Holey moley. I missed this when economist Willem Buiter posted it on his FT.com blog a few days ago. He says the front-runners for the Fed chairmanship when it comes open next year are incumbent Ben Bernanke, SF Fed President Janet Yellen and Larry Summers, then writes:
Both Bernanke and Yellen are qualified for the job. Summers is not.
There are several reasons why Summers would be an inappropriate choice as chairman of the Fed. Let’s start with Fed-relevant knowledge and expertise. Summers is not a monetary economist or macroeconomist. He has never shown any serious interest in researching and understanding the workings of the kind of complex, interdependent dynamic systems that represent the environment a central bank operates in. He is the arch-typical quick and dirty partial equilibrium man, full of clever isolated micro-insights, but incapable of grasping the whole. His macroeconomics stalled at the Keynesian cross. …
Even before Summers went to the US Treasury, his approach to financial crises (in emerging markets and developing countries) never got beyond the putting out of immediate fires. The impact of the bail-outs and rescue efforts advocated and promoted by Summers on the likelihood and severity of future crises was either not considered or not given any weight. …
… Summers has never shown any interest in creating institutions that enable policy makers (in the Fed, in the Treasury and in the regulatory agencies) to make credible, long-term commitments. He invariable favours opportunistic discretion over rule-bound flexibility. The last thing the US needs today is a chairman of the Fed with the long-term perspective and attention span of a fruit fly.
Ah, but then we could have a financial system run by a fruit fly and a vampire squid. What fun! (Especially since it turns out that both are harmless to humans.)
As for the thing about Summers being the “arch-typical quick and dirty partial equilibrium man” with his “macroeconomics stalled at the Keynesian cross,” that’s true of about 95% of modern economists, isn’t it? But maybe not Bernanke and Yellen.
Update: Paul Krugman springs to Summers’ defense, sort of:
Basically, if you want to question Larry’s judgment, we can have a discussion; but calling him dumb and/or ignorant is just silly.
Notice that Krugman raises no objection to calling him a fruit fly.