Following Larry Summers

http://chronicle.com/article/Larry-Summersthe/124790/

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"I never think of the future. It comes soon enough." (Albert Einstein)

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One of my colleagues sent me an article from "The Chronicle of Higher Education" that does an outstanding job of summarizing the "deficits" (actually, that's a very good word) implicit today in that combination of universities, government and banking that economists sometimes travel thru in their careers.

Lawrence (don't call me "Larry") Summers has moved thru the chairs of government and universities while presiding over and consulting with banks. His journey reminds me of the childrens' game: Finding Waldo (if I'm not correct with the name of that game, I'm close). Except, in this case, we're "Following Waldo" (Larry) thru the many public service (or non-profit) chairs of his career.

Recall that "Larry" has been one of our "favorites" in the past for his breathtakingly ignorant position as president of Harvard where he lost his job after suggesting that women might be innately inferior to men at scientific work. How could anybody so smart be so stupid? Which causes us to ask: is he really very smart?

Perhaps we should adjust our perception of Larry to a character more like "Pig Pen" from the "Peanuts" comic strip. The dirt seems to just circulate around him as he walks thru his various roles in life. Or, perhaps, that person that drives at 20 mph causing traffic accidents in his or her wake all the time oblivious to the wreckage.

So, the Obama Administration has announced that Larry is resigning as director of the National Economic Council (oh, and Larry, how's the economy going?) and will return to Harvard early next year. Charles Ferguson's article attached considers the damaging influence that some senior academic economists have on the effective functioning of the overall economy - Ferguson calls it "conflicts of interest." We call it inept.

As a rising economist at Harvard and the World Bank, Summers argued for privatization and deregulation in several areas, including finance. Later, as deputy secretary of the treasury and treasury secretary in the Clinton Administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation of the financial sector.

There is a general consensus amongst economists (right there, I worry) that Raghuram Rajan's 2005 paper presented at the annual Jackson Hole conference of central bankers was the first warning of the worldwide financial crisis to come. He argued, among other things, that the bonus structure for executives at financial institutions reinforced taking huge risks with other people's money. When he finished his talk there, Summers rose up in the audience and shouted him down with various accusations. Ridiculous and disrespectful.

We could go on here but we won't. Ferguson points out some interesting facts about the pay levels that some economists enjoy for being on various boards of directors. That perspective is certainly of interest. And, while Ferguson is obviously promoting his new documentary "Inside Job," nothing that he has summarized about the "economist triangle" (our new term for the dreaded economists movements between universities, government and banking) is incorrect. It's actually a great summary and all it involved was following "Larry."