in early 1946, he had a much more polished draft, in which the word modern had been dropped from the title, on sale in the MIT bookstore to anyone who chose to purchase it. After further revisions, the book was eventually published in 1948 by McGraw-Hill.

The reasons Samuelson gave for taking on the task were his susceptibility to flattery, the fact that he already had so many journal articles to his credit that it could hardly damage his reputation, and the mistaken idea that it would take him no more than three months. Foundations was already on its way to the publisher, and he recognized that there was a window of oppor­tunity, in that the existing textbooks were out of date. A further factor was that he was offered a reduction in his workload to write the book, though it is hard to find evidence of this in the MIT course catalogs.^d A textbook by a friend from his Harvard days, Lorie Tarshis, had been half-written before the war and would appear a year before Samuelson’s, but in 1945 Samuelson knew nothing of this.¹⁰ In the end, writing the book would take three years and was to involve him in unanticipated controversy.

As Freeman told Samuelson in 1945, the department had been trying to reform the introductory curriculum at MIT for some years.

d. In 1945—46, when teaching resumed after being virtually suspended for a year, Samuelson was listed as teaching the same courses as before 1944, and the following year he was listed as teaching two additional courses. These were more elementary courses— Economic Principles (Ec. ιι) and Prices and Production (Ec. 13)—and were presumably the ones where his book was tried out on students. If the catalogue is correct, and it may be that his teaching was different from what was anticipated when the catalogue went to press, the “reward” for writing the textbook must have involved postponing by a year the date when he would take over these courses himself. However, there is the possibility that the catalogue, which would have gone to press months before teaching began, may not indicate correctly who ended up teaching each course.

textbook was published, he sent him a copy, and Samuelson offered him advice on publication: if Clemence could persuade publishers that he might one day offer them a textbook, they would be more likely to take a chance on a more specialized book that would sell less well.¹²

Writing just as the United States was entering the war, Clemence and Doody argued that teachers had a duty to explain to their students the great changes that were taking place in the world.¹³ However, it was widely agreed that most general courses were not successful in doing this.

Clemence and Doody suggested that economics should be seen as the study of economic systems, where an economic system was “defined as any set of arrangements by means of which a group of people attempt to satisfy their wants for scarce goods and services.”¹⁴ If this definition were adopted, there remained the problem of integrating the material, and here they suggested using the concept of national income.

The entire course may be regarded as an attempt at the solution of a single economic problem. That problem is to explain the forces which determine the size and composition of the national income, its fluctua­tions over time, and its distribution in both space and time.^15,6

Business cycles would be a part of this, but they would not be the only topic of discussion: the study of national income was much broader. The course should begin with a discussion of statistics on U.S. national income “since the early period,” which students could discuss even before they were taught any theory. They should then be taught the idea of equilibrium, “beginning with a brief discussion of the principal institutions forming the structure of a capi­talist system, with emphasis on the free market.”¹⁶ This would cover business organization, the corporation, trade unionism, collective bargaining, public

e. It should be noted that this approach was not entirely new, in that it is reminiscent of the approach of Pigou's before the First World War.

finance, and international trade. The key point was that institutions were presented as relevant to the principal problem of explaining national income.

The preface to Economics, dated April 1948, promised a book that would meet the criteria set out by Clemence and Doody six years earlier.

It aims at an understanding of the economic institutions and prob­lems of American civilization in the middle of the twentieth century. National income provides the central unifying theme of the bookf¹

Traditional topics were omitted in favor of what Samuelson described as “a rich array of quantitative material.” The book was up to date in that much of this material had been available only in the previous half-dozen years. The subjects were those that were needed to understand the postwar world and those that people found interesting. Just as nonspecialists studying physics deserved to learn about atomic energy and nuclear structure, so economics students deserved to learn about the big questions of economic policy. The book should enable students to understand public statements from bodies such as the Committee for Economic Development, a mid­dle-of-the-road business group led by businessmen, newspaper publishers, and a Republican senator, or the President’s Economic Report to Congress. The book might present modern theories associated with Keynes, but Samuelson was claiming that it was emphatically not radical in its politics: teaching national income was consistent with adopting a middle-of-the- road position.¹⁸

Samuelson’s conception of the book had been reached very early on. In March 1946, he summarized his approach in a letter to Emile Despres.

I proceed on the conviction that the elementary course is primarily designed for people who will never be professional economists or even concentrators in economics. (I also believe, but I am not so sure of my ground, that the introductory course for concentrators should not devi­ate much from that for anyone else.) The elementary course, therefore, should concern itself with the important economic problems that con­front any intelligent adult. It follows automatically that all “impor­tant” questions will be of interest to the student. In fact, interesting the student would be the primary aim of the course. This may sound cynical, but I do not believe it is[,] since the intuition of the ordinary layman as to what is interesting is usually a pretty good one.¹⁹

A very similar statement found its way into the book’s preface, where he wrote that the topics people found interesting overlapped “almost perfectly” with the topics that were important for understanding the postwar world, and that “the instinct of the nonspecialist is nearly infallible.”²⁰ The earlier letter makes it clear that this near-infallibility referred to the identification of important problems: he was not implying that the layperson's understanding of these issues was infallible. Samuelson then told Despres what this meant in practice.

Certainly, this means pretty much soft-pedaling all so-called value and distribution theory. A little bit of supply and demand, cost, produc­tion and profit analysis of the firm will do no harm; and probably the same thing can be said for a fairly rigorous treatment of comparative cost. Aside from this, I would place emphasis upon national income, money, unemployment, the business cycle, fiscal policy, public debt, social security, etc., along with preliminary exposition of the elemen­tary facts of life about corporations, trade unions, stock market, etc.

His “preliminary exposition of the elementary facts of economic life” was so important that it covered almost 250 of the book's 600 pages.