Friday, October 24, 2008

Joe Stiglitz for Secretary of the Treasury?

I was able to hear Joe Stiglitz at the Women's Economic Round Table in NYC (held at Bloomberg News) on October 22. He offered a biting and funny critique of the current policy makers' inept attempts to deal with the financial crisis, describing the bail out effort as giving a blood transfusion to a hemorrhaging patient without attempting to stop the hemorrhage. But his main point was really the failure to do anything for the taxpayer, like stopping dividend payments for those banks and other entities accepting the bailout money (as was done in the UK). He estimated that something like 20% will immediately go out in dividends and said why not just write a check directly to them and skip the middleman? He also emphasized the need to help those who live on Main Street--he recommended extending unemployment benefits and giving aid to local and state governments, which he said were automatic stabilizers because when the need lessened the payments would decrease. For immediate infrastructure that could be built quickly he recommended school rehab and construction, for which there is a readily available labor force since residential construction has fallen so much. Overall he recommended a stimulus package of about 2-3% of GDP over two years. Both he and Paul Volcker, another panelist, described the current crisis as serious, without precedent, and said new forms of financial regulation will be needed. The third panelist, Robert Mundell also agreed with that, as I recall, but pinpointed the imposition of a high corporate income tax in June of 1932 as a major cause of the length of the depression in the 1930s; he recommended it be cut to 20% as a major way to restore confidence and limit the seriousness of this recession. Thanks to the video clip posted by Don Pedro on the Bloomberg debate between Holtz-Eakin and Furman, I know that McCain is proposing almost what Mundell wants, lowering it to 25%.

But can we have some debate and comments about Joe Stiglitz for Treasury Secretary? I'd really love readers' reactions. When in grad school at Yale I must admit we thought of him as quite conservative, steeped in Samuelson neoclassical economics (really at the time I don't think we fully realized how "liberal" that was relative to what else was out there and beginning to come to prominence in the discipline). But it seems to me he has become radical, even, and feminist, and I never thought I would ever say that either. At the same forum he extolled the Scandinavian countries as countries that have adjusted successfully to an open global market (saying because they were small they didn't have much choice) through a strong social safety net and massive investment (about 1% of GDP) to advance women in the labor market, because that is an investment with high returns and contributes to a successful, productive economy.

Those comments are a far cry from those of Larry Summers on the lesser brains of women. Really I fear that Obama could make a terrible mistake, insulting many, many women who have campaigned for him by picking Summers as Secretary. Please, please NO! It's really not possible to have men with these views in important leadership positions without doing damage to the advancement of women.


G said...

Stiglitz is a good guy, and he's right in much of what he says, but I don't think he's the right guy for the job. My impression is that in his previous gigs at the world bank and as cea chair he was a strong intellectual presence but was ineffective as a manager and mover of the bureaucracy.

I think summers would be a mistake for the reasons you mention.

This is a really tough job to fill. Ideally you would want someone is a progressive who understands the financial market. People who fit that profile rare, and most people who understand the markets are tainted by their roles in the events which led to the crisis.

Anonymous said...

The idea that Larry Summers is some raging sexist follows from the same kind of politically motivated, tortured, wild leap to conclusions we've been accustomed to hearing from Republican campaigns for decades. Can't we get past this nonsensical era of identity politics (which has poisoned American academia every bit as much). It requires a willful misreading of his comments (have you even done that?, comments he's retracted anyway) to draw that conclusion. Like the Treasury Secretary has so much to do with gender issues anyway. Let's not make the forming of an Obama administration a time for political purging.

Anonymous said...

Should top Management be responsible to the public company performance?

DRDR said...

Larry never said women have lesser brains. He presented a hypothesis about the variance of skill distributions. This does not mean that any woman has a smaller brain than a man, as you imply. This post was beneath you.

moxiemamma said...

To respond to anonymous I did read the Larry's comments and I think as a University President he should have known not to say them--that however he meant them he should ahve realized they would be taken as a put down but many women who study and work at his university. So whether he's sexist or not (and I have many friends who say he really isn't) he has very poor judgment and erratic behavior in many ways. The wonder is that Harvard appointed him in the first place since he was known to put his foot in his mouth often (think of his stint at the world bank). I think there is a symbolic leadership issue for the cabinet and I'm sure Obama is going to make his cabinet look like America, as they say. So we could say it's only fair to include some sexists. But think about it -- if the Harvard president had said something similar in public about blacks, would he not have been forced out sooner? And if that were the case Summers would not still be in consideration. Of course Summers did say something similar but he said it more in private to Cornell West and West promptly decamped for Princeton as I recall. We don't have to purge Larry -- we just have to let him stay where he is. I don't think he's a good choice and no one has a right to a cabinet position--it's all discretionary. Perhaps i should have explained myself furthre so as not to push your buttons.

moxiemamma said...

Dear DrDr,
Gee I'm new to this blogging thing and I could see it could take a lot of time. I didn't say Larry said women had smaller sized brains, i said he said they had lesser brains--he said something like the hypothesis that their brains are less suited (lesser, get it?) to math and science than are men's should be further explored or something like, that if I recall correctly. I stand by my comment on this issue, low as you think it is.

lerxst said...

Welcome to E40 moxx,

I'm actually not convinced that an academic economist would necessarily be the best choice given the importance of financial market complexities. I think the Rubin-Summers "team" actually worked well because you had a savvy and smart financial markets guy teamed with a deputy who had a brilliant academic mind (but with poor political skills).

I worry that Stiglitz may be a bit too much of an iconoclast (I'm thinking of his outspokenness during the Asian crisis) and not as much of a consensus builder.

Anonymous said...

Again, Summers did not say that women have "lesser brains," you do not recall correctly and you're perpetuating a ridiculous, anti-intellectual myth.

Summers said that the variance in the distribution of mathematical ability is higher among men than among women. This is turn implies, given other features of the distributions, that there will be more men than women in the extreme right tail of the distribution of mathematical ability, and that tail is largely from where highly skilled scientists are drawn. Summers offered that one of the many reasons we see more men than women in leading scientific positions is this unequal vairance, NOT that women have "lesser brains" or brains "less suited to math and science."

None of this controversial in the literature, it's only controversial because some people insist on ignorantly and offensively mischaracterizing what he said as "women have lesser brains than men."

I am an economist, and I support Obama. I only found this site today. I will never visit it again.

Anonymous said...

G has it on the spot. Stiglitz is a great economist, but probably not the right guy for that position. I also worry about the attitude he might bring to working with people at the World Bank & IMF, with whom he has had open disagreement. We need someone who will embrace globalization but has a measured understanding of the need for properly sequenced, and well balanced liberalization of trade and factor mobility.