20. Paul Samuelson’s Contributions to Public Economics

This chapter provides an impressionistic review of Paul Samuelson’s enduring contributions to the field of public economics. It focuses on his main foundational methods widely used in public finance and their important applications, elaborations, clarifications and caveats to his conclusions. The chapter discusses the pathbreaking use of mathematics to clarify assumptions and make testable predictions more precise, from constrained choice optimization models to revealed preference theory to the overlapping generations model to integrating microeconomic foundations into macroeconomics. It then focuses on his primary contributions to public economics: the theory of public goods. From the characteristics of the goods as non-rival and non-excludable to the free rider preference revelation problem to the summation of individual marginal valuations to derive the efficiency conditions to their interaction with the income distribution, it is all there in just three pages. We then look at the extensions and caveats it inspired. Finally, the chapter discusses Samuelson’s primary contribution to tax theory, his analysis of economic depreciation. The influence of his prolific publications, textbook, public intellectual writing and advising, and teaching on and by his numerous students who became important economists and policy makers, has been and continues to be profound. That places Samuelson high in the pantheon of great economists of the twentieth century and, indeed, in the history of economic thought, which, given his love of that subject, no doubt would have delighted him.