Effect Measure

Summers makes sausage

While I like Obama I’m none too fond of some of the people he has around him, especially in the economic area. Larry Summers and his pals (Rubin, Geithner, etc.) helped bring us the current crisis, although it took GWB and the Republican Congress to turn a bad situation into a catastrophe. We threw the Republicans out, and good riddance. But why let the others back in? These remarks are occasioned by a commitment I’ve made to do a “work in progress” seminar tomorrow morning. My scientific work is progressing nicely but one of the things that isn’t yet in progress is preparing for the seminar. Hence I am resorting to reposting something from four years ago that, alas, is still timely. It’s a little rant about Larry Summers:

One gaffe does not a Summers make (originally posted on February 22, 2005)

The “Larry Summers” show is still reverberating around the Main Stream Media and the blogosphere (for one of many accounts and some pertinent links, see this post at Majikthise). The wingnuts and their MSM fellow travelers are portraying him as the intellectually honest but innocent academic who got his weenie caught in the Political Correctness door (presumably Ward Churchill is not worthy of such solicitude). Poor guy. Lest you feel too sorry for him, though, consider a little bit of Larry’s prior history, courtesy of the sadly hilarious site, The Whirled Bank Group: Dedicated to a World Full of Poverty.

Here is the full text of a leaked memo from the World Bank’s Chief Economist in 1991, one Lawrence Summers:

DATE: December 12, 1991
TO: Distribution
FR: Lawrence H. Summers
Subject: GEP

‘Dirty’ Industries: Just between you and me, shouldn’t the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Less Developed Countries]? I can think of three reasons:

1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.

2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I’ve always though that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world welfare enhancing trade in air pollution and waste.

3) The demand for a clean environment for aesthetic and health reasons is likely to have very high income elasticity. The concern over an agent that causes a one in a million change in the odds of prostrate cancer is obviously going to be much higher in a country where people survive to get prostrate cancer than in a country where under 5 mortality is is 200 per thousand. Also, much of the concern over industrial atmosphere discharge is about visibility impairing particulates. These discharges may have very little direct health impact. Clearly trade in goods that embody aesthetic pollution concerns could be welfare enhancing. While production is mobile the consumption of pretty air is a non-tradable.

The problem with the arguments against all of these proposals for more pollution in LDCs (intrinsic rights to certain goods, moral reasons, social concerns, lack of adequate markets, etc.) could be turned around and used more or less effectively against every Bank proposal for liberalization.

The Whirled Bank site adds this Postscript:

After the memo became public in February 1992, Brazil’s then-Secretary of the Environment Jose Lutzenburger wrote back to Summers: “Your reasoning is perfectly logical but totally insane… Your thoughts [provide] a concrete example of the unbelievable alienation, reductionist thinking, social ruthlessness and the arrogant ignorance of many conventional ‘economists’ concerning the nature of the world we live in… If the World Bank keeps you as vice president it will lose all credibility. To me it would confirm what I often said… the best thing that could happen would be for the Bank to disappear.” Sadly, Mr. Lutzenburger was fired shortly after writing this letter.

Mr. Summers, on the other hand, was appointed the U.S. Treasury Secretary on July 2nd, 1999, and served through the remainder of the Clinton Admistration. Afterwards, he was named president of Harvard University.

Postscript: And now, Mr. Summers has returned as Obama’s Chief Economic Adviser.

What do they say about bad pennies?

Comments

  1. #1 Charles
    February 18, 2009

    All I can do is hope Mr. Summers has learned something in the last 18 years. Heaven knows I have. 18 years ago, I was still a Republican.

    Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully.

    OTOH, here is a recent CNBC interview of Nouriel Roubini and Nassim Taleb: Roubini and Taleb Discuss the Crisis (YouTube Video, 10:00 minutes)

    I think, under present circumstances, both of these gentlemen qualify as “subject matter experts”.

    If you can avoid bashing your head against the table in reaction to the massive and incredible stupidity of the newscritters, listen for the take of both Taleb and Roubini on what needs to be done with the present management layer of our financial infrastructure, and why.

  2. #2 revere
    February 18, 2009

    Charles: I actually heard the interview. Depressing.

  3. #3 Interrobang
    February 18, 2009

    *sigh* Summers is also the guy who thinks that women are by nature dumber than men. I bet the Ledbetter Act put a big knot in his shorts.

    I’m definitely going to have to count this as one of Obama’s antifeminist moments.

  4. #4 Lea
    February 18, 2009

    Damn revere, not encouraging at all. Hopefully one of Bambi’s staffers reads up on this and enlightens him.

    That was a good video Charles. Taleb is spot on about Bernake, especially with what I saw last night on the television. Only saw half of it but it was extremely good.

    http://www.pbs.org/wgbh/pages/frontline/meltdown/

    FRONTLINE – Inside the Meltdown
    How the economy went so bad, so fast and what Bernake and Paulson didn’t see, couldn’t stop and weren’t able to fix.

    ************************************

  5. #5 Linda
    February 18, 2009

    One item glaringly omitted from the Frontline piece last night was the fact that the tarp bailout plan was drawn up by Bush Administration officials months before the September crisis— It wasn’t drawn up by Paulson on the fly as Frontline would have you believe—that is, if you are to believe then White House Deputy Press Secretary Tony Fratto.

    [White House Deputy Press Secretary Tony] Fratto insisted that the plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough.
    —And the government did nothing real to prevent the financial meltdown.

    Source: http://www.rollcall.com/news/28599-1.html?type=printer_friendly

    It makes you wonder about Hillary cashing out of the market in May 2008.

  6. #6 Charles
    February 18, 2009

    By May of 2008, it was obvious to everybody but a derivatives broker what’d happened.

    Of course Hillary cashed out. I’ve said many hard things about her over the years, but I’ve never called her “stupid”.

  7. #7 K
    February 19, 2009

    Forecaster Gerald Celente on the crash of 09 speaking to Glenn Beck

    http://www.youtube.com/watch?v=sFtePsHsUkA

    Time to stop worrying about who has the right policy and put in a kitchen garden at least. There is nothing anyone can do anymore. Stupid decisions have been made all around, but underneath it all is that fact that the lifeblood of modern industrial civilization, oil, is running out and no transfusion of alternative energy will ever be able to provide the quantity and energy density of the first and easiest to obtain oil and other fossil fuels.

    Solar energy is available to power your human body – put some seeds in the ground, tend them, harvest them.

  8. #8 paiwan
    February 20, 2009

    Charles:

    You are probably right. Heaven knows how people can change.

    Hillary used to fret in White House; staff dared not to look at her by direct eye contact when she was First Lady.

    Maureen Dowd definitely out-said hard things than you had said (what did you say, anyway) during the primary election and warned Obama not giving Secretary to her.

    Rice cooked, as our language says-decision made; Maureen since the nomination, she has never commented Hillary in her Column until now.

    She is doing pretty well if I read Orville Schell(Director of the Asia Society) especially in relating to the new framework with China relationship.

    http://www.taipeitimes.com/News/editorials/archives/2009/02/20/2003436579

    She has been smart, especially this time smart enough to focus on China; Japan first, first Muslim country-Indonesia; then throw out the question for China-what China can do with North Korea. I am found of the sequences. Smart!

  9. #9 g336
    February 20, 2009

    Summers’ reasoning in that memo is classically sociopathic. Look up the clinical definition of antisocial personality disorder and see for yourself.

    1% of American males are diagnosable sociopaths and very often they end up in high places. See also a book titled “Snakes in Suits.”

    Sociopathy and other personality disorders are highly resistant to treatment, and in fact are rewarded by the culture. Here’s to hoping that Summers’ case was an adjustment disorder rather than a personality disorder, which by definition means it was circumstantial and can change. Or if not that, then here’s to hoping Obama is immune to the manipulation-by-charm that is a trademark of sociopaths.

    One thing we clearly need to change is the reward system for sociopathic behavior. A diagnosis based on one’s life history, should be grounds for disqualification from positions of authority in government and publicly-traded corporations.

  10. #10 paiwan
    February 21, 2009

    Obama needs someone to tell him truth from time to time, even in a blunt way; that is a good way to prevent an eternal optimist to become a sap.:-)

    Summers is a tenacious debator in what he thinks it worth to probe- a good researcher, not a good university president who has borne the responsibility of fund raising- demand PR work.

    Obama is good at inspiring a team and excellent fund raising job; as people speculate that he will mellow the team members, and vice versa.

    If Summers can lead the economists in the country to advise Obama to shorten the years of this terrible economy crisis, he doesn’t need the performance of delivering the inspiring speech to the country. No, he had not proved the skill when he was the president of a famous university; nevertheless his contribution in a highly professional circle has been assessed and in the election team.

    About the past, who don’t have embarassing and narcissistic background. Thrive from chaos!?

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