Wednesday, December 30, 2009

Hunt on Summers

His heart is in the right place (attacking administration economists), but his points are mostly all wrong. There is this gem, however:
“If you came up with 10 words to describe Larry, coordination and collaboration would not be two,” says one person requesting anonymity who has worked with Summers extensively and admires his intellectual force.
What I didn't like about the article is Hunt's assertion that Summer's isn't good at public communication. As I've mentioned, Summers is actually great to have on TV b/c he's relatively quick-witted, and is an old, white alpha-male who looks and talks like a conservative. Hence, he is likely to be popular with other middle-aged white males -- a demographic which Democrats very much need to appeal to. He's correct that Geithner isn't great on TV, at least the times I've seen him. Geithner is too obviously beta male -- he talks too fast, makes nervous movements, looks nervous, etc...

What Obama should have done is made Larry Summers the CEA Chair, only not listen to him much (like he is w/ C. Romer), but have Stiglitz working as a top behind-the-scenes adviser as someone who makes policy but doesn't have a fancy job title or appear on Sunday talk shows.

What's also annoying about the Hunt piece is that he cannot correctly identify any of the admins economic blunders:
"The vaunted economic team is faulted for poor coordination, drawing even the president’s ire, and an inability to convey an overarching policy."
As Brad DeLong points out, Hunt doesn't really offer any evidence of this.

The administration's three main economic policy errors are: 1) Pushing a stimulus which was too small, 2) Re-appointing Ben Bernanke, 3) being too soft on the banks/softpedaling financial regs/not doing something more comprehensive on executive/financial industry pay while it would have been easy to do so.

Brad also mentions Obama has yet to make appointments for two vacant Fed governorships... that's really dropping the ball given how critical it is for the Democratic Party that we not have unemployment above 9% next November... It would be nice to see someone like Joe Gagnon in there! I actually suspect that Bernanke is likely to be quite impressionable, and that if two solid, strong-minded economists were appointed who pushed for more QE, Bernanke might well consider it.


  1. Bernanke's seeming opposition to further QE is a bit odd. I recall reading a paper from him once, and I remember him saying it in a speech later, that for QE to be effective an aggressive policy was needed. I don't think anyone could believe what he's done is aggressive.

    That's why I'm puzzled why he doesn't seem to be pursuing further QE. He endorsed it previously, though he was very cautious about his endorsement, mostly because of the lack of robust empirical evidence. But reading his stuff he's cautious to make any direct conclusion about anything, so I don't read much into that. Yes , he noted the limited evidence, but ultimately concluded it would be effective. So, I'm confused. There are plenty of theoretical reasons why QE should work and small amounts of empirical data are available. I think that's enough to justify at least trying the policy given our situation. My reading of Bernanke is that he would seem to support this, but he's not.

    Is it just politics? Are other Fed governors so against it he won't pursue it at all? Is he just too timid to pursue an aggressive policy that is rather unorthodox, despite that fact he thinks it might work (maybe if we took Summers personality and gave it to Bernanke, we see a ton of QE, who knows)?

    I'm willing to bet it's become some combination thereof, but it's frustrating since he supports QE in his writings.

    PS: Are the google ads new? Upgrading to the ad realm?

  2. "Hunt on Summers"

    OC, I thought of Dick Cheney and his trusty shotgun. ;)

    As for Bernanke's reluctance to further QE, maybe he unconsciously wants the Reps to win next November.

  3. «I'm called a "marixist".»

    Just like Barack Hussein Obama-Soetoro is called an illegal immigrant far left extremist, never mind a secret Muslim indonesian.

    As to anonimity, GregM has already given you a "friendly warning", as if he were your benevolent Godfather, that what you write is career-destroying, and invited you to publish your real name.

    Don't make his day :-).

  4. lol, yeah, i got some emails from people asking me if they could put adds on the site, so I agreed... Who knows, maybe the revenue from that will cover 1% of the interest on my student loans...

    If I start getting trashy ads though, I'm taking them down...

  5. Re: Bernanke. He even has a paper where he says that, in the wake of a liquidity trap, it's a good idea to overshoot one's inflation target. For example, if the inflation target is 2%, and one year you get -1%, then the Fed shouldn't try to get back to 2%, but more closer to 3% over a couple years, so that the overall average is close to 2%.

    He's not doing this. I dunno if his personality is part of the problem, but I suspect if he had Larry Summers' confidence in his own brilliance, and Summers' ability to steamroll people, he'd be more likely to follow his own research.