Samuelson's Last Macroeconomic Model: Secular Stagnation and Endogenous Cyclical Growth

Abstract

On the occasion of the centennial of his mentor Alvin Hansen, Paul Samuelson published in 1988 a modified version of his seminal 1939 multiplier-accelerator model with the aim of addressing aspects of Hansen's secular stagnation hypothesis. The "Keynes-Hansen-Samuelson" model (or KHS, as he called it) was built to analyse the effects of population growth on the economy's trajectory. Despite Samuelson's strong claims for the analytical contributions of his 1988 paper, it has – in contrast with the 1939 model – received only scant attention by macroeconomists and historians of economics alike. Samuelson's 1988 paper was his last published macroeconomic model, based on his long-established tradition of non-optimizing macro-dynamics. Our paper provides a close reading of that article, together with some analytical results that shed new light on formal aspects of Samuelson’s 1988 model. We also discuss how it historically links up with business cycle models advanced by Samuelson's contemporaries.

Keywords: Stagnation, Samuelson, Flexible accelerator, Hansen