Wednesday, September 22, 2010

Mankiw: Larry Summers a Potentially Extinct Volcano

Harvard Professor Greg Mankiw tells us what Larry Summers will be returning to as a university professor at Harvard:

....being a university professor is quite a good deal. Top pay with maximum flexibility regarding teaching etc. As I understand it, you do pretty much whatever you want.

Then Mankiw continues his commentary suggesting that Summers would have possibly lost his tenure if he did not return and implies he is a "potentially extinct volcano."
Different universities have different policies regarding faculty leave for policy jobs, and different degrees of enforcement. Harvard allows two years of leave, and it has the reputation of enforcing the rule rather strictly. I can imagine that Larry could have negotiated an extra semester of leave, but I would have been surprised if the university had extended his leave much beyond that. (FYI, I left my CEA job in February 2005 after being in Washington for precisely two years.)

Would Larry have been rehired by Harvard if he resigned and stayed another couple of years in Washington? Unclear. The pro case for rehiring would be that Larry is one of the smartest guys around and has a great deal of fascinating experience to share with students. The con case would be that he has been out of the academic research game for quite a while and that in a time of reduced financial resources, faculty slots should be devoted to younger scholars rather than potentially extinct volcanoes. Ironically, if Larry were on the faculty voting on this matter, the con case is the kind of argument he might have made.

So, while I am sure that Larry's decision had various inputs, Harvard's leave policy was very plausibly one of them.

I can also say that ec 10 students will likely be among the beneficiaries of Larry's return. Larry was a regular guest lecturer in the course, and his lectures were always well received. He does a great job illustrating the connections between economic theory and economic reality.
BTW Highlights of Summers' career would be about how he blew up Harvard's endowment by trading in derivatives. I think I would sit in to hear him describe "the connections between economic theory and economic reality" on that one. Then, of course, Summers' faced another theory versus reality episode at Harvard when he fired Iris Mack, a black female, who warned him in an email that the derivatives trading in the Harvard endowment was extremely risky. If Summers, however, forgets to mention the Mack episode in class, the students will just have to get the story from the movie version Mack is working on. If Mack has any say, Billy Crudup will not be playing Summers.

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