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An Honest Economist In A PC World

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Forbes features Fred's Smith describes economist's Larry Summer's helpful advice for the developing world which is often criticized as politically incorrect. 

Larry Summers is a liberal economist with a penchant for telling it as he sees it. Yet in today’s politically correct world, honesty is not always appreciated. His history of getting into hot water for offending sensibilities (rather than actually being wrong) goes back to the early 1990s. It all started with a now-infamous leaked memo, written during his service as vice president and chief economist of the World Bank, in which he suggested that polluting industries and toxic waste storage facilities move to the developing world:

“ Underpopulated countries in Africa are vastly underpolluted … the economic logic … is impeccable."

That taking on jobs that richer people find distasteful has helped millions move out of poverty should be obvious, but it’s not something one can say in today’s world without being pilloried for it.

Then in 2002, as President of Harvard, Summers rebuked Harvard celebrity professor Cornel West, and for good reason. As The Economist reported:

“ Mr. West’s alleged sins included recording a rap CD, leading a political committee for Al Sharpton’s possible presidential campaign, writing books more likely to be reviewed in The New York Times than in academic journals and allowing grade inflation.

Sounds like a clear case of academic malpractice. But once Jesse Jackson and Al Sharpton weighed in, Summers was forced into a partial apology:

“ Mr. Summers apologetically announced how proud he was of all the members of the department, and pledged to create an “attractive environment” for them (usually campus-speak for “more money for less work”).

Then in a 2005 keynote speech at a conference on diversity, he speculated on why there are fewer women in certain scientific disciplines, bringing up possible gender differences in mathematical ability:

“ There is relatively clear evidence that whatever the difference in means—which can be debated—there is a difference in the standard deviation and variability of a male and female."

For raising this topic, he was attacked as sexist, even though he was talking about “variability,” not average ability. Some defended Summers, but again, he was forced to “explain” that his speech was a “purely academic exploration of hypotheses.”

Summers continued battle with a combative faculty soon led to his resignation, the shortest tenure of any Harvard president since the Civil war.

He again showed his iconoclastic credentials in the 2008 book Creative Capitalism: A Conversation with Bill Gates, Warren Buffett, and Other Economic Leaders, which included his essay, “You Want Creative Capitalism? Try This.” It was masterful, taking on Bill Gates’s suggestion that a new style of “creative” capitalism would move more rapidly to address the problems of the poor. Summers satirically described the risks involved, starting with an observation that making housing more accessible to the poor could be facilitated by setting up special agencies, which, of course, would then need government assistance and guarantees to accomplish what existing mortgage lenders had failed to do. He then pointed out that the approach had already been tried and failed spectacularly—in the form of the rapid expansion of the government sponsored enterprises Fannie Mae and Freddie Mac, whose subprime mortgage liabilities were a principal cause of the housing finance collapse.

It’s not clear whether his economic expertise was again solicited by Bill Gates and Warren Buffett. But, he persists, arguing in a recent Washington Post column that current monetary policy can do little to stimulate growth and recommending increasing government debt levels. It was a controversial piece and I even responded with a critique of his argument myself. So far, though, he hasn’t had to issue any apologies. Apparently fighting with the Federal Reserve is a less dangerous occupation than combating the Harvard faculty.

Following the leak of that 1991 memo, Summers went on to state:

“ I think the best that can be said is to quote La Guardia and say, “When I make a mistake, it’s a whopper.”

Summers is an honest economist in a politically correct world. We can only hope that more economists like him are in our future. We could use a few more such whoppers.

Originally posted at Forbes.