We Don’t Need a Brilliant Fed Chairman

Whether Larry Summers is qualified to take over the Fed doesn’t hinge on how smart he is, but whether he has the right ideas.

Photo by Meet the Press

The first time I met Larry Summers, I was immediately impressed with his intelligence. He was meeting with some undergraduates before taking office as president of Harvard University, this was near the high-water mark of “anti-globalization” sentiment on college campuses, and he was getting a bunch of tough questions about the global economy. I was way more left-wing back then than I am now, and I can tell you that Summers did an amazing job of mounting arguments on the fly that challenged my priors and changed my mind about things. It was an extremely impressive display. The only person I’ve ever met who was better than Summers at that kind of real-time dazzling argumentation was Robert Nozick.

And if Robert Nozick came back to life, I would definitely recommend that you take a seminar he taught. I would definitely recommend that your philosophy department hire him. And I would definitely not want to put him in a policymaking job in the federal government. Because, you know, a lot of his policy views are wrong.

Conversely, back in 2008 the first time I ever heard of Sonia Sotomayor was from some progressive law professors fretting that Barack Obama would likely appoint her to a Supreme Court vacancy. She just wasn’t brilliant and dazzling enough, they said. So I asked more about her. Did she have unsound views? Was she lazy? Was she dumb? No, no, no. She was smart and hard-working and had totally sound views on legal and constitutional issues. That sounded to me like the makings of a great Supreme Court justice! Leave the brilliant legal scholars on the law school faculties where they belong. You don’t need judges who revolutionize our understanding of the Constitution, you need judges who have basically the right ideas and who have the intelligence and diligence and judgment necessary to advance them effectively.

Summers turned out to be great at arguing with undergraduates but quite bad at being a university administrator. Because in many human endeavors brilliance is not that relevant as a job qualification. I don’t think we need someone who’s particularly brilliant at the Federal Reserve. We need someone who knows that when unemployment is too high and inflation is below 2 percent, you want to do more monetary stimulus. Someone who knows that you need to do more monetary stimulus but has literally no idea on Earth how to do it would be fine as long as he or she were capable of using Google and asking around. What wouldn’t be acceptable would be someone who has the wrong ideas about monetary policy. If you ask me about Janet Yellen, my concern about her has nothing to do with “gravitas.” I worry instead that as a veteran of the Bernanke Fed, her mind is simply closed to the possibility of aggressive new monetary stimulus since a sudden and effective turnaround in the monetary situation would be institutionally embarassing to the central bank—naturally raising the question of why they didn’t do it earlier. I would be thrilled to hear that the White House wanted to pass her over for this reason and bring in more of an outsider like Summers. But the case for that doesn’t hinge on his brilliance, it hinges on him having the right ideas. Does he? His ideas from 1991 seem OK to me. But that was 1991. Summers has had plenty of opportunities in the past five years to say something like “with unemployment high and inflation low, we need more monetary stimulus” and I haven’t heard it. Maybe he’s being coy. Maybe not. But honestly that’s the question— it’s not how smart is the guy, it’s does he want a more stimulative monetary policy?

In terms of recent commentary, Yellen seems like she favors policy that’s a bit more stimulative than the status quo while Summers comes across as being on the other side. If that’s right, that’s really bad. Being brilliant is a great quality in an academic economist, but what you need from an economic policymaker is correct ideas about public policy.