Paul Samuelson: Chicago is not so much a place as a state of mind

In 1954, a future Nobel laureate in economic sciences Paul Samuelson published one of his seminal articles “The Pure Theory of Public Expenditure”, which formalized the concept of public goods (which he called “collective consumption goods”) — i.e. goods that are non-rival and non-excludable. In this research, Samuelson showed and asserted that “No decentralized pricing system can serve to determine optimally these levels of collective consumption“. He also highlighted that “it is in the selfish interest of each person to give false signals, to pretend to have less interest in a given collective consumption activity than he really has.” (p. 388).
A decade later, Jora R. Minasian wrote a paper titled “Television Pricing and the Theory of Public Goods” in which he railed against Samuelson’s research and conclusion. Actually, Minasian misinterpreted and misrepresented them. In his bright and stormy rejoinder “Public Goods and Subscription TV: Correction of the Record” Samuelson masterly refuted Minasian’s propositions. In his final words, inter alia, Samuelson emphasized an essential point which is relevant till today:

“The final question is, Why all this? Is it because, despite all denials, Chicago is not so much a place as a state of mind? Is it because of the fear that finding an element of the public-good problem in an area is prone to deliver it over to the totalitarian state and take it away from the free market? The line between conviction and paranoia is a fine line… Only a bigoted devotee of laissez faire will find the theory of public goods, properly understood, subversive.” (Samuelson 1964: 83)

University of Chicago Department of Economics
Samuelson, Paul A. 1954. “Pure Theory of Public Expenditure.The Review of Economics and Statistics 36 (4): 387-389.
Samuelson, Paul A. 1964. “Public Goods and Subscription TV: Correction of the Record.”  The Journal of Law & Economics 7: 81-83

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