David Warsh: Why did Paul Samuelson end his momentous debate with Milton Friedman?

SOMERVILLE, Mass.

It was a transformative  national debate, on the level of Hamilton and Jefferson, or Lincoln and Douglas: Paul Samuelson (1915-2009) of the Massachusetts Institute of Technology, and Milton Friedman (1912-2006) of the University of Chicago, wrote dueling columns for Newsweek magazine from 1966 until May 1984. Then their arrangement ended abruptly, With no public explanation, Samuelson quit.

Why?

Friedman had become well known as a critic of government spending on basic research.  In Free to Choose, the 1980 book accompanying their highly successful television series, he and his economist wife, Rose, had argued that the National Science Foundation, the National Institutes of Health, and tax subsidies to higher education are undesirable and should be abolished.

Since Friedman was also an adviser to future President-elect Ronald Reagan, reporter Nicholas Wade, of Science magazine, called him up to ask what should be put in their place?

“Nothing,” Friedman replied. “The Treasury, the citizenry and the advancement of science would all be better off without the NSF and other research agencies.”

In his interview, Friedman enumerated to Wade the problems he felt that government caused. They boiled down to mediocrity, waste, abuse and a chilling effect on the academic community’s willingness to speak frankly and criticize programs. Harvard philosopher Willard Quine had made much the same argument in an essay in Daedalus in 1974.

Wade asked Friedman on whom should the burden of proof be placed?

“On those who wish to extract money from below-income taxpayer, or on those who argue the other way. I challenge you to find a single study justifying the amount of money now being spent on government support for research science.”

Abolition of government funding had been no proposal to advance in 1980, Friedman admitted, when Reagan was no more proven a candidate than had been Barry Goldwater, whom Friedman had also advised, in 1964.  But it was now 1981, and Reagan was at the newly elected president, riding a wave of excitement. When Friedman repeated his arguments in Newsweek in May, Paul Samuelson never wrote for the magazine again.

Some background: Samuelson had attended Harvard University on one of the first Social Science Research Council fellowship, leaving for MIT in 1940. In the late stage of World War II, the 29-year-old Samuelson had served, with John Edsall, the biochemist, and Robert Morison, head of biology for Rockefeller Foundation, on a subcommittee established to study post-war science policy for Vannevar Bush, World War II science czar.

When Bush’s report, Science, The Endless Frontier, was issued, in 1945, it contained the recommendations that the trio had favored: Pentagon funding for military technology; the National Institute of Health, for medicine; and National Science Foundation, for basic and applied science (including social sciences). Not until 1958, after the Soviet Union launched Sputnik , its first satellite, the year before, was the National Aeronautics and Space Administration was established.

Five years had been required to establish the NSF, owing to opposition in Congress, from populist senators who wanted funding to be distributed, equally among the states, county by county, pork-barrel fashion, rather than by a system of peer review. At the other end of end of the argument was Polaroid’s Edwin Land, who felt that government should favor entrepreneurial inventors, such as today Silicon Valley s titans (and, in those days, himself).

Fifteen years later, I asked Samuelson whether there had been any connection between one event and the other.  Had he suffered enough of his rival?  Not at all, Samuelson replied. He had been about quitting after a copy editor had changed a headline on a prior column in a way that displeased him.

Somehow, I didn’t believe him. I raised an eyebrow, and we continued the interview.

I thought of that when I took down from the shelf Better Living through Economics (Harvard, 2011 ), a book edited by John Siegfried, that I hadn’t found a way to write about when it was published.  The title was a play on a famous Dupont Co. advertising campaign, “Better living through chemistry.” Multiple chickens and multiple pots graced the book’s jacket, a reference to Herbert Hoover’s 1928 campaign promise, “a chicken in every pot.’’ Siegfried, a Vanderbilt University professor, had been for many years the widely respected secretary-treasurer of the American Economic Association.

The book contained a dozen case studies by leading economists who had been involved in policy reforms, followed by expert commentary on each.  Siegfried noted in an introduction that only one of the studies, the all-volunteer armed force, had been pursued by academic economists without external funding. Eventually Richard Nixon appointed a presidential commission to study transition from conscription to a market-based military; many economists were involved in its work. The plan they came up with was implemented in 1973.

In an overview of the essay, Charles Plott, of Caltech, noted that the contributions of economics had been accomplished “with only a tiny fraction of the level of research support given to other sciences.” Yet basic and applied research in economics, he asserted, had profound effects on American life.

The 12 essays included in Better Living through Economics described emissions trading; improved price indices; the effects of trade liberalization on growth in developing nations; welfare-to-work reform; a revolution in monetary economics; adoption of electro-magnetic spectrum auctions; air-transport deregulation; the application of deferred acceptance algorithms in school choice and medical education; new anti-trust measures; all-volunteer military forces, and policies to encourage retirement savings.

Regardless of whether you consider the effects of all these measures to have been net beneficial, you may agree that each was worth a try. Some clearly worked to provide better living. Perhaps others didn’t succeed as well.  After two or three American wars, for example, the returns on an all-volunteer-military force vs. conscription are not in.

One other test of government-sponsored basic research is worth thinking about, however – a natural experiment in which virtually all Americans took part.  This experiment was conducted without any of the protocols that Milton Friedman demanded as proof of the value of at least some, if not all, government spending on basic research. Certainly it can be argued about, long after the fact. But scale alone makes it important.

More on that experiment next week.

xxx

The reason that Samuelson gave for his decision to quit his long-standing column stemmed from the magazine’s decision to spike without telling him the column he had turned in, about John Kenneth Galbraith’s memoirs. Newsweek had reviewed the book “rather thoroughly” three weeks before, the editor explained.

Is it possible that Samuelson seized on the magazine’s slight as a fig leaf to conceal his irritation at Friedman’s proposal? The week before, the Chicagoan had called on the Reagan administration to sharply cut back on National Science Foundation’s grants to economists? Perhaps. In matters requiring diplomacy, the MIT professor was an artful dodger. But Samuelson turned 65 that year. He’d been dueling with Friedman in Newsweek since 1966.

Whatever the case, it was an abrupt way to end a momentous public  debate.

David Warsh, a veteran columnist and an economic historian, a proprietor of Somerville-based economicprincipals.com, where this column originated.