Abstract
During the heyday of discussion about Milton Friedman’s 1953 methodology paper, Samuelson’s operationalism was often discussed as the primary competitor to Friedman’s position. Although Friedman’s paper continues to be discussed—albeit at a steadily decreasing rate—Samuelson’s account of economic methodology has all but disappeared from the literature. This paper offers a re-examination of Samuelson’s account. Why a re-examination now? There are many reasons, but I will focus on just two. The first is that the historical research on Samuelson has exploded since his death in 2009, primarily because of the extensive archival material he left behind. The second is Samuelson’s revealed preference theory; it is methodologically relevant because Samuelson insisted it was an exemplar of his operationalist approach.
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Box 71, Paul A. Samuelson Papers, Economists’ Papers Archive, David M. Rubenstein Rare Book & Manuscript Library, Duke University (all archival references in this chapter refer to the Economists’ Papers Archive at Duke).
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I say “most” and not “all” because there were some American pragmatists—John Dewey in particular—who were sympathetic to operationalist ideas but interpreted them differently than most operationalists and did not self-identify with the positivist tradition. See Hands (2004) for a discussion of these issues.
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When one discusses operationalism in psychology and to a lesser extent economics, one immediately raises the question of the impact of behaviorism in these social sciences, since operationalism is frequently—sometimes correctly and sometime incorrectly—associated with behaviorism. But the impact of behaviorism and its relationship to operationalism in the social sciences is a very complex topic that has generated a massive literature in the history and philosophy of the social sciences. Given this, I will stay on task and defer the broader question of behaviorism for another time. Here, I will focus exclusively on Samuelson and his operationalist methodology sans behaviorism.
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Wong (1973: 319) discussed six of Samuelson’s different arguments and raised reasonable concerns about each.
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In many ways, it is disappointing that Samuelson continued to say the same things about economic methodology in published work throughout his life. It is disappointing because there are a few places in his correspondence where he expressed not only understanding of, but sympathy for, some of the ideas in post-positivist philosophy of science. For example: “the real objection to positivism in philosophy, I suppose, is that when you get down to the nitty-gritty, at the very frontier of what you mean about meaning, it cannot deliver the goods. When I read…Quine on Two Dogmas…I am distressed – because the simple-minded distinctions that my youthful reading of Ayer and other such types made me think can be maintained turn out to be fuzzy and even self-contradictory. And most logical positivists of the 1930s, who have not gone senile have recanted on their faith in their simplicities” (Samuelson to Hahn, 14 January, 1972, Box 36).
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This human and intentional property of operations was precisely that which attracted pragmatists like John Dewey to operationalism even though they were generally anti-positivist. See Footnote 3.
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I would suggest that he was a little less successful than Backhouse and Carvajalino seem to argue. Two of the reasons for this are: (i) the sheer fact that the number of pages in Foundations (and Samuelson’s later work) where the analysis is conducted in terms of derivatives and differential equations is significantly larger than the amount conducted in terms of discrete mathematics and (ii) also the fact that many of the linear inequalities are linear because they come from Jacobian or Hessian matrices and were thus also calculus-based. Note that this is not a criticism of the argument that Samuelson was trying to do mathematical economics in a Wilsonian way—it seems clear he was. It simply means that discrete mathematics was extremely difficult in the pre-computer age. Another factor may have been that Samuelson always saw his work as fitting into, and improving on, the grand flow of economic ideas, and doing that, and having it recognized as such, is much easier when the theory is couched in the same mathematical formalism.
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Since this chapter is primarily concerned with Samuelson’s methodology and not his economic theory, it is useful to note that RPT was fundamentally a methodological program. Samuelson did not introduce RPT because of some practical problem with ordinal utility theory, for example, to correct for particular empirical refutations or anomalies or to extend the possible range of application of the theory. He was trying to develop a theory that would have the same empirical implications as ordinal utility theory—the exact same Slutsky conditions—but one that would rest on more epistemically palatable foundations. As Daniel Hausman explains: “The raison d’être of revealed-preference theory was philosophical. It was supposed to enable economists to rid economic theory of references to subjective preferences or to make those references respectable” (Hausman 2000: 112).
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Samuelson says that WARP was “logically equivalent to the reformulation of Hicks and Allen,” but that is not the case in general (although it is true for only two goods), although Samuelson did not know this at the time (and nor did anyone else). It was not until Houthakker’s paper that it became clear that it was SARP, not WARP, that was equivalent to OUT. It was not until, as Samuelson put it: “Mr. Houthakker’s paper arrived in the daily mail” (Samuelson 1950: 370).
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Samuelson “New Foundations for the Pure Theory of Consumer’s Behavior,” Box 152 (no date, but definitely from the 1930s; it says “Paul A. Samuelson Harvard University”). Backhouse says the paper “is undated but is assumed to be 1937” (Backhouse 2017: 652, fn. 40).
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My assessment is thus similar to what Hausman calls the “methodological schizophrenia” of economics, whereby “methodological doctrine and practice regularly contradict one another. This schizophrenia is a symptom of the unsound philosophical premises underlying…economic methodology” (Hausman 1992: 152). I would also note that Samuelson’s use of abstract mathematical functions presumed to be “empirically determinable under ideal conditions” was typical of the theoretical economics of his day. It may not seem very “empirical” today, but it was standard practice then. See Hands (2017a) for more details.
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See Varian (2006) or Vermeulen (2012) for a general discussion of the GARP-based literature and the importance of Afriat’s work in its development. Moscati and Tubaro (2011) discuss some of the early applications of these techniques, while Andreoni et al. (2013), Cherchye et al. (2009), and Crawford and De Rock (2014) provide accessible discussions of the empirical revealed preference literature. Various aspects of this literature are discussed in Hands (2013, 2017a, b).
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Wade Hands, D. (2019). Re-examining Samuelson’s Operationalist Methodology. In: Cord, R., Anderson, R., Barnett, W. (eds) Paul Samuelson. Remaking Economics: Eminent Post-War Economists. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-56812-0_3
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