Sunday, April 18, 2010

Conservative Economists and Democratic Politics

The Wall Street Journal had an editorial about Larry Summers the other day. Summers wrote a letter to the editor that was published the same day.

He is currently director of Obama’s National Economic Council. Previously he was one of Clinton’s Treasury Secretaries, President of Harvard University, a well-known macroeconomist — for which he won the John Bates Clark medal in 1993 — and wonderkid going back to the early 80’s, as well as son of two famous economists and nephew of two Nobel Prize winners.

Summers is not regarded as a conservative.

But, over the last 40 years, a preponderance theory and evidence in economics has supported conservative political positions. This has moved the profession to the political right. Summers was pushed out at Harvard largely because he was seen as too conservative by its faculty.

The WSJ dug up this quote from Summers arguing against unemployment insurance:

"First, government assistance increases the measure of unemployment by prompting people who are not working to claim that they are looking for work even when they are not. …

"The second way government assistance programs contribute to long-term unemployment is by providing an incentive, and the means, not to work. Each unemployed person has a 'reservation wage'—the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance programs increase that reservation wage, causing an unemployed person to remain unemployed longer."

Summers’ reply argued that he was taken out of context, and offered this quote from the same article:

It is "a great mistake," I wrote in the article cited by the Journal, "to attribute most unemployment to government interventions in the economy or to any lack of desire to work on the part of the unemployed."

I have no doubt that Summers is correct. Having said that, it is not normal or typical for a White House economics advisor to have to claim that readers of their scholarly oeuvre are prevaricating. I’d go so far as to call it unheard of.

BTW: Krugman has also been getting “hoist by his own petard” about contradictions between his more serious scholarly work, and his current opinions.

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