Wednesday Wisdom

WHO

Paul Samuelson was a prominent American economist who made significant contributions to the field of economics. He was born on May 15, 1915, and he passed away on December 13, 2009. In 1970, Paul Samuelson was awarded the the Nobel prize for his contributions to the development of modern economic theory. Samuelson made significant contributions to the development and popularization of Keynesian economics. His work helped to explain how government policies, particularly fiscal policy, can influence and stabilize economic cycles. This was especially relevant during the post-World War II period and the early years of the Cold War. Paul Samuelson's work had a profound and lasting impact on the field of economics, and he is often credited with helping to establish economics as a more quantitative and mathematically rigorous discipline.

What he Produced

Samuelson’s textbook, "Economics," first published in 1948, played a crucial role in shaping the way economics is taught and understood. It became one of the most widely used economics textbooks and has had a profound influence on economic discourse. He was particularly known for his pioneering work in transforming economics into a more mathematical and empirical science.

The production possibility curve is a fundamental concept (PPC) also know product possibility frontier, in economics that helps explain the basic principles of scarcity, resource allocation, opportunity cost, and the trade-offs that societies face when deciding how to allocate limited resources efficiently. Samuelson used the PPC as a tool to illustrate fundamental economic concepts. He explained how the PPC reflects the trade-off between producing two goods or services when an economy has limited resources and technology. The term that is used generically is guns for capital goods and butter for consumer goods. "Guns and butter" is also a concept often used in economics and political science to illustrate the trade-off between a nation's defense (military spending) and civilian goods (consumer goods and public services). It highlights the allocation of a country's resources, particularly its budget, between military and non-military purposes.

While “Guns and Butter” serves as an example of understanding economic principles and political science, the term itself has been an indicator of a governments logical and ethical approach towards governing and allocating resources.

William Jennings Bryan was a statesman and a perennial Presidential candidate. Woodrow Wilson appointed him as his Secretary of State in the spring of 1913. He was deeply opposed to an US intervention into the hostilities around Europe which led to WWI after the assignation of Archduke Franz Ferdinand in 1914. He is believed to have first postured the economic model as an ethical question when he resigned in 1915 following the sinking of the Lusitania. As President Wilson was edging the United States towards joining the war, Bryan resigned saying “Wilson has chosen Guns over Butter”. Decades later, Nazi German economic minister was quoted as saying” Guns will make us powerful; butter will only make us fat ’to justify the buildup of the countries armed forces.

The concept of guns and butter were closely associated with discussions about the federal budget and the allocation of resources for defense spending and domestic programs during the Vietnam War era and as a result of the Cold War with Soviet Union. Charles Schultze, who worked as a senior fellow at the Brookings Institution and served as the director of the U.S. Bureau of the Budget (now known as the Office of Management and Budget) during the administration of President Lyndon B. Johnson in the 1960s. The term "guns and butter" was used to describe the dilemma faced by policymakers in deciding how to allocate resources between military and civilian needs, given the finite resources available and when deficit spending was taboo. Johnson choose Guns and butter policy while the Soviet Union was forced to adopt a policy of Guns over Butter.

2023 why do we care?

The principles of providing for a sovereign nation and for their people has never been so evident as today. While the devastation of the innocent people seems so trivial when put inside an economic model, there is a decision made in the allocation of resources. In a civilized society, the contract between the governing body and the people looks to balance resources to provide the health of their constituencies (Butter) while also providing protection (Guns).

In 1953 President Dwight D Eisenhower made a speech called “Chance for Peace” where he spoke about the trade-offs between guns and butter and warned of the growing industrial military complex.

Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. The cost of one modern heavy bomber is this: a modern brick school in more than 30 cities. It is two electric power plants, each serving a town of 60,000 population. It is two fine, fully equipped hospitals. It is some fifty miles of concrete pavement. We pay for a single fighter plane with a half million bushels of wheat. We pay for a single destroyer with new homes that could have housed more than 8,000 people. This is, I repeat, the best way of life to be found on the road the world has been taking. This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron. ... Is there no other way the world may live?

It appears that the words and warnings of President Eisenhower have largely gone unheeded, and the significance of Samuelson's Production Possibility Curve (PPC) models has been somewhat overlooked. What also seems to be lost in all the noise is that for the people of Gaza, the economic model hoisted on them is Guns over Butter, which never seems to be the correct, logical or ethical formula.

And now you know...

Philosophy is the art of thinking, the building block of progress that shapes critical thinking across economics, ethics, religion, and science. 

METAPHYSICS: Literally, the term metaphysics means ‘beyond the physical.’ Typically, this is the branch that most people think of when they picture philosophy. In metaphysics, the goal is to answer the what and how questions in life. Who are we, and what are time and space?

LOGIC: The study of reasoning. Much like metaphysics, understanding logic helps to understand and appreciate how we perceive the rest of our world. More than that, it provides a foundation for which to build and interpret arguments and analyses. 

ETHICS: The study of morality, right and wrong, good and evil. Ethics tackles difficult conversations by adding weight to actions and decisions. Politics takes ethics to a larger scale, applying it to a group (or groups) of people. Political philosophers study political governments, laws, justice, authority, rights, liberty, ethics, and much more.

AESTHETICS: What is beautiful? Philosophers try to understand, qualify, and quantify what makes art what it is. Aesthetics also takes a deeper look at the artwork itself, trying to understand the meaning behind it, both art as a whole and art on an individual level. A question an aesthetics philosopher would seek to address is whether or not beauty truly is in the eye of the beholder.

EPISTEMOLOGY: This is the study and understanding of knowledge. The main question is how do we know? We can question the limitations of logic, how comprehension works, and the ability (or perception) to be certain.