David Warsh covers economists like ESPN covers NFL draft picks. Whether he's delivering the scoop on Harvard's fumbling of job offers to two Berkeley economists, or simply attempting to put a couple of centuries' worth of economic history into context, he's got the goods -- the strengths, the weaknesses, the relative importance of individual contributions to the overall field. On Monday, he turned his attention to Austan Goolsbee, the chief economic advisor to Barack Obama.
Goolsbee has already gotten more media attention than economic advisors are usually wont to do during a political campaign -- in part because of the notorious NAFTA-gate, and in part because in the era of the econoblogosphere, every word uttered by an economic advisor to a prospective president is dissected, pored over, magnified and argued about endlessly by a battalion of always-online economists.
Case in point: Over the weekend, a flare-up of chatter discussing whether Goolsbee, who has a tenured position at the University of Chicago, had betrayed the infamous deregulatory ideology of the so-called Chicago School rippled through the blogosphere. (How the World Works was halfway through the job of writing a post summarizing all the twists and turns of this debate, before discovering that the Free Exchange blog had already completed the task.) The debate is illuminating -- particularly the contention by UC-Berkeley economic historian Brad DeLong that the archconservative Chicago-schooler Milton Friedman supported "extremely tight regulation of any financial institution whose liabilities served as part of the economy's stock of liquid assets." In other words: Even the patron saint of modern free-market fundamentalism believed that banks needed a short leash.
But should we be devoting quite so much attention to what economic advisors think and say? Warsh digs up a snarky tidbit from days gone by that suggests that politicians haven't always taken the dismal scientists too seriously.
It may be time to dust off the adage, attributed to one of Franklin Delano Roosevelt's political aides. When asked about the economic advisors to the campaign, he pointed to his suit coat and said, before replying, "Do you see these buttons on my sleeve? They don't do a damn thing, but fashion says I've got to have them, so I do."
Warsh then undermines this anecdote by proceeding to give his opinion on "the most striking paper in Goolsbee's portfolio": "Evidence on the High-Income Laffer Curve From Six Decades of Tax Reform."
The Laffer Curve refers to the theory, popular with supply-siders, that tax cuts generate so much economic activity that they essentially pay for themselves. The vast majority of economists do not subscribe to the broad outlines of the Laffer Curve, but, as Warsh explains, more subtle and "sophisticated" versions of the formulation have emerged over time. Goolsbee, says Warsh, compellingly refuted these newer formulations in his paper.
It seems that, for now at least, [Goolsbee] concluded, "we will have to keep paying for our tax cuts the old fashioned way" -- either by cutting expenditures, or, just possibly, dispensing with them altogether.
So: Goolsbee, a smart guy working at the intellectual center of free-market academic economics, who nonetheless spends his time laying waste to supply-side myths. A good man, perhaps, to have around in an economic bar fight.
And now, let's see the econoblogosphere extend a warm embrace to the newest member of the Obama economic team -- Jason Furman, Obama's new "director of economic policy." The Politico's Ben Smith notes that Furman is a "veteran of the Clinton White House" who has also served as "the director of the Hamilton Project, a center-left economic policy shop at Brookings overseen, among others, by former Clinton Treasury Secretaries Robert Rubin and Lawrence Summers." A representative sampling of what Furman's all about can be found in his proposal for how an economic stimulus plan should have been crafted, published this January.
Welcome to the party, Jason!
Update: That didn't take long. Marc Ambinder, blogging at the Atlantic, provides some more detail on Furman.