Question

Are Paul Samuelson's ideas still have relevance today? Please explain in a simple way possible.

- Revealed Preference Theory

- Business Cycle

- Social Welfare Function

Answer 1

1) Revealed Preference Theory : This theory forms the basis of consumer choices . It tells us that choice reveals preference of a consumer . This theory is much more practical than indifference curve and budget line analysis . Here the preference is judged by a consumer's behaviour or habits in the market . The demand curve is derived by the consumer's preference at different price levels . This theory is of great relevance since it provides a theoritical explanation to consumer behaviour based on consumer's own actions .

2) Business Cycle : Samuelson showed that  interaction between the multiplier and accelerator that gives rise to cyclical fluctuations in economic activity . His model relates the business cycle to to the internal workings of the economy , it shows how changes in investment and output reinforce each other . It is much more practical approach to economic fluctuations and is relevant still today .

3) Social Welfare Function : Samuelson social welfare function considers welfare for a given set of individual preferences or welfare rankings . It judges social welfare at individualistic level . Different individuals have different rankings of preference . This is also a very practical approach and in tandem with economic conditions .  .