Krugman on Summers
Posted on August 1st, 2013 in Uncategorized | 19 Comments »
The Nobel Prize-winning economist explains the mistakes of the non-Nobel economist.
…Summers made some pretty big mistakes in his campaign [to be Fed chair]. …Summers did not recognize the extent to which the political world has changed. He’s been carefully cultivating an image as a Very Serious Person, in a world where VSPness has gone from a source of cachet to being a liability on both right and left.
Think about it. Carefully cultivating a reputation for Seriousness does you no good on the right in a world where the Republican Party is more or less officially committed to crank economic doctrines, and where the GOP’s universally acknowledged intellectual leader is an obvious flimflam man.
Meanwhile, many if not all Democrats are well aware that the VSPs have been wrong about everything for the past decade or more, from the risks of financial deregulation to the fear of nonexistent bond vigilantes. Coming across as the return of Robert Rubin may have seemed savvy back in, say, 2008; it’s worse than useless now.
Krugman allows that Summers might still get the job, but only if the President is willing to expend a substantial amount of political capital on his behalf.
So is that what Obama did yesterday?
…the president described Mr. Summers as a rock of stability who deserved credit for helping to steer the American economy back from the financial crisis of 2008 and the ensuing recession. …
The Washington Post put it this way:
With the grumbling against Summers growing, Obama on Wednesday mounted an extraordinary defense of his friend and old adviser in the halls of Congress….
I have a slightly different take than Krugman; my argument is that Summers is such a contentious personality, and has made such dubious choices (Wall Street buckraking, the end of Glass-Steagall, opposing derivatives regulation, talking about women in science, Andrei Shleifer, treating so many people so badly) that, politically speaking, he dies the death of a thousand cuts. There are just so many angles of criticism opponents can take against him… You defend Summers against one thing, and critics just change the channel to the next. And this is where all those years of insufferable arrogance kick in; people just don’t like Summers.
For this reason, I would be surprised if the President nominated Summers to be Fed chair. But then, I’m surprised that he’s even seriously considering him. It’s Obama’s second term. Anything can happen.
19 Responses
8/1/2024 8:46 am
Ah, so much to remember, it is hard to keep track.
“That’s all very interesting,” [CA governor Gray Davis] said. “But as I said in Washington, I cannot agree to any rate increase. And no environmental waivers for the power plants.”
The energy executives spoke up. They had gone as far as they could. [Enron CEO Ken] Lay suggested that they dig through the numbers to show how closely everything had been shaved.
On the television screen in Los Angeles, Larry Summers looked like he was about to jump out of his skin.
“Governor,” Summers said, fixing his eyes on the screen in front of him, “it appears to me that these guys have done a pretty good job figuring out what the markets will do if the political leaders in California make the tough decisions to get things stabilized.”
The numbers were close, and certainly would help circumvent disaster. “We have to do what’s doable,” he said, “and not just what we want politically.”
Amazing how brilliant the guy is. Just brilliant.
http://www.randomhouse.com/crown/features/conspiracyoffools/excerpts3.html
8/1/2024 9:27 am
Harry,
The really brilliant guy is (really) Krugman because he gave unbelievably good advice to Enron when he was a consultant.
8/1/2024 11:17 am
I didn’t know Krugman was in the running to be Fed chair.
8/1/2024 12:34 pm
Yes, of course he is not running for the Fed, but it was so interesting that you linked the Enron piece.
In Krugman’s case, I think we have have to look at the character of the man who is criticizing the character of the man who is in the running for the Fed Chair. In my mind, there is more than a little hypocrisy in his criticism (in fact there is a lot) of Larry (not to say that the criticism isn’t warranted), when he was on the advisory board of a company that caused a tremendous amount of harm in one of the largest bankruptcies in history, a bankruptcy which caused financial misery for many ten of thousands.
One should look at one’s own character when speaking about the character of the person he is criticizing.
But why don’t I expect that from someone whose vast lefty audience hangs on his every utterance? Why don’t I? Well perhaps it is because Krugman said this, not long after 9/11: “One of the great clichés of the last few months was that Sept. 11 changed everything. I never believed that.” “I predict that in the years ahead Enron, not Sept. 11, will come to be seen as the greater turning point in U.S. society.”
8/1/2024 12:39 pm
Sam-Whatever Krugman’s failings may be, they’re not particularly relevant to his criticisms of LHS, are they?
8/1/2024 12:43 pm
Moreover, Sam, just out of curiosity I Googled Krugman and Enron and found this:
http://www.pkarchive.org/personal/EnronFAQ.html
I think your criticism is a bit off the mark, frankly, and close to disingenuous. Being paid to give briefings on the economy to company officials a couple times a year isn’t exactly the same as being “on the advisory board” of Enron. He disclosed it in his writings, he resigned when he became a columnist at the Times, etc. This doesn’t seem like a scandal to me, much less a blemish on Krugman’s character.
8/1/2024 12:57 pm
I’ll write more later, but you are wrong. He was on the advisory board of Enron.
8/1/2024 1:05 pm
Here is Krugman’s description:
*1. What did I do? In early 1999 I was asked to serve on a panel that offered Enron executives briefings on economic and political issues. As far as I knew at the time, they genuinely wanted to learn something. I resigned from that board in the fall of 1999, when I accepted an offer to write for the New York Times.*
And here is a 3rd-party take on the matter:
http://www.slate.com/articles/news_and_politics/press_box/2002/01/the_sullivan_principles.html
Sounds to me like Krugman has been fairly straight up about the whole thing.
8/1/2024 1:10 pm
Sam will find this insufferable and condescending, but I fear his game, like Federer’s, is getting notably weaker. Small, pointless digs at Cornel West and Paul Krugman would once have been beneath him-as was the ad hominem, generally. But now Sam is all ad hominem-this week, anyway.
8/1/2024 4:42 pm
Well Richard, let’s not use 3rd. parties to describe whether Krugman was on the advisory board. You said he wasn’t. I said he was. Let’s go to the source when he was working for Enron, not several years later.
Here is what Krugman said on May 24, 1999; “The retreat of business bureaucracy in the face of the market was brought home to me recently when I joined the advisory board at Enron-a company formed in the ’80s by the merger of two pipeline operators.” That was one sentence in a laudatory article he wrote, about what Enron was doing.
If that is what he said, why did you write “Being paid to give briefings on the economy to company officials a couple times a year isn’t exactly the same as being “on the advisory board” of Enron”?
And in your description of what he said years later (your post of 1:05 PM), you only presented para number 1. It seems in numbers 2 (my early resignation from the board),3 (The Enron board required that I spend 4 days in Houston), 4 (That Enron board, when I was on it), and 5 (I didn’t say that I was paid to serve on the board) which followed, he said he was on the board. Why put in only para1? Isn’t that what you’ve called out others for.. taking things out of context.
You wrote: “I think your criticism is a bit off the mark, frankly, and close to disingenuous. Being paid to give briefings on the economy to company officials a couple times a year isn’t exactly the same as being “on the advisory board” of Enron.”
A simple question: As a very responsible journalist, were you right or wrong to say Krugman was not on the advisory board of Enron?
Best,
Sam
8/1/2024 5:14 pm
Sam, I think the issue is that to say simply that he was “on the advisory board of Enron” implies that the body to which he belonged was advising them about all of Enron’s activities. Based on Krugman’s explanation at the link Richard provided, that is misleading; whatever the body in question was called, the advice he was asked to provide concerned “economic and political issues,” not the company’s own policies or actions.
Krugman’s explanation makes sense because of who else was on this board. He lists Larry Lindsey, Robert Zoellick, Pankaj Ghemawat, Irwin Stelzer, and William Kristol. That is clearly not the kind of group you would assemble to give corporate executives advice about how to run a business.
As it happens, I agree with you about two things: first, I do think many liberals are too uncritically accepting of Krugman’s views; second, I do think Krugman should have done more due diligence about the creeps he was getting paid by (though that doesn’t necessarily mean he did anything wrong by accepting their money). However, where we part ways is that you seem to think the fact that Krugman’s behavior and even some of his views have changed since 1999 is evidence of some kind of hypocrisy on his part. To me, it seems more like evidence of responsibly updating beliefs based on external events.
Now, you could further argue that critics of Summers should extend to Summers the same charity I’ve extended to Krugman and assume Summers capable of updating beliefs as well. This runs into two problems, though: first, you would need to produce evidence that Summers’s relevant beliefs have changed; I don’t think you want to do that because you seem to endorse Summers’s earlier views (I may be wrong here, though). Second, it would still be open to critics of Summers to condemn both Summers and Krugman for poor judgment, which I for one am happy to do. But this only brings us back to Harry Lewis’s point that Krugman isn’t being considered for Fed Chair, so I still fail to see the relevance of any of this.
8/1/2024 5:15 pm
ugh, stupid HTML mark-up. Apologies for the unintentional italics.
8/1/2024 8:15 pm
Sam—I wrote what I wrote because the way that Krugman is using the term and the way that you are using the term are clearly different. Krugman is using the term to mean, we were a group of economists, mostly, who sat down with Enron executives (for money, yes) and gave our views on the economy. That’s very different than what we might typically think of a corporate [advisory] board doing, which is to give strategic guidance on company direction-with the implication that it is thus more more entangled with the affairs and potential wrongdoings of the company. We might, for example say, “Bob Rubin was an advisor to Citigroup,” and think of that as a guy who was pretty engaged in high-level decision-making. That surely wasn’t the case with Krugman.
That is my answer, as a responsible journalist.
8/2/2024 8:40 am
Sam,
My very high regard for Krugman’s opinions is a number of things, but it is not ‘uncritical.’ I have it because he has been right about a truly incredible number of things over the last fifteen years, and in many of those cases he stood nearly alone with his prediction or insight. I don’t know a better basis for respecting someone’s opinions than a long track record of success.
Even your 9/11 examples are to Krugman’s credit, as they were largely correct. Indeed many of the elements that were involved in Enron were involved in the crash a decade later, and that crash has impacted far, far more American lives more significantly than 9/11 or its aftermath. Evaluating his argument depends on whether you think “society” is more about people and their checkbooks, or more about what DC and 24-hour news channels obsess about.
Moreover, I agree with Krugman that 9/11 as an event changed nothing. Nineteen nuts from a well-understood group created an opportunity for our massively dysfunctional American politics to change everything. The many, many people who were saying 9/11 was changing everything were making prophecies that were self-fulfilling. A sane country, even merely sane enough to have inaugurated Al Gore, would not have been deeply changed by 9/11; and this one was changed not by the event but by its own failures to respond with the adult judgment of a Krugman or even a Richard Clarke.
Those last couple paragraphs will annoy you as special pleading for Krugman, but they’re my response to statements of Krugman’s that you consider particularly embarrassing to him. I think they’re not embarrassing at all — though I am aware he has said some other things along the way that were.
For the record, I am not opposed to Summers running the Fed; others have been more right about a number of things, but to be frank after the last few years I think some intellectual bullying might be what the doctor ordered for a number of the stubborn Fed members who fear phantom inflation more than real, massive long-term unemployment.
At some point of course inflation is no longer a phantom, don’t get me wrong.
Would prefer Yellen or Romer.
Krugman is a national treasure.
SE
8/2/2024 9:01 am
Standing Eagle has proclaimed:
“For the record, I am not opposed to Summers running the Fed”
8/2/2024 11:30 am
Memo, — Zing. My economic judgment does not, you’re right, need to be on the record.
I thought my opinion was of some small interest, though, because I’m probably in the top 50 of people whose professional lives were senselessly damaged both
i) most deeply and
ii) most directly
by Summers’ failures as an institutional leader.
You can call that claim arrogant too — and I don’t intend to back it up with facts about myself — but I’d submit that many of the people who TRULY go under the bus when a place is badly run are the ones you’ve never heard of.
So I think my opinion has a little extra credibility because it diverges from my personal feelings on the guy.
Forgive the grandiosity.
Here’s to a healthy focus on greatly increasing employment rates.
8/2/2024 12:46 pm
SE-I didn’t realize that. If you’d care to share, I’d be interested to hear that story….
8/2/2024 4:12 pm
Standing Eagle is Larry Summers
8/3/2024 12:08 pm
I find the use of words that I have to look up in the dictionary like “fatuous” offensive.