Larry Summers vs. Janet Yellen

by on July 22, 2013 at 12:43 pm in Uncategorized | Permalink

Read Paul Krugman, Scott Sumner, Ezra Klein, and others on this.  My thinking is simple.  Public choice considerations constrain a looser monetary policy with either candidate.  Otherwise, it is easier for me to imagine Summers having credibility with a Republican administration, and having a real voice, relative to Yellen.  He simply has more right-wing street cred, keeping in mind that Yellen is a former Professor from Berkeley who has never really taken heat from the left, unlike Summers.  I think that overall the voice of the Fed within government is a clear positive.  The chance of a Republican administration, come the next election, is probably at least forty percent.  Thus I would prefer Summers.

1 mw July 22, 2013 at 12:46 pm

What is the evidence that whether a liberal economist has marginally more right-wing street cred has any practical implications for their influence with Republican politicians? What influence does Republican-appointed Ben Bernanke have within the Republican party?

2 Jeff L July 22, 2013 at 12:57 pm

Because Ben Bernanke is a Republican, it makes the GOP less united in their desire to audit the fed, etc. If Summers has more right wing credibility it means the Fed is more likely to retain its independence.

3 Jon Rodney July 22, 2013 at 12:48 pm

I would have thought that their public views on monetary policy would be a lot more important than a very fuzzily-defined “street-cred” metric.

4 Canyon Bosler July 22, 2013 at 1:00 pm

That is certainly true when the candidates have markedly different views. However, when they are as similar as Yellen and Summers that doesn’t give you much to consider, so maybe expanding out to fluffier ideas about influence brings something new to the table.

5 Jon Rodney July 22, 2013 at 1:30 pm

Perhaps … but I don’t think their views are as close as you imply. Summers has said some things regarding the effectiveness of monetary policy that seem questionable to me. See Sumner on this:

6 Joe Smith July 22, 2013 at 1:03 pm

Larry Summers has a track record of epically bad judgment. He would be a disaster waiting to happen.

7 Anon July 22, 2013 at 1:09 pm

After many a Summers , dies the Swan.

8 Roy July 22, 2013 at 1:21 pm

I think this sort of thing is underrated. Summers has done a lot of hugely foolish things, and he has done them in public. The fact that he has been able to recover from them after taking an initial hit is worth something, but that they were unforced errors makes me very wary.

If Tyler is so concerned about the Fed’s credibility, he should really think about the damage if Summers made any of his typical boneheaded errors while Fed chair.

9 George Doehner July 22, 2013 at 1:37 pm

Failing up is very over class. The list of American apparatchiks that stumble from one job to the next is quite long. Summers is just another example. I think a useful metric would be counting the number of such people in the ruling class. The higher the number, the closer to collapse.

10 Roy July 22, 2013 at 3:46 pm

But Summers failures are different, he is a gaffe machine more than anything else. I am not really qualified to say whether he actually fails in ways other than this. But at Harvard for example, he kept making unforced errors until he was forced to resign. These errors were all about appearances and not about doing his job poorly. However when you consider that a University President’s job is about 70% appearances the mistakes were pretty dire.

I suspect being Fed chair is rather similar to being president of a top university in this regard.

11 Joe Smith July 22, 2013 at 4:26 pm

“I suspect being Fed chair is rather similar to being president of a top university in this regard.”

Except that a verbal gaffe by the Chairman of the Fed could send the markets and the economy into free fall. The stakes are about a million times bigger than they were at Harvard.

12 Beefcake the Mighty July 22, 2013 at 11:38 pm

How do you know they’re gaffes? Follow up Barkley Rosser’s suggestion below to look into the Shleifer affair. Everyone talks about his women and science statements, few people have ever heard about the privatization scandal (really outright theft by one of his cronies) that he tried to cover up. Sounds rather calculated to me. Summers is many things, but dumb is not one of them.

13 Joe in Morgantown July 23, 2013 at 10:35 am

Summers caused the richest university in the world to run out of money. Wow.

Summers may be very smart, but he isn’t half as smart as he thinks he is.

14 Barry July 22, 2013 at 4:34 pm

“Larry Summers has a track record of epically bad judgment. He would be a disaster waiting to happen. ”

Which gives him *great* right-wing street credit :0

15 JW July 22, 2013 at 1:11 pm

This is easily the dumbest commentary I’ve ever seen from Cowen. “right-wing street cred”? “never taken heat from the left”? Obama should appoint someone based on the fact that there is a 40% chance of the opposition winning the next election? When has that consideration ever entered the mind of a politician?

16 Millian July 22, 2013 at 1:18 pm

Supreme Court appointments. But the stupid part is to imagine that the Republicans would be nicer to one Obama nominee versus another with almost identical views.

17 JW July 22, 2013 at 1:22 pm

I definitely agree with you that politicians consider the opposite party when they are making high level court nominations, but they usually try to get the person that is most like them that they can get through the Congress. They don’t try to appease the other party or voters by becoming more like the party that might replace them.

18 Millian July 22, 2013 at 1:16 pm

You don’t have to worry about being disregarded for promotion by Summers on the grounds that your sex makes you less likely to be an exceptional employee. Therefore, you would prefer Summers.

19 Cliff July 22, 2013 at 3:58 pm

The truth hurts, I guess. In your mind is it impossible for someone to understand the truth that women are underrepresented at extremes of IQ due to genetics without discriminating against them when their actual performance is revealed?

20 Barkley Rosser July 22, 2013 at 4:10 pm

Uh, Cliff, are you saying that Yellen is not smart enough because Summers is right that women are not in the upper tail of the intelligence distribution, or are you one of those misguided souls who thinks that Summers was fired as Harvard prez because of his remarks about the lack of women in science?

On the former, there is plenty of evidence that Janet Yellen is very smart, and she knows a lot more about the Fed and how it operates in all its dark and dusty corners than does Summers.

On the latter, while many do not know it, it is a fact easily discovered by appropriate search that Summers was fired for lying to the Harvard faculty about covering up for Andrei Shleifer after Harvard had to pay $22 million to end the federal lawsuit arising from Shleifer’s misbehaviors in Russia.

21 Beefcake the Mighty July 22, 2013 at 8:23 pm

Whether or not a particular individual (e.g. Yellen) is smart really has nothing to do with the question of women as a group in the distribution of IQ. Not sure you understand the distinction.

Spot on, however, regarding the Shleifer affair, one of the most appalling academic (or otherwise) scandals in recent memory. (You might want to tell fat-boy Boettke this over at the GMU blog; he seems to have a hard-on for Shleifer because he’s a famous economist who’s said some vaguely Hayekian things from time to time.) Puzzling that it receives rather little attention in the media. One might also mention Summers running interference for Zuckerberg against the Winklevoss twins in the Facebook case.

Hmm; wonder if there are some dots to connect in all of this?

22 Barkley Rosser July 23, 2013 at 12:00 am


I made no comment at all on the basic issue about the distribution of womens’ intelligence, and I do not do so here. But Janet Yellen is very smart, whatever is the truth of that argument.

Pete Boettke knows full well my views on Shleifer.

23 Andrew' July 22, 2013 at 1:17 pm

As with almost any coin toss decision with my wife, I’d do the exact opposite, for exactly the reasons she outlines.

24 Michael July 22, 2013 at 2:22 pm

Reading between the lines, the argument seems to be that Republicans may act ever so slightly less partisan and tribal if a member of the ol’ boys club gets the pick instead of that liberal lady from Berkeley, California. The GOP would just never respect her.

25 dan1111 July 23, 2013 at 1:10 am

Summers deviated from the party line on a number of issues while serving in the Obama administration. He has supported tax cuts, warned about the size of government, and expressed worry about increased government involvement in health care.

But of course Republicans’ opinion of him would not be informed by those legitimate policy issues at all. It is all about sexism!

26 Derek July 22, 2013 at 2:38 pm

How about something revolutionary like finding someone who saw the last crisis coming? Not in retrospect but was genuinely expecting things to go really badly. Ask whether they believe the claptrap that bubbles cannot be recognized.

27 Cliff July 22, 2013 at 3:59 pm

Yellen sounded the alarm on the housing crisis, Summers pooh-poohed it. My vote is for Yellen.

28 Barkley Rosser July 22, 2013 at 6:28 pm

Completely agree, Cliff, and Robert McBride at Calculated Risk has documented other areas where Yellen was right about the economy and Summers was not. She knows the Fed well, and he does not. She is also collegial, and he is not. Really, I agree with the person who said this is one of Tyler’s worst posts. Not a single argument in it is defensible.

29 dearieme July 22, 2013 at 5:45 pm

If Summers were appointed, let us hope that Summers’ lease hath all too short a date.

30 FE July 22, 2013 at 5:51 pm

I construe this as “Larry Summers has authored so many bad policies, he’s practically a Republican,” which is totally unfair to the GOP. Summers is always and everywhere a Democratic phenomenon.

31 dan1111 July 23, 2013 at 1:03 am

Lots of people are construing this in weird ways. I don’t see any claim that he has authored bad policies here, or that he is a Republican. However, Summers has been willing to buck the leftist line–for example, warning about the size of government and advocating tax cuts as stimulus.

32 sebastian July 22, 2013 at 6:46 pm

That is a terrible argument…

How about trying to figure out who is more likely to do the right thing?

33 Anarchist Antidefamation League July 22, 2013 at 8:00 pm

Ron Paul should be the next Fed chairman, and then shut the place down.

34 Joseph Ward July 23, 2013 at 9:00 am

Please keep in mind that leaders of government agencies cannot make decisions such as closing them down. They are creations of Congress and the President and only Congress and the President can close them. Perhaps Ron Paul could vote to institute a gold standard with his powers as a F.O.M.C. member, but he couldn’t close down the Fed.

35 econonerd69 July 22, 2013 at 8:04 pm

lets appoint woodford instead.

36 Beefcake the Mighty July 22, 2013 at 8:15 pm

It’s always striking to see the strangle-hold that Protestants and Catholics have over the financial industry.

Oh, wait…

37 LTPhillips July 22, 2013 at 9:56 pm

I just finished reading Ron Suskind’s “Confidence Men.” If Obama nominated Summers to the Federal Reserve, it would be inexplicable.

38 Beefcake the Mighty July 22, 2013 at 10:09 pm

How’s that?

39 JoeDog July 22, 2013 at 10:18 pm

Has the blogger spent the last five years in a box? The notion that Republicans would accept any Obama nominee is out of sorts with their track record. If Obama appointed Milton Friedman’s corpse, Republicans would filibuster him. He should appoint Janet Yellen. Democrats aren’t generally good at politics but their War on Women meme has struck a chord. Republicans will be a little less likely to filibuster her appointment for fear of stepping into the Democrat’s trap.

40 dan1111 July 23, 2013 at 1:26 am

Huh? Please provide evidence of moderate Obama nominees that have been blocked. In fact only a relatively small portion of nominees have faced serious opposition, and always because of specific concerns about their views.

And if the “war on women” campaign is an example of the Democrats’ smart politics, what would dumb politics be? Responding to every question with fart noises?

41 Ryan July 22, 2013 at 10:31 pm

“Street-cred” in Washington is a fun word for political clout.

42 Claude Emer July 22, 2013 at 11:45 pm

I guess TC needs to add a book to his collection, The Unwinding by George Packer.

43 Euripides July 22, 2013 at 11:46 pm

How about appointing Neil Wallace instead? He’s got a lot of street creed with money search theorists.

44 Pat MacAuley July 23, 2013 at 4:35 pm

I think Bernanke should be forced to stay on for 4 more years, rather than being allowed to return to academia and the six-figure speech circuit. He’s had a lot of fun expanding credit exponentially, but the party is almost over, and things will probably be unpleasant for the next few years. I’m 90% sure Obama would reappoint Bernanke if Ben would say yes.
Do the right thing, Ben, don’t leave a mess for your hapless successor.

45 KC July 23, 2013 at 6:01 pm

Lost a bit of respect for Cowen here. Summers would be a terrible choice. Whether he’d be more respected by an incoming Republican admin is pointless. Let’s ask who would do a better job. I think somebody is impersonation Tyler in this post….hopefully.

46 anon July 23, 2013 at 7:12 pm

Harvard men stick together, what did you expect?

47 tim July 24, 2013 at 10:29 am

i was at a merrill lynch event last night where the clear preference was for continuity in QE and thus for Yellen. I suspect that would be a very mainstream preference among professional investors.
And the odds of a GOP administration in 2017, absent Christie, are nearly zero. The rest of them are nuts.

48 rpenm July 24, 2013 at 9:34 pm

Politics is not about policy. Partisanship is not about ideology. Republicans will not be sympathetic to Summer’s ideological meandering. His close association with two Democratic administrations and his aggressive, no-regrets personal style will raise more partisan hackles (among the board and committee as well) than Yellen. It will be easier to politicize a Summers Fed than a Yellen Fed.

49 American in Istanbul July 24, 2013 at 10:39 pm

This is silly. A preference for Summers or Yellen should be based on whether or not the likely policies that result will be good or bad for the country, and of course who would do a better job. Who cares if the Fed chairman has extra credibility with the next administration, if his or her policies are misguided?

Once in a while Cowen seems to make intentionally weak arguments for positions that he presumably holds on other grounds.

50 economist July 25, 2013 at 9:43 am

Yellen is a clear thinker that will operate an intelligent monetary policy. She listens to all views, and makes a decision. Conversely, Larry Summers is overly impressed with himself, misses important factors, and listens to no one. “Deafness” is not a good trait in someone who will have a major role in future national policy.

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