The Conversion Myth
Samuelson had previously taken courses on business cycle theory and money and banking, but he developed a serious interest in these topics only while he was a junior fellow. His own explanation of this new direction in his thinking is simple: he and his friends discovered Keynes.
In an article written to mark Keynes's death, he wrote, using the quotation from Wordsworth's The Prelude that he had used on several other occasions to describe his time in the Society of Fellows (see chapter 10 this volume):To have been born as an economist before 1936 was a boon—yes. But not to have been born too long before!
Bliss was it in that dawn to be alive,
But to be young was very heaven!
The General Theory caught most economists under the age of 35 with the unexpected virulence of a disease first attacking and decimating an isolated tribe of South Sea islanders. Economists beyond 50 turned out to be quite immune to the ailment. With time, most economists in-between began to run the fever, often without knowing or admitting their condition.1
In this account, Samuelson became caught up in the excitement created by Keynes's revolutionary ideas. Though he thought that the joke had worn thin, he spoke of this revolution as if it were a religious movement: “[W]e find a Gospel, Scriptures, a Prophet, Disciples, Apostles, Epigoni, and even a Duality; and if there is no Apostolic Succession, there is at least an Apostolic Benediction.”2 He went on to spoil his opening generalization about economists under thirty-five having no immunity to Keynesian ideas by saying that, for two years, he had been immune, even though he was only twenty when the General Theory was published?
I must confess that my own first reaction to the General Theory was not at all like that of Keats on first looking into Chapman's Homer. No silent watcher, I, upon a peak in Darien.
My rebellion against its pretensions would have been complete except for an uneasy realization that I did not at all understand what it was about. And I think I am giving away no secrets when I solemnly aver—upon the basis of vivid personal recollection—that no one else in Cambridge, Massachusetts, really knew what it was about for some 12 to 18 months after its publication.3His initial resistance to Keynesian ideas was part of his claim, to which he attached great importance, of having been old enough to have understood the old theories.
The other element in this immensely powerful myth concerns the role of one of his teachers, Alvin Hansen, who arrived at Harvard from the University of Minnesota in September 1937. Samuelson presented him as having been converted to Keynes when he arrived at Harvard, the sole exception to the rule that economists over the age of fifty were immune to the Keynesian disease. “On the train from Minnesota, so to speak, Hansen must have seen the light.”4 In an article in Newsweek, he picked Hansen out as unique among his generation.
As the great Max Planck, himself the originator of the quantum theory in physics, has said, science makes progress funeral by funeral: the old are never converted by the new doctrines, they are simply replaced by a new generation. He [Hansen] read Keynes, and disagreed. He read again, and agreed.5
“Singlehandedly,” Samuelson wrote in the New York Times, “he converted a generation of Harvard (and American!) economists away from an ancient orthodoxy in macroeconomic policy.”6 Moreover, Hansen did not simply
a. The book appeared in February; his twenty-first birthday was in May. convert a generation of academic economists; he also converted policymakers. In his second term, Samuelson claimed, it became clear that Roosevelt’s “fireside chats,” the National Recovery Administration (NRA), and planning rhetoric would not pull the United States out of depression: it was necessary to run deliberate budget deficits to restore prosperity? “It was Hansen, and his Harvard-trained economists,” he wrote, “who gradually converted the President and the Congress to an understanding of these facts of economic life.”7
Several points in this story are problematic, but it nevertheless attests to Hansen’s immense importance for Samuelson.c Prior to Hansen’s arrival, though he revered Schumpeter and to a lesser extent Haberler, the main influence on Samuelson had been Wilson, whom he described as his intellectual father. He never traced an intellectual family tree back through Hansen, but there is no doubt that for around a decade Hansen became his most important mentor.
Shortly after being awarded the Nobel Memorial Prize when he wrote a memoir of his graduate-student days, Samuelson mailed a photocopy to Hansen with the inscription, “To Alvin Hansen, who made it all possible.”8 Samuelson was liberal with praise, and this was a private communication in which one might expect to find flattery, but there are good reasons to believe this remark should be taken very seriously—and perhaps even literally. Once Hansen arrived in Harvard, their careers became entwined, and Samuelson’s work developed in directions in which Wilson could never have led him.Samuelson’s account of Hansen echoes his account of his own intellectual development. Hansen acquired authority as a supporter of Keynes because he had been not only old enough to have known the old theory but also one of its most eminent exponents. Samuelson therefore pointed out that, though his business cycle theory may have been eclectic, Hansen had explicitly endorsed Say’s Law—the notion that it is impossible for there to be a shortage of aggregate demand—the doctrine that had been the main target of Keynes’s book.9 Samuelson also stressed the critical tone of Hansen’s review of the General Theory, remarking that it would have gone down well with the Harvard professors who appointed him.10
Given its centrality to Samuelson’s whole career, this episode needs to be examined very carefully. Hansen’s most perceptive interpreter, Perry
b. The NRA, established in 1933, sought to reduce the competitive price cutting that was seen to be undermining businesses by establishing industry codes of practice.
c. Not least among the problems with this story is its neglect of the role of Lauchlin Currie. Mehrling, has written about the story of Hansen's conversion that Samuelson helped to establish as a myth.
Among economists, Hansen is most commonly remembered as a popularizer of the ideas of the great British economist John Maynard Keynes. According to what has become the accepted view, Hansen's special genius was his intellectual flexibility, to wit his willingness to abandon the neo-classical orthodoxy of his first fifty years in favor of the fresh ideas blowing in from across the ocean....
It must be admitted that this makes a marvelous story: Hansen as convert, like Saul on the road to Damascus, overwhelmed by the Keynesian light on the train from Minnesota to Harvard.11Unfortunately, as Merhling documents in detail, hardly any of this account is true. Hansen was never an orthodox neoclassical economist, and he was never a convert to Keynes in the sense implied by the conversion myth. The reason the myth took such deep root and was so powerful was that it was extraordinarily useful. Mehrling continued:
The historical usefulness of the conversion myth must also be admitted. If Hansen at fifty could reject the barren orthodoxy he himself had promulgated for twenty years at the University of Minnesota, why should any mere graduate student delay? If Hansen was the Apostle Paul, then Keynes was the Messiah, and the young Keynesians were the early Christians, with a message destined to sweep the world.
There is no one to whom this conversion myth was more useful than Samuelson, who became, along with Hansen, one of the leading exponents of Keynesian economics in America. His own career became so closely tied to Hansen's and to the Keynesian revolution that his view of Hansen came to be entangled with his own self-understanding. When he wrote about how Hansen had developed Keynesian theory so that it could be used to analyze the effects of policy, Samuelson was talking about areas in which his own contributions were, despite Hansen's seniority, of a similar magnitude. Samuelson wrote about Hansen's modesty, the way he give his students space to shine, and the way he sought the views of his critics. These were clearly remarks Samuelson would like to have been said about himself. Demythologizing Hansen's conversion is thus central to any understanding of Samuelson's role in the Keynesian revolution and his relationship to Harvard. The key to this is placing the discussion in the context in which it was viewed at the time— business cycle theory.