Larry Summers Shows the Real Purpose of Education

To persuade.

Larry Summers has two Nobel laureates as uncles (Samuelson and Arrow). He was an economics prodigy, getting tenure at Harvard before he was 30. He is about as smart and educated as one can be.

And so now, the Wall Street Journal outlines his sell-out to the Obama machine. Summer’s specialty, if anything, was labor economics (here’s Summers’ take). He did a couple papers, noting the well-documented fact that increasing unemployment insurance increases unemployment spells–if you pay for something, you get more of it. It makes obvious sense, it wasn’t a surprising result, and no one disputes it.

So, how does Summers explain why now he thinks an increase in unemployment insurance will decrease unemployment? Well, a partial derivative is not necessarily the same sign as the total derivative. In theory, they could be different. In practice, they rarely are, and extraordinary claims require extra-ordinary evidence. But the benefit of a PhD in economics is you can rationalize this stretch much more efficiently than others. Anyway, Summers now argues that unemployment benefit increases will reduce unemployment through the fact that now, we are not at full employment, so the fiscal multiplier is especially strong. I have never lived during a period when we were at full employment, which Summers defines as ‘ where nearly every person who wants a job is able to obtain one’. I guess their earlier work was in some fantasy world of full employment, and in real life all that research is irrelevant, which I’m sure was not mentioned in those articles. Summers’s casuistry highlights that ultimately, scientists are not far different than mercenary lawyers, an articulate advocate arguing for a greater good.

Summers already demonstrated his lack of integrity in the gender-science hullabaloo, where he at listed among several explanations for the lack of female scientists that women could be less scientifically oriented in some natural way (motivation, analytics). He then cowardly backtracked, and got his deserved punishment, showing himself no friend of either PC leftists or those who think the hypothesis is a legitimate question.

It’s good to know more, but don’t think that the primary reason people become scientists is to find truths, but rather, to fortify their egalitarian or libertarian prejudices. Not all, but most.

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About Eric Falkenstein 136 Articles

Eric Falkenstein is an economist who specializes in quantitative issues in finance: risk management, long/short equity investing, default modeling, etc.

Eric received his Ph.D. in Economics from Northwestern University , 1994 and his B.A. in Economics from Washington University in St. Louis, 1987

He is the author of the 2009 book Finding Alpha.

Visit: Eric Falkenstein's Website

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