I’ve long been an admirer of Paul Krugman’s blogging style never mind his skills as an economist. I suspect it’s his writing skills as much as his economic expertise which makes him just about the most influential US political and economic commentator this side of Rush Limbaugh; but he has really excelled himself with his latest piece: The She-Devil of Constitution Avenue
I’ve spent five years and more watching the inflationphobes, who weren’t particularly sensible to begin with, descend into shrill unholy madness. They could have reacted to the failure of their predictions — the continued absence of the runaway inflation they insisted was just around the corner — by stepping back and reconsidering both their model and their recommendations. But no. At best, we see a proliferation of new reasons to raise interest rates in a depressed economy, with nary an acknowledgment that previous predictions were dead wrong. At worst, we see conspiracy theories — we actually have double-digit inflation, but the BLS is spiriting the evidence away in its black helicopters and burying it in Area 51.
So at this point I thought I’d seen everything. But no: the prospect that Janet Yellen, a monetary dove, might become the next Fed chair has driven the right into a frenzy of — well, words fail me. Jonathan Chait has the goods: the New York Sun ran an editorial titled The Female Dollar, warning about a “gender-backed currency”. I kid you not.
And the Wall Street Journal thinks this was such a great analysis that it quotes the phrase, and argues at some length — or, actually, asserts, since if there’s a rational argument there I can’t find it — that the only possible reason people might want Yellen to succeed Bernanke is that she’s not just a monetary dove but a woman.
And they have a point. After all, what possible non-gender case is there for Yellen? That is, aside from the fact that she’s been a highly successful team player at the Fed, has a distinguished record as a research economist on the very issues she would have to deal with as chair, and, according to a recent assessment, has the best forecasting track record of 14 top Fed policymakers. Whose assessment? Um, the Wall Street Journal’s.
As usual, words don’t really fail Paul. And it’s not as if he has a particular axe to grind for Yellen. Larry Summers, Yellen’s chief rival for the position, was actually a classmate of Krugman’s at Harvard. Nobel Prize-Winner Paul Krugman: I’m A ‘Loner’
The New York profile’s author, Benjamin Wallace-Wells, instead, contrasts Krugman with his bombastic former classmate at Harvard graduate school: Larry Summers, ex-director of Obama’s National Economic Council.
“Let’s put it this way,” Krugman says when describing the difference between the two. “When things go crazy, my instinct is to go radical on policy, and Larry’s is to be a little more cautious.” Summers, in return, took aim at Krugman as “the guy in the bleachers who always demands the fake kick, the triple-reverse, the long bomb, or the big trade,” without ever getting in the game.
It’s not as if Summers has a distinguished track record when he has gotten “into the game”:
The big problem with Summers is not his record on deregulation (although that’s bad enough) or his foot-in-mouth remarks about women in math, or for suggesting that African countries would make for good toxic waste dumps. No, it’s his appalling record the one time he was in a leadership position, as president of Harvard. Summers was unquestionably the worst leader in Harvard’s history.
Summers, unduly impressed with his own economic credentials, overruled two successive presidents of Harvard Management Corporation (the in-house fund management operation chock full of well qualified and paid money managers that invest the Harvard endowment). Not content to let the pros have all the fun, Summers insisted on gambling with the university’s operating funds, which are the monies that come in every year (tuition and board payments, government grants, the payments out of the endowment allotted to the annual budget). His risk-taking left the University with over $2 billion in losses and unwind costs and forced wide-spread budget cuts, even down to getting rid of hot breakfasts.
Not content to almost bankrupt Harvard, Summers had other problematic associations whilst President of Harvard:
Summers’ second big problem is the scandal that led to his ouster at Harvard, which was NOT the “women suck at elite math and sciences” remarks. The university has conveniently let that be assumed to be the proximate cause.
In fact, it was Summers’ long-standing relationship with and protection of Andrei Schleifer, a Harvard economics professor, who was at the heart of a corruption scandal where he used his influential role on a Harvard contract advising on Russian privatization to enrich himself and his wife, his chief lieutenant Jonathan Hay, and other cronies. The US government sued Harvard for breach of contract and Shleifer and Hay for fraud and won.
As Chief Economist of the World Bank, Summers confirmed his climate change denial inclinations:
Lawrence Summers – Wikipedia, the free encyclopedia
As Chief Economist, Summers stated in a 1991 interview: “There are no… limits to the carrying capacity of the earth that are likely to bind any time in the foreseeable future. There isn’t a risk of an apocalypse due to global warming or anything else. The idea that we should put limits on growth because of some natural limit, is a profound error and one that, were it ever to prove influential, would have staggering social costs.”
Neither does Summers seem to be an enthusiastic supporter of Obamacare and government intervention in general:
Lawrence Summers – Wikipedia, the free encyclopedia
On September 21, 2010, the White House announced that Summers would step down from his position on the NEC at the end of the year, to return to Harvard University. In a speech to the Economic Policy Institute upon leaving his post, Summers “warn[ed] against the creeping cost of government” and “approvingly quot[ed] Daniel Patrick Moynihan‘s argument that increased government involvement in the health care sector is a risky idea.”
—Snip—
Upon the death of libertarian economist Milton Friedman, Summers wrote an Op-Ed in The New York Times entitled “The Great Liberator” arguing that “any honest Democrat will admit that we are now all Friedmanites.”
This does not appear to be an admission that Krugman is prepared to make:
The She-Devil of Constitution Avenue
I’ve been saying for a long time that we aren’t having a rational argument over economic policy, that the inflationista position is driven by politics and psychology rather than anything the other side would recognize as analysis. But this really proves it beyond a shadow of a doubt; if you really want to understand what’s going on here, the Austrian you need to read isn’t Friedrich Hayek or Ludwig von Mises, it’s Sigmund Freud.
So will we have a Yellen backed dollar? I would be amazed if Obama appointed an ideological opponent of equality, climate change, public health care, financial regulation and good governance. Summers also sought to limit the size of Obama’s stimulus plan – a plan generally now seen as having been insufficiently ambitious to overcome the depression following the financial crisis. Why would Obama want to appoint a serial failure when he has a perfectly capable candidate on offer. The very fact that Yellen’s opponents are forced to us her gender as a reason against her appointment shows how bankrupt their economic arguments really are.
