Lawrence Summers as Fed Chair: The View From Climate Policy

Lawrence Summers: Does The Emperor Have Any Clothes?

Lawrence Summers: Does The Emperor Have Any Clothes?

Lots of debate in Blogistan and elsewhere about President Obama’s apparent desire to appoint Larry Summers as Fed Chair.  We know (or at least we think we know) that he is brilliant, but he has a strange tendency to get matters of judgment wrong.  He supported the abolition of Glass-Steagall, endorsed deregulation of the financial industry, and seems to have little desire to admit that he got these things wrong.  Plus, there are sexist overtones to the seeming refusal to want to appoint current Fed vice-chair Janet Yellen, an outstanding economist in her own right.

All right.  But what does this have to do with climate policy?

Interestingly, a few years ago, Summers participated in a Council on Foreign Relations task force regarding climate policy options.  Like all CFR task forces, this one was self-consciously centrist, chaired by former New York Governor George Pataki (relatively moderate Republican, especially on climate issues) and former Iowa Governor (and now Agriculture Secretary) Tom Vilsack (moderate Democrat).  Its report, Confronting Climate Change: A Strategy for US Foreign Policy, is a quite comprehensive view of the stakes of climate policy, at least as of June 2008, when it was written.  It recommends putting a price on carbon, reducing emissions to the Kyoto level, and several other policy options.  Summers signed it.

But interestingly, Summers also appended a very short “comment” to the report, which says something about potential behavior as Fed Chair (how much is up to the reader).

Here are the two key graphs of his comment:

I have signed this report because it makes the need for urgent action on climate change clear and presents a smart and thoughtful agenda for reducing U.S. emissions, building international consensus, and promoting international action, with which I broadly concur.

The Task Force rightly notes that the costs of addressing climate change are highly uncertain, but I remain concerned that many policymakers do not sufficiently appreciate how large these uncertainties are or the consequences of paying them insufficient attention. Environmental certainty enjoys much attention while uncertainty over the cost of cutting emissions receives too little. This balance is wrong, particularly in the short term, since emissions in any given year matter little, while high costs, even for a short period, can cause substantial economic harm, particularly to the most vulnerable.

A few things jump out here:

1)  Summers gets the politics of climate change exactly 100% wrong.  The gravamen of his argument, i.e. “we are hurtling toward overregulation in the climate sphere” was wrong at the time and has been proved to be completely inaccurate.  To the extent that a Fed Chair has to be cognizant of political trends, this is not a good sign.  Anyone can get political prognostication wrong: but to go out of your way to get it wrong is a black mark.

2)  Summers makes no real substantive contribution in his comment.  He seems simply to want to emphasize, “I am thinking about things that no one else is.”  This on a task force with some of the leading thinkers in the field.  This does not bode well for a position like Fed Chair, which requires building consensus.

3)  He was wrong about what other people are thinking about.  Scholars and policymakers have been thinking about uncertainty all the time and had done so for more than a decade.

4)  To the extent that his emphasis on short-term costs and long-term benefits is a sub silentio call for a carbon tax, he was also wrong about its salience: the carbon tax idea was being promoted literally by dozens of scholars and policymakers.

5)  To the extent that his emphasis on short-term costs and long-term benefits is a restatement of the need of a high discount rate, it is not backed up by any facts or reasoning.  It also is wrong on the absence of short-term costs.

I keep hearing that Summers is a very brilliant man, and would do a wonderful job as Fed Chair.  To the extent that his intervention in climate policy is any indication, there is absolutely no evidence of this, and in fact the evidence demonstrates the opposite.  I’m assuming for the time being that the Emperor has clothes: but it would be nice to see them eventually.

Comments

  1. Barry says

    ” We know (or at least we think we know) that he is brilliant, but he has a strange tendency to get matters of judgment wrong. ”

    Odd tendency in the Most Brillian Man at Harvard (and therefore, in the World).

    I’ve noticed that all evidence for Summers’ brilliance is basically private, anecdotal statements by friends and (some) colleagues; it’s nowhere to be found in his public record.

    • Mark Kleiman says

      According to people who grok contemporary economics, that’s simply not so; they tell me he’s written a couple of dozen killer papers.

      • Mitch Guthman says

        Then he should stick to writing papers because he is lousy at everything else except, of course, for working the revolving door for big bucks and ingratiating himself with people in a position to help him to fail ever upwards and ever more brilliantly.

      • Barry says

        First, not to be insulting, but you are not a good judge of character – you support McArdle, even to the point of, ah, not reading what she actually wrote. You also support Heymann, and dishonestly insulted people who wanted to hold his boss, Ortiz, accountable for her subordinate’s actions.

        Second, again it’s the same thing ‘trust me, ignore his public record, he’s actually smart. Ignore the massive number of blunders, destruction and massive bribery and criminality.’. There is nobody who supports Summers who doesn’t hold to this pattern, probably because there is no way to support Summers without it.

        Third, *if* we took these private comments to be true, the best analogy is that Summers is a brilliant theoretical physicist/mathematician, whereas what we need is a very smart Chief Engineer.

  2. MikeM says

    Summers as Mahler? “The difference between Beethoven and Mahler is the difference between watching a great man walk down the street and watching a great actor play the part of a great man walking down the street.”

    • Dennis says

      That quote is from Aaron Copland, written in the period when Mahler was considered a minor (at best) composer. Copland was 11 years old when Mahler died. It’s unlikely that the young Copland saw Mahler conduct, and less likely that he heard Mahler conducting his work.

      Assuming for the moment that Summers will be appointed the Fed Chairman, I can only hope that our grandchildren have reason to view our opinions of Summers as I view Copland’s take on Mahler: misguided, and more reflecting lack of familiarity than informed opinion.

      • Ned says

        I’m a fan of Mahler and a former member of the Mahler Society. And Copland’s quote does seem unnecessarily harsh.

        That said, it’s true that Mahler was no Beethoven. Of course, nobody but Beethoven has yet managed to be Beethoven. (the late quartets, the symphonies, piano sonatas, piano concertos, … ). But as much as I like Mahler, he’s bound to come off badly in any comparison to Beethoven.

  3. James Wimberley says

    Seconded.

    My own problem with Summers is his grotesque mismatch to the job of the world’s most powerful central banker. Think more of the guy who carries the nuclear launch codes. You don’t want an impulsive, abrasive showoff. You do want somebody cleverer than they look who thinks twice before saying anything. Say what you like about Ben Bernanke’s policies, he acts the public part to perfection and has managed the Fed prima donnas perfectly. Yellen’s apparent boringness is a qualification, on top of knowing what she’s doing by all accounts.

    BTW, I interpret the leaking of Summers’s candidacy as a polished stab in the back. If Obama had really wanted him, he’d have nominated him by now. Compare the slow death of the Keystone pipeline. State have it seems now decided to investigate the consultants who wrote the original environmental impact assessment for conflict of interest. Another six months’ delay, perhaps? Drip, drip, drip. Eventually Keystone will get the message and withdraw the proposal.

  4. calling all toasters says

    If you want to stop Summers, the real question is: why is Obama so attached to this guy? My answer: Obama is a social climber within the alleged meritocracy. He got his career going at Harvard Law Review, made his political bones at foundations hobnobbing with elites, and when he gets to Washington, his Cabinet officers are all Senators and Governors (electoral consequences be damned). If you’re going to beat a Harvard president, it’s not going to be with a more-qualified and more suitable economist of superior judgment. Really, how many of us had heard of Janet Yellen before? She isn’t famous enough for Obama to appoint. Plus, Obama is in the macho boy economic club– even Elizabeth Warren got the cold shoulder. It will take a whole lot of Senatorial anger to keep Obama from adding the greatest genius since Wile E. Coyote to his crew. If only Pelosi were still Speaker….

  5. Bloix says

    I somehow think you’ve missed the meaning of the Summers addendum. It’s a statement that although he signed the main report, he disagrees with it and would prefer that nothing be done.

    Note his statement that the report presents an agenda “with which I broadly concur.” “Broadly concur,” as everyone should know, means “specifically disagree.”

    He goes on to say that people who want to do something immediately – i.e., the authors of this report – are getting the “balance” wrong, and he’s as clear as can be that his preference would be to do nothing at all “in the short term.”

    Why? Because “emissions in any given year matter little, while high costs, even for a short period, can cause substantial economic harm.”

    This is classic Summers,isn’t it – you claim to be part of a consensus while in plain sight you’re cutting the legs out from under your good buddies.

    • politicalfootball says

      I think Bloix catches the import of this. Summers’ emphasis (as presented here; I haven’t read the whole thing) is on the cost of confronting climate change. Fear of that cost – including the exaggeration of the cost uncertainties – is probably the dominant driver of climate change policy, particularly in the U.S.

      So, unless there’s some larger context of which I’m unaware, this seems just crazy-wrong:

      Environmental certainty enjoys much attention while uncertainty over the cost of cutting emissions receives too little.

      • RichardC says

        No. “fear of the cost” is the public justification for doing nothing. The real driver is
        entrenched economic interests of fossil-fuel producers, with extreme political influence.
        It isn’t a coincidence that we did nothing while we had a President and VP who were
        oil-industry veterans. Under Obama, at least Waxman-Markey passed in the House (for
        which I will always greatly respect Speaker Pelosi); it couldn’t – or at least didn’t -
        get 60 votes in the Senate. That’s a tough bar to clear, especially for legislation with
        regional impacts (especially on coal-producing regions) which cut across ideological
        boundaries.

        Any policy change which affects patterns of energy production and usage will have winners
        and losers. On the whole, the losers will be those who are wealthy and powerful under
        the status quo. So they fight hard against any change.

  6. Michael O'Hare says

    neither “emissions” nor “high costs” in the quoted statement mean anything at all without numbers. Not to mention the weasely elision of “in that year” after “…any given year”: Summers seems a little old to have the same discount rate as Jeff Spicoli.

  7. NY-Paul says

    Regardless of who is chosen, the new Chairman will be carrying out the goals and ambitions held by Obama. Since B.O. hasn’t quite fulfilled his dream of being the Transformational President he had hoped to be, he may see The Fed as the vehicle which could attain for him a reasonably positive legacy. Goodness knows, his Don Quixote attempts to “work with” Congress hasn’t borne him much memorable fruit. (Egg maybe, not fruit)

    For that reason he needs a Patton (Summers,) not an Eisenhower (Yellen.) Our (the 99%) problem is, how do we define a good economy? As we saw in The Government’s reaction to the 2007/8 financial disaster, women & children were held in the basement, while the lifeboats were reserved for the Plutocrats. What course Obama charts for Summers in his last Act will be really interesting to watch.

    • Mitch Guthman says

      The prerequisite to a Patton is an Eisenhower. Pound for pound, Patton was probably the best fighting general in any army during the Second World War. But he could never have done Ike’s job or even his own without Ike to guide him and run interference. Every time he was on his own outside of planning a battle, it was one disaster after another caused by his ego and abrasive personality.

      But to be clear, Summers isn’t a Patton. He doesn’t have remotely Patton’s genius and ability. The only thing the two men seem to have in common is huge egos, abrasive personalities and a string of disasters when left to their own devices.

      • politicalfootball says

        Patton, for all his faults, was at least on our side. Summers isn’t. (Speaking for myself, at least.)

      • James Wimberley says

        Not a view shared by the citizens of Avranches, who gave a plot of land in the town for a memorial to the US Third Army that is US territory. You can still find bits of the single-track road, the last one before the sea, over the bridge at Pontaubault into Brittany, down which Patton pushed seven divisions in five days in August 1944.

        • J. Michael Neal says

          There were certainly aspects of generalship at which Patton was very good. He was then fortunate that history thrust him into positions that maximized his abilities while also providing him superior officers who protected him from some of his biggest incompetencies. Overall I’d rate him as good but nowhere close to the top five army level commanders of that war. (Slim, Manstein, Rokossovski, Yamashita, Zhukov, for what it’s worth.)

    • joel hanes says

      Cling tight to those opinions, Dan, and by all means post them widely.

      Good thing that you, a mechanical engineer, are more clear-sighted and competent than 95% of the world’s professional climate scientists.

      Also impressive that both your cites are to things you wrote yourself.

      • Dan Pangburn says

        For the most part, they are not mere opinions but are actual calculations that apply real science and engineering.

        Average global temperature is more correctly understood as a problem in the thermodynamics of radiation heat transfer, and a fairly simple one at that (or at least simple for a licensed mechanical engineer like me with 9 units of post graduate thermodynamics). Climate Scientists are the wrong folks to try to solve a heat transfer problem. Along with other mistakes, they get mired in the minutia of weather.

        Some of their mistakes are revealed at http://consensusmistakes.blogspot.com/

        The radiation heat transfer problem is addressed at http://lowaltitudeclouds.blogspot.com/

        I authored those also.

      • RichardC says

        Having read some of your analysis, I have to applaud your ability to take the complex
        climate data, separate the signal from the noise, and then focus on cherry-picking
        from the noise. You also erected a really huge strawman in suggesting that the
        AGW theory would predict a month-by-month correlation between CO2 levels and
        temperature anomalies, even though elsewhere you acknowledge that the oceans
        constitute a large reservoir of heat which would be expected to delay and dampen
        any short-term fluctuations.

        “There are three kinds of lies: lies; damned lies; and statistics”.

        • politicalfootball says

          If right-wing nuts lacked cherry-picked data, they wouldn’t have any data at all.

      • Dan Pangburn says

        Average global temperature history since 1975 is like a hill. We went up the hill from 1975 to 2001 where the average global temperatures reached a plateau per the average of the five government agencies that publicly report temperature anomalies. The anomalies and links to the reporting agencies are shown at http://endofgw.blogspot.com/. The average global temperature trend since 2001 has been flat to slightly declining but is on the plateau at the top of the hill. Claiming that the hill is highest at its top is not very profound. The temperature trend has started to decline but the decline will be slow; about 0.1 K per decade for the planet, maybe twice that fast for land areas.

    • James Wimberley says

      If this were my post, I’d delete your comment. The RBC is not a forum for competent discussion of climate science, a fortiori not of incompetent discussion either. If you were a competent commentator, you would be contributing to a climate science forum. Ignorant propaganda is not welcome.

      • Therapsid says

        “The RBC is not a forum for competent discussion of climate science”

        Then why is there a post discussing the selection of the next Fed Chairmen in relation to climate change?

        Anyway, your response is mildly threatening in nature. I would delete your comment, quite frankly.

        • James Wimberley says

          You do understand the difference between climate science (which Dan Pangburn denied) and climate policy, which is what we discuss here? I’d love to write on James Hansen’s 350 ppm target, but could not add anything useful. It is relevant to policy to note that by construction the IPCC findings on the science are conservative and that the recent literature tilts towards the alarmist, Hansenist side, a shift which will no doubt be reflected in IPCC 5.

          Each blogger here takes their own decisions on moderation of comments within the house guidelines. This is Jonathan’s post, not mine, and it may have been a mistake on my part to intervene. I adopted a “no denialist trolls” policy for my own climate policy posts some time ago because I was fed up with discussions being derailed.

          I’m sorry, but the blogosphere is not a democracy or an anarchy like Facebook. You don’t have to read anything I or Jonathan writes. But on the whole we get on here all right. The bloggers understand that we are privileged. We all value the quality of our commenters and the RBC’s near-freedom from trolls.

        • Ken Rhodes says

          Therapsid: “Then why is there a post discussing the selection of the next Fed Chairmen in relation to climate change?”

          There isn’t, Therapsid. Not at all. The post is discussing the selection of the next Fed Chairman in relation to his understanding of politics (and political trends), his ability (and inclination) to contribute substance to ongoing discussion of an important issue, his ability (and inclination) to discern what policy makers and scholars are thinking about in relation to an issue he is working on, his ability (and inclination) to differentiate the priority of various specific issues within the “big picture,” and his inclination to provide facts and reasoning to support his conclusion. You will note that those points are organized quite nicely in Jonathan’s five numbered points. The importance of the points is not to debate climate science, it’s to comment on the abilities and inclinations of the person who has been suggested for an important banking post.

  8. James Wimberley says

    Jonathan’s citation raises the question of Summers’ competence at arithmetic. “Environmental certainty enjoys much attention while uncertainty over the cost of cutting emissions receives too little.”

    The antithesis is is absurd. First, the environmental impacts of AGW are still highly uncertain in value if not direction. All we know for certain is that BAU leading to 1000 ppm of CO2 will be unliveable and therefore cost something near 100% of world GDP, plus whatever value you place on human life times 8 billion or so. But the timing is uncertain, as is the impact of partial mitigation. The central opinion is that 450 ppm leading to 2deg C of warming has a 50% chance of being OK, but there is a big range of opinion and uncertainty on either side. Contrast Summers’ claimed concern with mitigation costs. For the mainstream 2 deg target, Stern estimates around 2% of world GDP, Nordhaus 5%. These are small numbers compared to those under discussion for impacts.

    The sympathy for the most vulnerable is just concern trolling. It would be perfectly feasible to compensate the American poor for a carbon tax, and some of the proposals on the table do just that. There are no plans on the table from Summers or any other policymaker to compensate the Bangladeshi poor for inaction.

  9. James Wimberley says

    PS. JZ: “I’m assuming for the time being that the Emperor has clothes …”
    He certainly doesn’t go to the right hairdresser.
    Jean-Claude_Trichet-200
    Jean-Claude Trichet, first Chairman of the ECB

    Mario-Draghi-BCE
    Mario Draghi, second Chairman of the ECB

    mervyn_king
    Melvyn King, previous Governor of the Bank of England

    MarkCarney-EPA
    Mark Carney, current Governor of the Bank of England

      • NCG says

        I know nothing about men’s hairstyles. Nothing in those photos jumped out at me either way. What was I supposed to think? Confused!

        As an aside though, it reminded me how I am puzzled that the entire Continent got suckered by the austerity pushers. I find that odd. I mean, I guess I could see *trying* it, if one were at a loss of what else to do. But after this many years???

          • James Wimberley says

            Come on, it’s the contrast with Summers’ $5 mop. No, I am not offering this as a serious objection.

          • Bloix says

            Those are fresh $100 haircuts, NCG. (Maybe not Carney’s, but still it’s a pretty nice cut.) Summers had his done at the Hair Cuttery, and not too recently, either.

          • NCG says

            Thanks, I wasn’t joking. I really didn’t understand that those are supposed to be good haircuts. I mean, they don’t look bad to me, but I wouldn’t have thought they stood out at all either way.

            You know though, this makes me wonder — have we ever had a bald FR chair? I don’t think we should discriminate based on follicles!!! After we get used to having a female chair, maybe we need to revisit this anti-bald prejudice issue that we might all be having.

          • NCG says

            Well. To embarrass myself further re male hair ignorance, I just clicked the Bernanke links. Though to me, he seems to still have plenty of hair, I have a feeling that to a lot of people, he might count as bald. So, I retract my remarks about anti-bald prejudice being a possible issue.

          • NCG says

            Okay, clearly something is up with me today. This is my last hair-related post today, I *promise.*

            But, Summers’ hair in that photo … it doesn’t look bad to me. Why/how is that a $5 haircut????? What is wrong with it? What is it *supposed* to look like???? And how does everyone else know these things and I don’t?

  10. NCG says

    I think another possibility is this: he really doesn’t care one way or the other about the planet, and was mostly just phoning it in on that committee. Because I agree, it’s a pretty dumb thing to say when we have only one little planet to live on.

    But I agree with Zasloff’s possible larger point, which is that “brilliance” is not even close to being enough. It is just a jumping-off point. The beginning of our inquiry.

  11. Kenneth Almquist says

    I think Johnathan is mistaken when he infers that Summers predicted that, “we are hurtling toward overregulation in the climate sphere.” Johnathan bases that on a passage that refers to unidentified “policy makers.” Summers addresses the politics directly in his final sentence and takes the opposite of the position that Johnathan attributes to him:

    “I concur in this report not because I share in all of its tactical judgments but because I share the animating strategic judgment that there is far more danger of the United States doing too little rather than too much to address climate change.”

    I’m just correcting what I see as a factual error here; I’m not supporting Summers. Summers’ performance as president of Harvard suggests to me that he doesn’t have the leadership skills required to be Fed Chairman.

  12. NCG says

    Zasloff, Digby linked to a much better reason to re-think Summers — his role during the time Enron was bleeping us. According to her link to the Daily Beast — which I don’t read so I don’t know if it’s any good? — he was giving Davis some supremely bad and condescending advice, along with Greenspan.

    I’d forgotten all about this. I knew there was a reason I didn’t like him. On the other hand though, I think he was in favor of helping Mexico when they had some financial crisis the basis of which I don’t remember anymore (probably a devaluation). Hmph.

    Well, at least someone should ask him about all this. I don’t know what Yellen was saying then.