Semi-Daily Journal

Economists writing Socratic dialogues? They really _do_ do things differently at Berkeley. But how did Nietzsche get in there?...

Rotfl! That was brilliant.

Perhaps Professor DeLong was inspired by the philosopher economist Amartya Sen? :)

Thusly did Thrasymachus prove himself to be the wisest economist in Greece.

Except, that has nothing to do with Medici rule. Not that Nietzsche would have cared.

I agree with the argument. So why was Clinton able to know he needed a Bob Rubin and plant him in the job while the Bush team and Reagan insist on appointments that are "clinically mad"?

My guess is that their understanding of economics is so poor, that they don't realize that the guys they appoint don't have the right qualifications? Maybe the problem is in the job description. Is the Secretary of Treasury the manager of a government beaurocracy only? or is the Secretary of Treasury like the Secretary of State to the Financial World? Why did Bush appoint O'Neill and not the GOP version of Bob Rubin? Surely there are plenty of candidates in the pool.

Agreed, Snow needs to go, if we get 4 more years of Bush there needs to be someone in there who isn't constantly roiling the currency markets.

They didn't apppoint a truly competent Secretary of the Treasury because such an individual would have had his/her own views about economic policy. The White House didn't want that.

I suspect also that the President's circle of contacts does not include such people, while it does include a lot of CEOs.

Invisible Adjunct :

Whats Nietzsche doing there ?

It's simple. As he started at the abyss, the abyss stared back at him.

The abyss then filled out the interview sheet, and strongly recommended him for a job at Goldman Sachs, and he made partner in 3 years(*cue jokes about incomprehensible mysticism and new economy analysis*).

Ian

bakho,

I don't know why Bush has chosen those he has chosen, but a separate theme here ought to be that Bush has chosen two finance ministers without finance backgrounds, while Rubin was cut from classic "Treasury Secretary" cloth.

I do, more or less, know why Clinton chose Rubin. Not to suck up too much, but Thrasymachus' analysis applies not only to why Rubin was good at his job, but to how he got it. Remember, Rubin wasn't initially chosen as Treasury Secretary. He replace Lloyd Bentsen after having been National Economic Advisor - a Clinton-created position, if I remember rightly. In his first job for Clinton, Rubin was once again sitting in rooms full of people all of whom wanted to have the final say on economic and financial policies. Rubin came out on top, and reportedly did so by not showing CEO-like hubris. He listened, coddled, put people together who might, between them and with his subtle guidance, reach workable policy decisions. Clinton probably saw something of himself in that behavior.

By the way, Rubin got his first administration job by raising lots of money for Clinton.

I'd add two points:

1) When Clinton was elected, there were still a lot of people in the markets who thought that Republicans were better for the economy than Democrats. Especially after Bentsen turned out to be something of a damp squib, Clinton needed to install someone with a lot of credibility in the markets, and they don't come much more credible than Bob Rubin.

2) The GOP in general, and the Bush administration in particular, is mistrustful of Wall Street. While many Wall Streeters are, indeed, Republican, they're still very much blue-staters who hang out with people like trial lawyers and live in, well, Manhattan. They also have an irritatingly clear-eyed view of fiscal policy.

Yeah, why did Lloyd Bentsen get left out? Wasn't he our host's boss for awhile?

Also left out is that there's a BIG difference in inheriting a recovering economy (4.7% growth, 4th qtr, '92, iirc) than one about to tank.

Interesting argument, though I would be wary of trying to generalize from these three (maybe four, counting Summers) examples of Sec Treasuries to make any kind of general rule.

O'Neil and Snow may well have been isolated from the real world, but that's hardly a general criticism of corporate CEOs. I highly doubt that, for example, Michael Dell or Betsy Holden (Kraft) surround themselves with yes-men. If they did, they'd be either overtaken by competitors (in the case of Dell), fired by the board (in the case of Holden), or both. O'Neil and Snow came from companies that were especially isolated from market forces. That's not neccesarily their fault (They're aren't a lot of hungry young turks starting up new aluminum companies), but it does suggest that they might not have been right for the job.

Though I think Clinton did a good job on economic matters, and respect Rubin a great deal, they weren't perfect. In fact, the most serious criticism that I can make of them is that they took the capital markets TOO seriously. By the time the late 1990s rolled around, the U.S. equity market had become a high-profile symbol of the general economic prosperity. The economy was booming, and the nighlt NASDAQ quote was proof. It can be argued that Clinton and Rubin were a little too concerned with keeping good times going, and that the over-capitalization of U.S. industry in general (and the tech/telecom sectors in particular) in the late 1990s boom contributed to the over-capacity issues that plague the economy right now.

Now again, on balance we were probably better off having the late 1990s boom than not having it, but it hasn't come without costs (the hangover has been brutal). So while Rubin did an excellen job, I'm not sure that I'm ready to say that we should always install a Wall Streeter as Sec Treasury. Different times call for different styles.

Another criticism for Summers is his, er, unilateralist approach in their conduct of rescue business in Asia (such as forcing Korea to liberalize their capital markets), that certainly squandered American good will as much as Bush's war conduct did.

Bakho, KH,...:

surprised no one pointed this out, but here goes: the GOP right wouldn't pick Rubins as cabinet appointees because they identify the Good of the Economy (just to stick with Platonic forms) with the Good of Business. They believe, further, that the latter Good is the same as the Good of Business Owners. Wall Street types, otoh, tend to look at the Economy as an organic whole, by understanding the trends of which they can harvest large amounts of cash for themselves. In this, their outlook is much more similar to that of academic economists.

The GOP slogan that will routinely elicit plaudits from the average obtuse audience is that gov't should be "run like a business." Well, that's what you get.

Nothing as complicated as suggested here; the GOP just takes its cues from the business world more than the Democrats do. That's why you're a lot more likely to see CEOs than ex-academics.

One of the things you're taught in business school (which most of these CEOs attended at one point in their lives) is that when all else fails, cut prices. That is, cutting prices is the last possible thing you can/should do to your products/services, because once you do that, you're basically signalling to the world that you're out of ideas and/or that everything you already tried hasn't worked.

This is effectively a signal from CEO Bush and CFO Snow that they are out of ideas. Tax cuts haven't worked (but we'll take them anyway), jawboning hasn't worked, blaming the minority hasn't worked, spending like drunken sailors hasn't worked (say, why do drunken sailors always get such a bad rap?). So they're effectively cutting prices on our national assets to trick other countries into buying them cheap. Pay no attention to that deteriorating fiscal picture, our capital markets will surely pay off someday! Oh, you don't like them at this price? How about now? *SLASH*

Other countries (namely, Japan) have already signaled they aren't going to stand for it, and have started flooding the market with yen. The ECB should likely do the same if the Euro rises to $1.20 or more.

The more the big economies play this pissing game to try and squeeze more economic growth out of the, the bigger effect a fiat currency glut will have on the open markets, which will eventually produce inflation the likes of which we've never seen.

Right, Brad?

Manny

"O'Neil and Snow came from companies that were especially isolated from market forces."

James Surowiecki had a column a while back (perhaps when Snow was appointed?) arguing that this was true of most Bush Administration CEOs. They tended to come from the energy industry or industries dependent on government contracts (Haliburton is both)--Surowiecki, IIRC, called them crony capitalists rather than free-market capitalists.

I don't remember why the energy industry in particular counts as crony capitalism--the article isn't online.

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I don't remember why the energy industry in particular counts as crony capitalism--the article isn't online.
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Maybe because of lack of demand elasticity and high entry barrier. These people are there rather by cooptation amongst themselves, and I suspect they are there more because they inherited their fortune than for a business or technological performance.

Here in Spain Aznar has put his cronies on the top of every privatized State corporation he has been able to do. These last weeks he has arranged for the cancellation of a merging that would have created a competition in the electricity-natural gas sector, because the center of decision would be in Barcelona(so not in Madrid), under the eye of La Caixa, the main savings bank of Spain. And to fend future threats, has begun legislation that would limit voting right of savings banks to 3% of the total, without consideration of the real amount of shares they hold.

DSW