Tape 189 - 1975 Nobel Award

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Interviewer	Welcome once again as MIT professor	0:02
	Paul Samuelson discusses the current economic scene.	0:04
	This series is produced by	0:07
	Instructional Dynamics, Incorporated.	0:08
	Professor Samuelson, an award you're very familiar with,	0:11
	the Nobel Prize in Economics was awarded just recently.	0:13
	Your comments.	0:16
Paul	This is a topic that I'm very happy to discuss.	0:19
	I know the work of both the men who have just been awarded	0:23
	the new Alfred Nobel Award in Economics.	0:28
	Kantorovich in Russia, Leonid Kantorovich,	0:32
	who was a very distinguished mathematician,	0:35
	who has done excellent work in economics.	0:39
	And from Yale University, Professor Tjalling Koopmans,	0:42
	who was born in the Netherlands, trained as a physicist,	0:47
	as Jan Tinbergen, the sharer of the first Nobel Prize was,	0:52
	and who has had a most distinguished career in economics	0:56
	and in particular in economics	1:01
	and econometrics in this country.	1:04
	Well, before I discuss the general	1:08
	subject matter of their research,	1:13
	which although I haven't yet seen the citation,	1:16
	must be in the general field of what is called	1:20
	modern linear programming,	1:25
	an important technique that was invented	1:27
	only at the time of World War II.	1:31
	Invented independently in Russia	1:36
	by Kantorovich in a 1939 article.	1:39
	In this country by an obscure elderly mathematician,	1:42
	professor emeritus from MIT named Hitchcock	1:49
	and by Professor Koopmans when he was working	1:53
	at the war shipping board in Washington during the war.	1:56
	Furthermore, George Dantzig, a distinguished statistician,	2:00
	a student of Professor Neyman	2:06
	at the University of California at Berkeley,	2:07
	while working for the Air Force,	2:11
	really completed the mathematical theory	2:13
	of linear programming when he discovered	2:17
	a practical algorithm for solving the problems.	2:20
	You could say that the problem existed	2:24
	since the beginning of time	2:25
	but not until George Dantzig made it manageably computable	2:27
	did it become a serious influence.	2:35
	Since 1947 when George Dantzig finished his algorithm,	2:38
	the simplex Method, there have been, I suppose,	2:43
	literally hundreds of thousands of applications	2:46
	of linear programming in industry,	2:50
	in the defense forces,	2:53
	and in economics itself.	2:56
	You might ask, since these three men,	2:59
	I leave out Hitchcock,	3:03
	all made contributions, why didn't they have a prize	3:05
	for all three men?	3:08
	Well, they could very well have done so	3:10
	but they probably figured,	3:12
	I mean the Royal Academy of Science of Sweden,	3:15
	that George Dantzig was not himself really an economist.	3:20
	Now you might say, is Kantorovich an economist?	3:27
	And I will develop the argument that he is.	3:29
	Let me give some background.	3:37
	First, let's say this, the prize was not unexpected.	3:39
	I don't think that one could have predicted	3:45
	with any certainty or even made the odds most favorable	3:47
	to the prize being given to these two men	3:55
	but one realized that linear programming has had	3:59
	such a monumental number of applications	4:03
	and has caused a revolution in viewpoint	4:10
	within analytical economics itself.	4:16
	I exaggerate a little but only a little	4:19
	that someday that committee was likely to give	4:21
	a Nobel Prize for the originators of that.	4:24
	Furthermore, they killed two birds with one stone.	4:27
	There always is, particularly in the field	4:30
	of literature and Nobel Prizes,	4:32
	a tendency for some people to argue that	4:34
	you should share the wealth,	4:37
	that every part of the world should be given its fair share.	4:40
	You and I, most of my listeners,	4:45
	cannot understand the poetry of Tagore	4:47
	in its native language, which I suppose is Bengali.	4:51
	We have to take inadequate translations.	4:55
	It's unfair, it might be said,	4:59
	that only a Swede should be able to write prose	5:01
	which would command the prize	5:05
	and actually Swede's have gotten perhaps a little more	5:06
	than their fair share in terms of the role	5:09
	of Swedish writers in world literature.	5:12
	I think that's an understandable biased	5:14
	of the Swedish Royal Academy.	5:16
	So the argument goes, does Africa have a good writer?	5:19
	Well, no first rate writer like T.S. Eliot,	5:25
	say, or like Tolstoy.	5:29
	By the way, Tolstoy did not receive the Nobel Prize.	5:34
	I believe that T.S. Eliot did.	5:37
	The fact that Tolstoy didn't is a reflection	5:40
	on the skill of the early Royal Academy.	5:44
	Well if Africa doesn't have a first class writer	5:50
	then let's find the best writer in Africa	5:55
	and give him the prize.	5:58
	Not every year, not every other year,	6:00
	but once in 15 years.	6:02
	And so you get a geographical distribution	6:05
	not by absolute merit but in terms of	6:07
	giving every particular region representation.	6:11
	I don't have to belabor the point that	6:15
	there is a lot of pressure in that direction.	6:17
	Well, if that were so and if the Nobel committee	6:20
	wanted to show that it was even handed	6:24
	as between western and eastern economics,	6:27
	I mean, mainstream economics of the west primarily,	6:31
	and so called Marxist economics	6:35
	of the eastern European socialist countries,	6:39
	perhaps of China.	6:43
	At least a billion, perhaps a billion and a half	6:46
	of the four billion odd people in the world	6:50
	profess to believe in Marxian economics.	6:54
	Well, if the Nobel committee was ever gonna play that game,	6:57
	they certainly would have difficulty	7:01
	with eastern Europe and Russia.	7:03
	For one thing, they could have given the prize	7:06
	to the late Michael Kalecki,	7:09
	who did brilliant work in econometrics,	7:11
	in business cycle analysis, in Keynes analysis.	7:14
	He was an independent discoverer of the general theory	7:18
	it is documentable in many regards to believe.	7:21
	But they had to move fast if they wanted to give it	7:28
	to Kalecki 'cause Kalecki was in his early seventies	7:31
	and not in good health and he is now dead	7:34
	and there is a tradition	7:36
	never to give the prize posthumously.	7:37
	So, you really have a great arid wasteland	7:40
	as far as good economists in eastern Europe.	7:44
	Sometime when I have more time	7:51
	and don't have to talk about the pleasant matter	7:52
	of the recent Nobel Prize winners,	7:57
	I'd like to speculate with you as to why it seems to be	8:00
	that only in bourgeois society	8:04
	do you get good political economy.	8:06
	Because it seems to me there is something	8:10
	of an empirical generalization.	8:12
	I don't mean that you have to be a bourgeois apologist	8:15
	of bourgeois economies in order to be a good economist.	8:18
	On the contrary, some of the best work of economists	8:21
	has been done in criticism of the bourgeois economy	8:25
	but there seems to be something in the bourgeois economy	8:30
	which makes for good political economy.	8:33
	In any case, the economists of the Soviet Union,	8:37
	I'm going to speak very bluntly,	8:43
	are not a terribly admirable, enviable lot.	8:46
	I've met most of them, I think,	8:56
	most of the leading economists over the years	8:58
	at international gatherings.	9:00
	For some years I was president of	9:03
	the International Economic Association	9:04
	and I met the three official economists sent each year.	9:06
	Many of them I liked as persons.	9:14
	Some of them one could get closer to than others.	9:17
	But one did not feel that you were	9:21
	in the presence of great minds and in fact,	9:25
	aside from the quality of the minds of the men,	9:28
	they were extremely uninformed	9:32
	and naive about many of the subjects	9:34
	that were their life work.	9:37
	So I think it would have been almost impossible	9:41
	to have given an award to any Soviet economist	9:45
	in the mainstream of Soviet economics.	9:50
	Indeed, I tell you no secrets when I say that the economists	9:52
	in the universities in the Soviet Union	9:56
	are not the best economists in the Soviet Union.	9:59
	They tend to be ideologues who simply teach	10:04
	a vulgar form of Marxism.	10:07
	It consists mostly of stale critiques	10:11
	of what is deceived to be western capitalism.	10:16
	I once read with care the english translation	10:21
	of the fundamental textbook	10:25
	in political economy of the Soviet Union.	10:28
	It succeeded the premier by Stalin,	10:31
	I don't know who wrote the thing for Stalin.	10:35
	If I were he, I wouldn't wanna claim too much credit for it	10:38
	but Stalin may have written his own version	10:44
	but this was after the death of Stalin, a revised version.	10:46
	And there really was not, in the whole of the book,	10:50
	one consecutive set of economic statistics on the west.	10:56
	It was selective quotations, it's very dull stuff.	11:01
	Everybody in the Soviet Union,	11:05
	if you wanna be an engineer	11:06
	and when you get to about high school age,	11:08
	junior college age,	11:11
	you must go through the catechism of Marxian economics.	11:12
	And it's a cynical joke among	11:16
	the professionals in the Soviet Union	11:19
	when they pass each other in the hallway,	11:23
	they say in mock seriousness, what constitutes value?	11:25
	Value is constituted by socially necessary labor time	11:29
	and it would be just like a religion in decay.	11:33
	It's a rule of life that if we were made to read	11:37
	Silas Marner in high school,	11:41
	even if Silar Marner were a much better novel	11:43
	of George Eliot's than it is, we wouldn't enjoy it.	11:45
	Many a person has had his potential liking for Shakespeare	11:49
	dulled by the fact that he read in high school Macbeth,	11:54
	perhaps Julius Caesar, perhaps the Merchant of Venice,	11:59
	and even those plays,	12:04
	his enjoyment of them in later life was blunted	12:08
	because it was compulsory reading.	12:12
	Kantorovich was and is a really first rate mathematician.	12:15
	This is one of the things that surprises each of us	12:22
	about the Soviet Union, its unevenness.	12:26
	They will be able to produce a rocket or a hydrogen bomb,	12:29
	which we know involves precision bearings	12:35
	and gyroscopes that compare favorably	12:40
	with the very best that can be done in the west	12:46
	and the very best that can be done in the United States.	12:49
	At the same time, the hotel electric fan won't work,	12:51
	the waiters are inefficient, there is great unevenness.	12:58
	Now, in pure mathematics, people like Kolmogorov	13:07
	and Khinchin and Kantorovich and Pontryagin,	13:13
	I'm only naming four of the recent generation,	13:19
	all of these men are getting a little bit on,	13:25
	some of them now dead.	13:28
	They are the best mathematicians in the world,	13:29
	I mean they compare favorably,	13:33
	have to give no quarter	13:36
	to mathematicians anywhere in the world.	13:38
	Kolmogorov, if you wanted to compare him	13:41
	with von Neumann or with Norbert Wiener	13:44
	or George D. Birkhoff, our great mathematicians,	13:47
	or Hilbert or G. H. Hardy,	13:52
	you would have to mention them in the same breath.	13:55
	There's a tremendous tradition there.	13:58
	Well, Kantorovich, somehow by accident,	14:00
	got into the problem of, I think it has a very odd title,	14:04
	something like a problem of masses.	14:09
	But the problem is, if you have,	14:11
	I'm stating it in the Hitchcock form,	14:16
	suppose you have eight factories	14:19
	and you know the amount of paper pulp	14:22
	that is produced in each of the eight factories.	14:25
	And suppose you have 50 destinations	14:31
	and you know the amounts which have to be sent	14:34
	to each of the 50 destinations.	14:37
	Of course, the total amount which is gonna be received	14:40
	by the 50 importing stations is equal, almost by definition,	14:42
	to the total amount which is gonna be exported	14:48
	by the eight factories.	14:51
	And suppose you're given the transportation costs	14:54
	from any factory to any consuming point destination.	14:56
	That's a set of positive numbers,	15:01
	a rectangular set, eight by 50,	15:04
	giving the cost of sending one unit of paper pulp.	15:08
	You could ask the question,	15:12
	it's a natural question for an economist to ask,	15:13
	so think of what a genius a mathematician	15:15
	must be to even be able to formulate the question	15:17
	how would you minimize the sum total of wasted costs	15:21
	in the form of transport costs,	15:26
	total transport cost expense,	15:28
	by allocating the output of each factory	15:30
	to which consumption center?	15:35
	Now there's certain obvious shortcuts that can be made.	15:38
	You would, for example, if there was a consuming point	15:42
	right near a factory and other things were equal,	15:45
	you would certainly not send the output	15:48
	from Moscow to Siberia at the same time	15:51
	that you're sending Siberian paper pulp to Moscow.	15:54
	Cross-haulage would be eliminated.	15:57
	And this problem was formulated	16:00
	and the solution outlined by Kantorovich in 1939	16:03
	and that is his first claim to fame in this regard.	16:07
	The Hitchcock article, I should tell you,	16:12
	dates from about 1941 and appears in the home mathematical	16:14
	journal of MIT Journal of Mathematics and Physics.	16:19
	Well, where does Koopmans come in?	16:24
	Koopmans was at the war shipping board	16:26
	and the problem there was a shortage of ships	16:29
	and there was a great system of allocation	16:34
	between all the shipping of the combined war shipping board.	16:38
	Koopmans, as an analyst, didn't like the arbitrary way.	16:45
	It made sense but it was just common sense,	16:50
	it wasn't extraordinary in uncommon sense.	16:52
	The matters were allocated and so as he thought about,	16:55
	he saw, in a flash, that you could give a price	16:58
	to each empty ship in each spot on the globe	17:04
	and then he worked out the optimal way	17:08
	to maximize the rents from the ships,	17:13
	wherever they might be on the globe.	17:16
	I can't go beyond that in my hasty explanation	17:19
	but that problem is isomorphic with the Hitchcock problem	17:24
	and the problem of Kantorovich.	17:30
	It's a special case, it's the so-called assignment	17:35
	or transportation problem of the general problem	17:38
	of linear programming.	17:41
	Of course, fingers were made before forks	17:43
	and long before there was a detailed science	17:46
	of linear programming,	17:49
	there was a realization of some of these problems.	17:51
	Indeed, George J. Stigler, a distinguished economist	17:55
	at the University of Chicago,	17:59
	then at the University of Minnesota in the 1940s,	18:01
	war years I guess.	18:07
	Perhaps it was 1939.	18:11
	He worked out a famous problem.	18:13
	He said, we know the nutrient requirements of calories,	18:15
	vitamin A, vitamin B,	18:19
	which the National Research Counsel says an adult,	18:21
	he's a six foot adult,	18:25
	Stigler being more than six feet was the example he gave.	18:27
	So we have a column vector	18:32
	of all these nutrient requirements.	18:34
	We know for each food from nutritionists	18:37
	just what it holds in the way of vitamin A,	18:41
	vitamin B, Nyacin, et cetera.	18:44
	Milk, of course is just loaded with all sorts	18:47
	of positive items in the column vector	18:50
	representing its nutritional content.	18:53
	Finally, and this is because George Stigler	18:57
	was an economist that the problem	18:59
	presented itself to him in this way.	19:01
	Finally, we know from the Bureau of Labor Statistics	19:04
	what the price of milk is,	19:06
	what the price of buckwheat is,	19:08
	what the price of kidneys,	19:09
	what the price of filet mignon is.	19:11
	And he said, now there should be a way of meeting	19:14
	the National Research Counsel's nutritional requirements	19:17
	for an adult by selecting the right	19:21
	market basket of food so as to give you an adequate diet	19:27
	in respect of each of the requirements	19:32
	at the lowest total costs.	19:36
	And this is a general problem in linear programming.	19:39
	It's not a problem which Professor Stigler	19:46
	was able to solve.	19:50
	When I first read it,	19:52
	I received a copy of the paper from George Stigler,	19:54
	I immediately recognized its similarity	19:59
	to the Hitchcock problem and I was not able to solve it.	20:02
	However, George Stigler was able to solve it	20:06
	to a very good approximation.	20:09
	He was able to show that his approximate solution	20:11
	came very near to the least cost	20:13
	that any solution could possibly have.	20:17
	And I was able, in an article written in the 1940s,	20:20
	to show that the way a price change would effect	20:26
	the quantity bought could not be of the following form.	20:31
	Sir Robert Giffen had pointed out	20:38
	that an increase in the price of potatoes,	20:41
	we don't know where he pointed this out	20:43
	but it's attributed to him,	20:45
	an increase in the price of potatoes for poor Irish peasants	20:46
	who are so dependent upon potatoes	20:50
	for most of their nutrition,	20:52
	an increase in the price of potatoes	20:57
	would so increase the amount they have to spend	20:58
	that they would have so little left to spend for meat	21:01
	that they actually would increase	21:05
	their consumption of potatoes at the higher price.	21:07
	This was thought to be a paradox	21:11
	but it is no paradox, it's perfectly consistent	21:13
	with the rational preference theory	21:15
	and Professor Stigler ventured the guess	21:18
	that this was possible in his problem.	21:21
	And I was able to show,	21:25
	even though I couldn't solve the problem	21:27
	anymore than he could,	21:28
	that this was not a possibility	21:29
	'cause I could show what some of the properties were	21:32
	of the solution even though I didn't have an algorithm	21:33
	for getting the solution.	21:36
	Today, that problem is solvable on a very large scale.	21:38
	I might say, by the way, that the optimal solution	21:44
	of Stigler cost as I remembered in 1939 about $40 a year.	21:47
	You could get all the kidneys and buckwheat,	21:53
	flour that was needed for an adequate diet.	21:58
	Ram has shown that you can do pretty well	22:04
	with peanut butter and lima beans.	22:07
	The Mexican peasant diet turns out to be	22:10
	a pretty cheap diet.	22:13
	If you're gonna be on a life raft,	22:17
	the Navy has found that caramel candies	22:19
	are pretty nearly a adequate short-term diet	22:22
	and they're very easy to carry.	22:28
	Of course they're very hard on your fillings	22:31
	but I don't think you'll care about that.	22:33
	Well, this is the achievement.	22:36
	It sounds as I'm describing it	22:40
	as the kind of mathematical puzzle you might read about	22:41
	in Scientific American.	22:45
	But of course, Newton's apple falling to Earth,	22:46
	which is really Newton's moon falling around the Earth,	22:50
	is also that kind of a puzzle.	22:55
	And Newton who was perhaps the greatest mind that ever lived	22:57
	has said, I don't know how I appear to others	23:01
	but to myself, I appear to be a mere child	23:03
	playing on the beach,	23:06
	forming beautiful patterns out of the stones.	23:09
	To quote Shakespeare and to cease to quote Newton,	23:14
	really an idiot telling a tale signifying nothing.	23:18
	Well, the tales that the non-idiots like Einstein	23:23
	and Newton and Kantorovich and Koopmans tell	23:27
	are fraught with significance for modern life.	23:31
	Professor Koopmans also has claims	23:38
	that he was one of the pioneers	23:42
	in the econometric field of identification.	23:44
	This work was done when he was at the University of Chicago	23:48
	at the Cowles Commission,	23:52
	so-called Alfred Cowles being a benefactor	23:55
	of the pure sciences.	24:00
	And he moved from the University of Chicago to Yale,	24:01
	to Yale's great benefit when the Cowles Commission	24:05
	was reborn as the Cowles Foundation.	24:10
	And at Yale, he and Jacob Marschak	24:14
	and Herbert Scarf and James Tobin	24:19
	have created from an old fashioned	24:22
	moribund economics department,	24:25
	one of the liveliest economic centers.	24:27
	One last reflection with respect to the problem	24:31
	of giving an award to a Russian economist,	24:36
	you know that the Peace Prize has just been	24:40
	given to Sakharov, the great Russian physicist	24:42
	who helped to create the hydrogen bomb	24:46
	but who has been one of the incredibly	24:49
	courageous dissidents.	24:51
	It was given to the rage of the Russian authorities.	24:54
	I don't think that the Kantorovich award	24:57
	will be to the rage of the authorities.	25:00
	Kantorovich has really been paying the greatest compliment	25:03
	that the capitalistic system could have	25:07
	in that his algorithms involved shadow prices.	25:09
	And so you might say, this is the Russians' way of	25:15
	sneaking up on the use of market pricing.	25:19
	And I say more power to them if they can get around	25:23
	inefficient quantity rationing	25:27
	by imitating the capitalistic price system	25:31
	but not seeming to do it directly	25:35
	because you'll get in trouble in the Soviet system	25:38
	if you're a mathematician or an economist	25:42
	who is imitating bourgeois economics.	25:44
	If you can arrive at it by the use of mathematics,	25:47
	well, more power to you.	25:50
	Now what's interesting is that Kantorovich,	25:53
	who is, in effect,	25:56
	a disbeliever in the labor theory of value,	25:58
	who thinks that other resources	26:01
	have to be given a proper price,	26:03
	who is not a bourgeois economist,	26:06
	who is not a believer in bourgeois economics,	26:08
	he still professes to be a Marxian economist.	26:11
	And one of the dissident Russian economists	26:15
	who left the country told me he knows	26:19
	Kantorovich very well, he admires him,	26:21
	and my informant regards the Marxian economics as a joke,	26:24
	as a albatross around the neck	26:32
	of any sensible thinker in social engineering	26:35
	in the Soviet Union.	26:40
	But he said it was a mystery to him,	26:42
	he never could get Kantorovich to admit	26:43
	that the Marxian economics was the witchcraft	26:48
	which was applied along with the arsenic	26:52
	of linear programming to effectively kill the sheep.	26:54
	And he said he was never able to work out in his own mind	27:00
	whether this was tactics.	27:03
	He would say to Kantorovich, well now,	27:06
	we're just here together,	27:08
	this is a matter of tactics with you, isn't it?	27:09
	And Kantorovich would stoutly maintain no.	27:11
	Well, probably we shall never know	27:15
	what the true state of affairs is in that regard.	27:19
	I think it will be an appointment which will do something,	27:26
	which the officials in the Soviet Union will not dislike,	27:31
	it will help a more rational element in socialist planning.	27:33
	And so it seems to me that from that viewpoint,	27:42
	it's a very good thing.	27:44
	It's not a rap on the knuckles of the system	27:45
	the way the Nobel award of Solzhenitsyn was	27:48
	or of Pasternak, who'd written Doctor Zhivago.	27:55
	It's within the mainstream of Soviet life	28:02
	and yet, the better elements as a person of goodwill	28:06
	might measure that are given a boost	28:14
	and there won't be another equivalent occasion	28:20
	for a long time to come	28:24
	when a respectable jury in a neutral country like Sweden	28:26
	can find a person in economic science	28:30
	in the socialist countries of the world to give an award to	28:35
	because he has made contributions	28:42
	to the science of political economy.	28:45
	I leave you then with that paradox	28:48
	that in the land where it is considered	28:50
	that political economy has, for the first time,	28:53
	been scientifically founded,	28:56
	it is practically impossible to find	28:59
	a scientific political economist	29:02
	unless you find a mathematician	29:04
	who looks upon the matter only in terms of	29:10
	the abstract logic of mathematics.	29:13
Interviewer	If you have any comments	29:17
	or questions for Professor Samuelson,	29:19
	address them to Instructional Dynamics, Incorporated,	29:20
	450 East Ohio Street, Chicago, Illinois, 60611.	29:23

Item Info

Title:

Tape 189 - 1975 Nobel Award

Date:

October 1975

Contributor:

Samuelson, Paul A. (Paul Anthony), 1915-2009

Subject:

Format:

audiocassettes

Language:

English

Digital Collection:

Paul A. Samuelson papers, 1933-2010 and undated

Source Collection:

Paul A. Samuelson papers, 1933-2010

Series:

Economics Cassette Series: Paul Samuelson

Rights:

Limited Re-Use

CC BY-NC 4.0

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Identifier:

RL10082-CS-0170
ref2481_e07
samuelsonpaul
duke:325194
pstau001171
ark:/87924/r4qz2303p
3b108cbe-968d-4d3e-a401-9eec2b281f11

Permalink:

https://idn.duke.edu/ark:/87924/r4qz2303p

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Tape 189 - 1975 Nobel Award

Transcript

Item Info

Economists' Papers Archive

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