Throughout his career, Larry Summers has been a leader in macroeconomics, holding powerful positions in academia and policy. He advances "Big Ideas" but then often turns 180 degrees. Why is that?
First of all, I really agree that Summers does not explain his policy recommendations well. We all deserve better. That said:
Summer’s turn (?) on secular stagnation. I can think of at least two reasons. 1) The Fed had already changed course, abandoned inflation ceiling policy so no “stimulus” (as opposed to “relief”) was necessary. 2) His policies for secular stagnation were to alleviate inadequate demand and he saw the COVID recession as mainly a problem of supply.
Bargaining Power again two 1) He favored structural chances to increase labor’s bargain power like unionization (?) what he was seeing was cyclical. 2) The increases were driven by supply constraints (unemployment benefits(?) or workers fear of returning to still COVID-ridden workplaces.
Inflation targeting: Maybe he thinks that we do not need a higher inflation target now that the Fed has shown that it can achieve its 2% target by showing markets that it really MEANS 2% as an average, not 2* as a ceiling. As for QE in October 2021, maybe he thinks that the Fed has won, markets believe the Fed will achieve its 2% target and does not need to continue with QE at present levels.
Inflation risks: Maybe he is afraid the Fed will get cold feet about bringing inflation expectation back in line if they stay to far above target too long.
But again, I wish he would make his political/economic arguments clearer.
Whenever I try to understand Summers I think about the fact that he approached both Elizabeth Warren and Yanis Varoufakis with the following pitch:
“Larry leaned back in his chair and offered me some advice,” Ms. Warren writes. “I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders." https://www.nytimes.com/2014/04/27/business/from-outside-or-inside-the-deck-looks-stacked.html
Larry Summers said to Yannis Varoufakis: “ ‘There are two kinds of politicians,’ he said: ‘insiders and outsiders. The outsiders prioritize their freedom to speak their version of the truth. The price of their freedom is that they are ignored by the insiders, who make the important decisions. The insiders, for their part, follow a sacrosanct rule: never turn against other insiders and never talk to outsiders about what insiders say or do. Their reward? Access to inside information and a chance, though no guarantee, of influencing powerful people and outcomes.’” Source: Yanis Varoufakis’ book, “Adults in the Room.”
So... take anything Summers says with a grain of salt. You are an outsider and he's not telling you what he really thinks.
First of all, I really agree that Summers does not explain his policy recommendations well. We all deserve better. That said:
Summer’s turn (?) on secular stagnation. I can think of at least two reasons. 1) The Fed had already changed course, abandoned inflation ceiling policy so no “stimulus” (as opposed to “relief”) was necessary. 2) His policies for secular stagnation were to alleviate inadequate demand and he saw the COVID recession as mainly a problem of supply.
Bargaining Power again two 1) He favored structural chances to increase labor’s bargain power like unionization (?) what he was seeing was cyclical. 2) The increases were driven by supply constraints (unemployment benefits(?) or workers fear of returning to still COVID-ridden workplaces.
Inflation targeting: Maybe he thinks that we do not need a higher inflation target now that the Fed has shown that it can achieve its 2% target by showing markets that it really MEANS 2% as an average, not 2* as a ceiling. As for QE in October 2021, maybe he thinks that the Fed has won, markets believe the Fed will achieve its 2% target and does not need to continue with QE at present levels.
Inflation risks: Maybe he is afraid the Fed will get cold feet about bringing inflation expectation back in line if they stay to far above target too long.
But again, I wish he would make his political/economic arguments clearer.
Whenever I try to understand Summers I think about the fact that he approached both Elizabeth Warren and Yanis Varoufakis with the following pitch:
“Larry leaned back in his chair and offered me some advice,” Ms. Warren writes. “I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don’t listen to them. Insiders, however, get lots of access and a chance to push their ideas. People — powerful people — listen to what they have to say. But insiders also understand one unbreakable rule: They don’t criticize other insiders." https://www.nytimes.com/2014/04/27/business/from-outside-or-inside-the-deck-looks-stacked.html
Larry Summers said to Yannis Varoufakis: “ ‘There are two kinds of politicians,’ he said: ‘insiders and outsiders. The outsiders prioritize their freedom to speak their version of the truth. The price of their freedom is that they are ignored by the insiders, who make the important decisions. The insiders, for their part, follow a sacrosanct rule: never turn against other insiders and never talk to outsiders about what insiders say or do. Their reward? Access to inside information and a chance, though no guarantee, of influencing powerful people and outcomes.’” Source: Yanis Varoufakis’ book, “Adults in the Room.”
So... take anything Summers says with a grain of salt. You are an outsider and he's not telling you what he really thinks.