Wednesday, June 17, 2009


Conor Clarke interviews the great economist Paul Samuelson. This excerpt caught my eye:

Samuelson: The 1980s trained macroeconomics -- like Greg Mankiw and Ben Bernanke and so forth -- became a very complacent group, very ill adapted to meet with a completely unpredictable and new situation, such as we've had. I looked up -- and by the way, most of these guys are MIT trained; Princeton to MIT or Harvard to MIT -- Mankiw's bestseller, both the macro book and his introductory textbook, I went through the index to look for liquidity trap. It wasn't there!

Clarke: Oh, I used those textbooks. There's got to be something in there on liquidity traps.

Samuelson: Well, not in the index.

Paul is factually wrong here, or at least out of date. If you look in the most recent edition, the 6th, of my intermediate macro book (or in the new 7th edition, which will be released next month), you will find term "liquidity trap" in the index. And it will point you to an extended discussion of the topic.

I presume Paul was looking at an older edition of the book. The material on the liquidity trap was added in the 5th edition, published in 2003. As a textbook author, I am always fine-tuning the selection of topics covered. To do otherwise would be, well, complacent.