Results for “Larry Summers”
194 found

Larry Summers on the risk of bubbles and excess leverage

by  Tyler Cowen in

He explains it very well in a single paragraph:

The second strategy, which has dominated U.S. policy in recent years, is lowering relevant interest rates and capital costs as much as possible and relying on regulatory policies to ensure financial stability. No doubt the economy is far healthier now than it would have been in the absence of these measures. But a growth strategy that relies on interest rates significantly below growth rates for long periods virtually ensures the emergence of substantial financial bubbles and dangerous buildups in leverage. The idea that regulation can allow the growth benefits of easy credit to come without cost is a chimera. The increases in asset values and increased ability to borrow that stimulate the economy are the proper concern of prudent regulation.

Note that “build-ups in leverage” will do enough of the work of the argument if you are allergic to citation of “bubbles.”

Wassily Leontief and Larry Summers on technological unemployment

by  Tyler Cowen in

Here is a very interesting piece from 1983 (jstor), Population and Development Review, it is called “Technological Advance, Economic Growth, and the Distribution of Income,” here is one excerpt:

In populous, poor, less developed countries, technological unemployment has existed for a long time under the name of “disguised agricultural unemployment”; in Bangladesh, for instance, there are more people on the land than are needed to cultivate it on the basis of any available technology.  Industrialization is counted upon by the governments of most of these countries to relieve the situation by providing — as it did in the past — much additional employment.

If I may put this into my own terminology, Leontief is suggesting that at some margins fixed proportions mean many agricultural laborers, or would-be laborers, are ZMP or zero marginal product.

Haven’t you ever wondered how some traditional economies can have unemployment rates which are so high?  Those are “structural” problems, yes, but of what kind?

By the way, Brad DeLong cites Larry Summers on ZMP workers:

My friend and coauthor Larry Summers touched on this a year and a bit ago when he was here giving the Wildavski lecture. He was talking about the extraordinary decline in American labor force participation even among prime-aged males–that a surprisingly large chunk of our male population is now in the position where there is nothing that people can think of for them to do that is useful enough to cover the costs of making sure that they actually do it correctly, and don’t break the stuff and subtract value when they are supposed to be adding to it.

Larry Summers vs. Janet Yellen

by  Tyler Cowen

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.

David Brooks on Larry Summers

by  Tyler Cowen in

To use a fancy word, there’s a metacognition deficit. Very few in public life habitually step back and think about the weakness in their own thinking and what they should do to compensate. A few people I interview do this regularly (in fact, Larry Summers is one). But it is rare. The rigors of combat discourage it.

Of the problems that afflict the country, this is the underlying one.

The full piece is here.

Larry Summers in the White House

by  Tyler Cowen in

Harvard University professor
Lawrence Summers will join the Obama administration with a
ready-made sales pitch for substantial economic stimulus and a
chance that the role springboards him to the Federal Reserve.  Summers, 53, was Bill Clinton’s last Treasury secretary. He
will have a wide-ranging portfolio and help craft Obama’s
economic policies, a Democratic aide said…It also positions him to
succeed Fed Chairman Ben S. Bernanke, whose term at the helm of
the central bank expires in January 2010, said Vincent Reinhart,
former director of the Fed’s Division of Monetary Affairs.

Here is the story.

Larry Summers on the agencies

by  Tyler Cowen in

He always had a talent for the bottom line.  On the mortgage agencies he writes:

What went wrong? The illusion that the companies were doing virtuous
work made it impossible to build a political case for serious
regulation. When there were social failures the companies always blamed
their need to perform for the shareholders. When there were business
failures it was always the result of their social obligations.
Government budget discipline was not appropriate because it was always
emphasized that they were "private companies.” But market discipline
was nearly nonexistent given the general perception — now validated —
that their debt was government backed. Little wonder with gains
privatized and losses socialized that the enterprises have gambled
their way into financial catastrophe.

I wonder how general the lesson here might be. My fear is fairly
general. Inherent in the multiple objectives urged for creative
capitalists is a loss of accountability with respect to performance.
The sense that the mission is virtuous is always a great club for
beating down skeptics. When institutions have special responsibilities
it is necessary that they be supported in competition to the detriment
of market efficiency.

It is hard in this world to do well. It is hard to do good. When I
hear a claim that an institution is going to do both, I reach for my
wallet. You should too.

Here is more.  Larry Summers was my professor for Macro II and every lecture was a joy.  "Lecture" isn’t even the right word, it was more like turning on a faucet.

Can Larry Summers talk me into the stimulus package?

by  Tyler Cowen in

Here is his non-excerptable attempt, via Brad DeLong.  Still I am not convinced.  Using the Law of the Excluded Middle, yes you can get me to agree that the stimulus package is unlikely to do direct economic harm.  I still see the stimulus plan in terms of larger symbolic battles.  We pass too many policies just to show politicians are "doing something," just because it is an election year, just because voters think government should solve every problem, and just because politicians know that voters don’t understand any real economics.  This fits all those categories.  On the substance, I would add that for the U.S. "not going bankrupt" is a matter of degree.  Compared to Brad or Arnold Kling, I’m still a fiscal optimist.  But I’ve spent too much time reading papers on the intransitivity of indifference relations:  "Just another grain of sugar in your coffee, dear.  It won’t change the taste even a tiny bit…"

Larry Summers watch

by  Tyler Cowen in

Via Daniel Drezner:

A few months after stepping down as president of Harvard University, Lawrence H. Summers has joined a $25 billion hedge fund management firm, D.E. Shaw & Co., as a part-time managing director.

Summers will remain on the Harvard faculty while he works for D.E. Shaw on strategic initiatives and high-level portfolio management, according to the company.

Is Larry Summers reshaping Harvard?

by  Tyler Cowen in

Yes, say many observers. His pro-science, back to the basics stance may make him one of Harvard’s most influential Presidents. And he is not backing down when faced with faculty opposition. Read this article from The Boston Globe, thanks to Instapundit for the link. Read here and here for my two previous blog posts on Larry at Harvard, with links to other commentary.

Addendum: Here is a recent (and brief) address by Summers on economics and morality, he stresses the ability of markets to conserve on altruism. Thanks to Doug Irwin for the pointer.