Risk-Aversion And Office Holding

Paul Krugman and Lawrence Summers appear to have similar training, temperament, and outlook but as Ben Wallace-Wells’ excellent Krugman profile notes they often disagree anyway:

[Paul] Krugman has been arguing with Summers about policy, he says, for most of their adult lives, and their arguments have often followed the same line: “Let’s put it this way,” Krugman says. “When things go crazy, my instinct is to go radical on policy, and Larry’s is to be a little more cautious.”

Summers concedes that a bigger stimulus would have been the optimal policy in 2009. “The Obama administration asked for less than all that it recognized pure macroeconomic analysis would have called for, and it only got 75 cents on the dollar. But political constraints and practical problems with moving spending quickly constrained us. The president’s political advisers felt, and history bears them out on this since the bill only passed by a whisker, that asking for even more would have put rapid passage at risk.”

I’ve come to think this reflects the difference between people who write about policy (people like me!) and people who do policy. Practical policymakers seem averse to the idea that first you try to decide what the right diagnosis is, and then you try to implement the solution implied by your diagnosis. The disposition to act that way cuts against the dispositions you need to be a successful coalition-builder, and a successful coalition-builder is what you need to be to ever become a high-level policymaker.