Who Said It? Larry Summers
By David Henderson
In yesterday’s post, I gave a long quote from the book, Commanding Heights, by Daniel Yergin and Joseph Stanislaw, and I asked who said it. Two of the commenters answered correctly: Larry Summers.
Here’s the paragraph that follows the two paragraphs I quoted:
“As for Milton Friedman,” Summers added, “he was the devil figure in my youth. Only with time have I come to have large amounts of grudging respect. And with time, increasingly ungrudging respect.”
That quote from Summers reminds me of my take on Larry’s views when we both worked in the Reagan White House under his mentor, Martin Feldstein. Here’s what I wrote in the introduction to the second edition of The Concise Encyclopedia of Economics.
In fact, the story of how I first had the idea for an encyclopedia of economics involves Larry Summers. It was the fall of 1982, when he was a domestic policy economist and I was a senior staff economist under Martin Feldstein, the new chairman of President Ronald Reagan’s Council of Economic Advisers. Several of us would sometimes lunch together and, of course, would mix it up on various issues. Macro-economics brought out a wide range of opinions. For instance, Larry and our colleague Paul Krugman, now a regular economics columnist with the New York Times, worried that the high deficits of the time would cause high inflation. Ben Zycher and Lincoln Anderson, fellow senior economists, and I were fairly confident that the policies would not cause high inflation because the Federal Reserve Board under Paul Volcker seemed to be keeping the growth of the money supply low. But on various microeconomic issues and on free trade we were almost completely unanimous. We all thought price controls are generally a bad idea. We all favored free trade and were critical of Reagan for his restrictions on Japanese auto exports to the United States. We often agreed that this or that government policy was counterproductive and that free people, left to their own devices, would work things out better than governments would. It was after one of those conversations that I started thinking that the world could use an encyclopedia. And an encyclopedia makes much more sense if there is agreement among the experts.
Interestingly, the difference between the liberals and the libertarians was less on the economic analysis and even the bottom-line policy conclusions than it was on our feelings about the bottom line. The libertarians–Anderson, Zycher, and I–loved it when the answer was that free markets work; and that was usually the answer. The liberals, Krugman more than Summers, seemed often upset when that was the answer; they seemed to want a big role for government.