In Defense of Larry Summers
Larry Summers is on the short list being considered by the president to succeed Ben Bernanke as Chair of the Federal Reserve. In terms of public service, Summers was most recently President’s Obama’s first Director of the National Economic Council, and prior to that served as Secretary of the Treasury during President Clinton’s second term, and Deputy Secretary during his first.
Summers had previously served with President Reagan’s Council of Economic Advisors and was nominated by President George H.W. Bush and served as Chief Economist at the World Bank. In terms of his academic work, Summers was a wunderkind, the youngest ever full professor in this history of Harvard University, and a winner of the distinguished John Bates Clark Award by the American Economic Association for his contributions in the areas of macroeconomics, public finance and labor economics.
Summers is opposed by the radical left of the Democratic Party. Supposedly, the opposition is due to his brusque personality (concerning which, I’ll just say this: He does appear to be of the opinion of that, in his case, modesty would be dishonest). In reality, the opposition stems from his straying off the Democratic reservation on a number of key issues, among these economic growth, the green agenda, and race and gender.
Regarding race and gender, Summers had the audacity, as president of Harvard University, to think that all members of the faculty of the university should be productive, including the race-baiter Cornell West. Also, that males — having greater variability in many measurable traits — would predominate at both the top and the bottom of various distributions of performance. In his research, he demonstrated that overly generous welfare and unemployment benefits result in less work and self-responsibility. All of this is, you know,verboten. It’s heresy as far as the radical left is concerned.
Concerning the green agenda — which argues, simultaneously, that we are running out of resources and that if we keep using resources at our current rate we will doom the planet — Summers dismissed the apocalyptic scenarios. He said we are neither running out of resources, nor are we dooming the planet. He saw through the phony baloney of the Kyoto Agreement and supported economic development in the poor countries of the world.
We economists know that as long as resources are priced in free markets, we will never run out of them (their prices will reflect current and expected future supplies and demands, and high prices will induce any needed conservation, efficiency in use, and development of alternatives). Furthermore, if CO2 in the atmosphere is indeed a problem, then we need global caps, not caps only on developed countries, and we would need to equally value pulling CO2 out of the atmosphere (which might be relatively cheap) and not exclusively focus on limiting emissions of CO2 into the atmosphere.
As for economic growth, Summers advocated lower tax rates and balanced budgets, admittedly from the perspective of a centrist Democrat. To be sure, he helped design the stimulus plan of Obama’s first term; but, we might be thinking differently about the stimulus if the windmills and other green energy projects that it subsidized resulted in something more than piles of dead birds.
As to whether somebody like Summers can continue in the Democratic Party amongst the political correct crowd is an open question. We will see if economics is to be subordinated to politics.