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Go Home One More Note On Larry Summers (updated)

THE PLANK NOVEMBER 10, 2008

One More Note On Larry Summers (updated)

BY JONATHAN COHN

Noam has made most of the essential points about Lawrence Summers, who remains (as far as I know) one of two people under consideration to become Barack Obama's Secretary of the Treasury. But I wanted to add one thought, relevant--I hope--to other liberals like me.

On the issues I know best and over which the Treasury Secretary has sway, Summers is good. Very, very good. In the last few years, he has become a persistent critic of inequality and advocate for government action to redress it. He's a true believer in health care reform, both as a way to alleviate economic insecurity and to address the country's long-term fiscal crisis. He wants major action on climate change. And he has argued for aggressive action to stimulate the economy, despite high deficits. As he wrote in a September column for the Financial Times:

...in the current circumstances the case for fiscal stimulus--policy actions that increase short-term deficits--is stronger than at any time in my professional lifetime. Unemployment is now almost certain to increase--probably to the highest levels observed in a generation. Monetary policy has very little scope to stimulate the economy given how low policy rates already are and the problems in the financial system. And experience around the world with economic downturns caused by financial distress suggests that while they are of uncertain depth, they are almost always of long duration.

Summers is not the only economist who holds these views nowadays. But few can espouse them with the credibility and wide-ranging influence that Summers possesses. Leaders in government and the private sector, both here and abroad--all of them trust him, both for his intelligence and experience.

And that would matter where it counts the most: in the White House. When Obama is making decisions, some of his advisors will be making the case against activist interventions--sometimes on policy grounds, sometimes on political grounds. That'll be their job and, sometimes, they'll be right. But Summers can be counted upon to push back and to push back hard.

I'm not arguing that the job should necessairly go to Summers. To make that judgment, I'd have to know a lot more about his chief rival for the post, Tim Geithner, who sounds awfully impressive in his own right.

But I do know that Summers--whatever his shortcomings, real and perceived--would be a passionate, effective advocate for progressive economics in the White House. That's not something to take lightly.

Update: Huffington Post has a post from Sheryl Sandberg, who worked with Summers at the World Bank and Treasury, about his record on gender issues. She cites everything from his interest in advising a college thesis (hers) on the economics of spousal abuse to his efforts at improving Social Security benefits for women working at home. "Many people note that our nation has few economists with his
intelligence," she writes. "They should also know that we have few leaders, if any,
in the financial world who have done more for women.

--Jonathan Cohn 

Be sure to check out Noam Scheiber's defense of Larry Summers here.

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"In the last few years, he has become a persistent critic of inequality and advocate for government action to redress it. ....Summers is not the only economist who holds these views nowadays. But few can espouse them with the credibility and wide-ranging influence that Summers possesses."

I find it a little disturbing that where there is a conflict between liberal aims and consensus academic economics, at least in tone this post appears to place more weight on the former.

Of course, academic economics can't solve all our problems and it doesn't have all the answers. And it's not a monolithic body of knowledge; there's room for disagreement within the field. But I am wary of pursuing policies that are outside of the "mainstream" or "consensus" (where there is one) simply because they fit our ideological predispositions.

This touches on some deep questions about the role of experts in a technocracy. Even in a technocratic government we use democratic politics and ideology to establish which values we should pursue (because value questions are tricky and an "expert" can't really settle them for us).

But what worries me is that our value system would cause us to second-guess consensus academic views about efficacy, and to cherry-pick from the economic research and evidence.

In an uncertain world, sure, you have to do this to some extent. But taken to the extreme this is nothing more than the "anti-science" that we so decried in the Bush administration.

Now, Larry Summers is very much not a crank. So it's not on the same level, maybe not even close. But it still makes me uncomfortable. It's late and I hope this post is comprehensible.

- mkayser0

November 10, 2008 at 4:34am

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Cohn won't, but I will be  "...arguing that the job should necessarily go to Summers."

Geithner is needed where he is, and in terms of atmospherics you just can't beat the confidence-inspiring image of the Old Pro coming off the bench to save the game in the last quarter. Or inning if you're so inclined.

- Robert Powell

November 10, 2008 at 7:03am

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Have you read (in the New York Review of Books, Volume 55, Number 19, Decembr 4, 2008) the article by George Soros, "The Crisis and What to Do About It."

The theory of reflexivity is presented here (not for the first time).  My impression of this idea is that the comments of Greenspan embodied the theory of relfexivity when he (Greenspan) admitted his amazement that the markets would do what they are doing to get us into this mess.  His premises prevented him from seeing the trouble we were in until the blows began to fall.  It seems I remember hearing Greenspan comment that he didn't believe investment people were 'suicidal,'

I am pretty upset about recovery of the system as we know it because I think it's too sick--perhaps Obama is the only one who can fix it, but even he cannot raise a corpse from the dead.  

Please let me know your idea of what 'reflexivity' is and also if you believe the patient is dead (i.e, the economy).  

It's the first time in my life I've been glad my grandparents aren't around to endure this.

MaggieH

- magrick

November 10, 2008 at 7:15am

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I still think this is the wrong place for an economist.  If Summers is a key player, he should be Chair of the Council of Economic Advisers (although I would prefer Krugman).  If we are going to straighten out the finance mess, we need a powerful, credible, tough Wall Street guy at Treasury, which is a finance agency, not an economic management agency.  You don't need to know how the financial sector actually functions to give compelling advice about fiscal policy.  You do need to know how it functions if you are going to fix it and economists don't except at a theoretical level.

- roidubouloi

November 10, 2008 at 10:37am

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Corzine for Treasury Sec'y, Summers or Krugman for top economic adviser.  An even more important question is who is going to be head of OMB.  Now THAT is a crucial role in the current environment as it requires a hell of a lot more than advice.

- roidubouloi

November 10, 2008 at 10:39am

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My hope is that Obama will value competence over politics by choosing Summers.  Besides, by selecting Summers, Obama can reap some political benefits from standing up to the feminist-left of the party and demonstrate his commitment to excellence above political considerations.  Amends can be made elsewhere.  Choosing competence with gravitas in the Sec of Treas is too important to be playing politics.

SB

- sbennett53

November 10, 2008 at 10:48am

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Dean Baker is making the case that Summers did not see the Housing Crisis coming and so why should be trust him to get us out of this mess.  Is there anyone who was both prescient and 'credible' enough for a major appointment like this?

- GoodLiberal

November 10, 2008 at 11:44am

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Yes, liberal, his name is Paul Krugman.  He say it coming, and he is credible, but neither he nor Summers understands enough about the finance sector to oversee it properly.  There is confusion here between finance and economics.  They are not the same discipline.

- roidubouloi

November 10, 2008 at 2:51pm

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What about Laura Tyson for Treasury Secretary? I always found her impressive.

- jon shaw

November 10, 2008 at 3:48pm

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I agree with roid, and neither Cohn nor Scheiber address the issue of Summers' political skills. And, neither addresses his past record in the Clinton administration. The issue of Summers' gender gaffe is a distraction.

- miguknamja4

November 11, 2008 at 5:22am

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roidubouloi and miguknamja4-

Thanks for the comments.

There is a difference between economic and finance, but, rest assured, Summers understands finance, too.  Politically, he was fine when he served in the Clinton administration.

I'm not sure that means he should be the guy. Like I said, he has his shortcomings (who doesn't?) and I just don't know enough about Geithner to make an informed judgment.

But I think his strongly rogressive positions on the major disputes of the day ought to count for a lot.

- Jonathan Cohn

November 11, 2008 at 10:10pm

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Over the weekend I finished Nobel laureate Paul Krugman's excellent The Conscience of a Liberal, which I will examine at length tomorrow. Today I want to discuss one particular chapter of the book, in which Krugman argues that the most...

- Anonymous

November 24, 2008 at 11:29am

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