Text 31: play it again, Samuelson

In September 1998 thousands of students throughout the world will begin an introductory economics course. They will probably use only one textbook. For most, that one course will be their only brush with the dismal science. That is why basic economics textbooks are enormously influential. One, in particular, has been extraordinarily so: Paul Samuelson's "Economics", first published in 1948, has taught at least two generations of Americans (and many others) all they know about the subject.

As well as influence, textbooks can also bring their authors riches. Gregory Mankiw, an economist at Harvard University, was paid an advance of $1.4m for a basic textbook*, out in August 1997 that has been named as "the new Samuelson". Fortunately, this claim is only half-true. Like Mr Samuelson's book in its day, Mr Mankiw's book sets a new standard of clarity and liveliness. Like almost all modern texts, it uses many of the basic analytical tools developed by Mr Samuelson. But Mr Mankiw's aim, unlike Mr Samuelson's, is to elucidate rather than advocate. This is a big difference.

It is difficult to exaggerate the worldwide impact of Mr Samuelson's «Economics». Its 15 editions have sold more than 4m copies and it has been translated into 41 languages. Though its popularity has waned somewhat in recent years, many millions of people learned their economics from the textbook's lively prose. The book has great strengths. In microeconomics in particular, the pedagogy Mr Samuelson developed - diagrams of supply and demand, or cost curves, for instance - still set the discipline's standard. More problematic is his approach to macroeconomics. Although Mr Samuelson claimed that he had no great message to impart in his first textbook, he was actually introducing, explaining and advocating the then revolutionary economics of John Maenad Keynes. Hence the book reflected a belief in the need for active government and skepticism about market outcomes. Although it has evolved enormously over 15 editions, that tone remains.

Has this been for the best? In an intriguing recent paper, Mark Skousen of Rollins College in Florida studies the evolution of «Economics» and argues that its approach may have hindered people's understanding, Mr Samuelson's determination to provide a unified approach to macroeconomics created a false sense that there was a single way of thinking about how economies work. Readers of early editions would have the (wrong) impression that there was no longer disagreement about macroeconomics.

More important, the Keynesian basis of «Economics» means that large aspects of macroeconomics have been underplayed, and dubious policy prescriptions advocated. By concentrating principally on short-run aggregate demand, the book understated the importance of the causes of long-run economic growth. Its emphasis on Keynnes's concerns that people might save too much and so shrink the economy led through many editions to an anti-saving tone. Only in the 13^th edition in 1998 did Messrs. Samuelson and Nordhaus bemoan the low level of American savings and suggest a close link between saving and economic growth.

Nor are the book's microeconomics beyond fault. «Economics» has remained convinced that government should correct market failures and provide public goods. Every edition since 1961, for instance, cites lighthouses as examples of public goods that markets cannot provide - even though in 1974 Ronald Coase, a Chicago economist and, like Mr Samuelson, a Nobel laureate, explained how many English lighthouses in the 19^th century were commercially run. To be sure, some of this criticism is based on hindsight. In the 1950s or 1960s, Mr Samuelson's book would not have seemed as subjective or one-sided as it does today. And it has developed over time with Mr Samuelson's own ideas. But for all that, the book remains rooted in its time and in a single set of ideas.

Mr Mankiw's book, even if it becomes a bestseller, will not radically alter economic teaching in the way that Mr Samuelson's did. This is no criticism, for Mr Mankiw has produced something long overdue: an accessible introduction to modern economics. By writing more in the style of a magazine than a stodgy textbook and explaining even complex ideas in an intuitive, concise way, he will leave few students bored or bewildered. A second innovation is the book's structure and emphasis, which reflect today's economic realities and economists' understanding. International trade, for instance, looms large early on. The discussion of macroeconomics begins with long-run growth and only later moves to short-run fluctuations.

Most refreshing, though, is the book's even-handedness. Mr Mankiw seems to revel in setting out how different schools of thought have contributed to economists' current state of knowledge. Like «Economics», this book also mentions lighthouses. But it asks, «Are lighthouses public goods?» and gives the arguments on both sides. Whether the book's sales will justify Mr Mankiw's huge advance remains to be seen. But if, as it deserves, it becomes popular with the millions of students who take introductory economics, tomorrow's graduated might not only understand economics. They might even enjoy it.

* "Principles of Economics". Dryden Press.

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