Felix Salmon

Does Larry Summers Get Things Right?

By Reuters Staff
March 16, 2009

Noam Scheiber has a 6,000-word profile of Larry Summers in the New Republic which as good an introduction as any to the man and his temperament. If there’s a theme running through it, it’s one of Summers being right, but lacking the political ability to implement his vision.

It happened with the Mexico bailout in 1995: Congress had no interest in it, and the bailout only happened because Bob Rubin happened to find a $35 billion slush fund, designed for something quite different, and repurpose it without the need for Congressional approval. It happened at Harvard:

Summers had assumed Harvard was a pure meritocracy–where ideas win out on the basis of their strength and little else. His own experience as a professor there had taught him as much. When he proposed, say, revising the undergraduate curriculum to focus more on basic knowledge than on the latest intellectual fashions, he was prepared to defend the logic of the plan, not sweet-talk professors who felt threatened by it.

And, of course, it’s happening right now:

It’s not clear our political system is even equipped to deal with economic crisis. With the financial markets teetering and Congress refusing to give the administration another cent to save the crumbling banking system, one could be forgiven for thinking the lesson still applies. Even the stimulus, bold when it was conceived, no longer looks sufficient. But Congress is unlikely to part with more money any time soon.

Scheiber concludes that insofar as it’s practicable, we should "unleash our hard-charging geniuses and get out of their way" — essentially hand economic policy to Summers on a platter, and tell him to have at it.

But in fact there’s precious little evidence that when it comes to policy prescriptions, Summers has any particular special ability to alight upon exactly the right course of action at any given time. He’s good at asking pointed questions, but I don’t see many people standing around right now and saying "if only we’d listened more to Larry".

Although Scheiber picks on one particular FT column of Larry’s as indicating that he might be more inclined towards bank nationalization than Tim Geithner is, the real lesson of Summers’s tenure as an FT columnist is that most of his policy prescriptions tend to be carefully-hedged conventional wisdom, the kind of thing that most left-leaning economists would be hard pressed to disagree with. I was econoblogging for the entire time that Summers spent at the FT, and I almost never found anything worth blogging in his columns: they struck me as being made up mostly of hot air and self-importance, with very little of actual substance.

So maybe the NEC is the right place for Summers after all: he gets to be interested in lots of things — something he’s very good at — without taking responsibility for running the economy. The big question is whether the rest of Obama’s economic team — Geithner, Volcker, Romer, and the rest — are going to be able to get a look-in even as the enormous Summers ego fills up most of the West Wing. If he crowds them out — and there’s every indication that he’s doing just that — he might end up doing more harm than good.

Reprinted from Portfolio.com

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