Economist Brad DeLong has posted the item on his blog A Slight Preference for Larry Summers to Be Federal Reserve Chair.
To be good choices for Federal Reserve chair, candidates must pass three tests. They must have experience at a similar job: this is not something to throw somebody into and expect them to swim. They must fear high inflation as they fear a tornado, and feel in their bones the pain of the unemployed. And they must understand and properly weight the different models of how the economy might behave. Right now, this third means that a good Federal Reserve chair must give a relatively high weight to the Keynesian model, which has been so successful at describing and forecasting the economy over the last six years.
Larry Summers has an edge as the most creative thinker likely to successfully think outside the box should outside-the-box thinking be called for, and least likely to bind himself to an institutional consensus past its sell-by date. If times are placid, the stakes are small. If times are turbulent, outside-the-box thinking has its place.
I might be tempted to listen to DeLong’s argument if someone could present any evidence that Larry Summers fought hard at the beginning of Obama’s term to get the President to request a larger stimulus package as many leading Keynesian economists were calling for.
Is there any evidence that Summers fought hard against the proposition that you could ask for less, and then ask for a second round if the first proved to be insufficient? Did he fight for the proposition that you should ask for more than was necessary? Even if you got what you asked for, you could always not use the spending authority you got if it turned out not to be needed.
When the first stimulus proved to be insufficient, is there any evidence that Larry Summers urged the President to request a second go round? Is there evidence that Larry Summers urged the President to disprove talk that the first stimulus was a failure by using the argument that the first stimulus stopped the catastrophe, but was too weak to spur economic recovery?
In Larry Summers’ supposed highly influential role with the President, I see no evidence that he did the things I suggest needed to be done. Lacking such evidence, I have to presume he did none of those things. That is why I think he should be disqualified as a candidate for the Federal Reserve Chairperson.
DeLong mentions former head of Obama’s Council of Economic Advisers, Christy Romer, as a candidate for Fed Chairperson. There is good evidence that she did take all the proper actions I mentioned above and that Larry Summers took an active role in disparaging her expertise. I believe she resigned from the council out of frustration, and went back to her position as Economics Professor at The University of California, Berkeley.