Continuing to make bold moves in the first 100 days of his administration, Obama will announce this week two blockbuster appointments to senior positions at the Department of Treasury.
Freakonomist
Sure to raise eyebrows will be the appointment of University of Chicago economist Steve Levitt to Tim Geithner’s team. Rarely venturing into the realm of policy, the author of Freakonomics is better known –and often derided– for research focusing more on cute trivialities like cheating by Sumo wrestlers.
Ironically, his foray into Sumo-economics appears to be exactly why he is getting the call. As readers of Freakonomics know, Levitt made headlines when he used the same statistical analysis to expose widespread cheating by teachers in the Chicago Public Schools. How does this help the Department of Treasury you ask? Stress Tests. The big headline of Geithner’s first announcement as Treasury Secretary was the promise to screen out banks doomed to fail. Strangely, Treasury has since been mum on the results from the stress tests. Now we know the reason: it turns out all the banks are getting passing marks and the suspicious Treasury Secretary is calling on Levitt to bring his Sumo-scrutiny to bear on the banks.
Colleagues at the University of Chicago economics department are cheering the move. “I could not think of a better choice than Steve Levitt to move to Washington and help the Obama team” says Nobel Laureate James Heckman, adding that he expects the job to occupy Levitt for two full Obama administration terms. “We will miss him, but he has an important job to do.”
When we finally reached Levitt, he was at McDonalds headquarters at Oak Brook, IL. Some of their franchises have been cheating by hiding Big Mac revenues that they have to share with McDonalds. Levitt has found a way to benchmark performance that can reveal suspiciously underperforming locations. “This is what economists call ‘moral hazard,’ ” Levitt said over a carton of Chicken McNuggets. “Look, economics is not rocket science. Think of the US Government as like McDonalds, a bank and a toxic asset are just like a franchisee and a Big Mac. Once you see it that way, its simple.”
Former Bushie
Joe Lieberman supported John McCain during the election, made a speech at the Republican Convention and said Obama was not ready for the Presidency. And yet Obama later forgave him because he knew Lieberman’s vote was going to be crucial in the Senate.
Now, Obama has shown the same pragmatic streak in inviting Greg Mankiw to join his administration. Mankiw was the head of Bush II’s Council of Economic Advisors. He has so far played a role on the sidelines, an informal referee of the contest between Obama and his right-wing critics. Mankiw is often skeptical of Obama’s plans but at the same time he does not fully endorse their antithesis. This ambiguity has suited Mankiw well, as he has been courted by both sides of the political spectrum. Finally, he has chosen his prom date and decided to join the Obama administration. He will serve alongside his old Harvard colleague Larry Summers as Co-Director of the National Economic Council.
Why did Obama choose Mankiw for this post?
Mankiw said, “Well, in all modesty, I must point out that I proposed something like the Geithner plan – of course, I call it the Mankiw plan (!) – last October. There are some differences in the details but the principles are the same. I’m looking forward to improving the plan and being involved in its implementation. Whenever you are asked to serve your country, I think you should do it, even if there are ideological differences with some of the people involved.”
The additional intellectual heft of having Mankiw on board will certainly help in the coming months. Mankiw is also quite familiar with the rump of the Republican party that is still left standing in Congress. He is one of the rare individuals who has a good relationship with both John Boehner and Mitch McConnell. McConnell and Mankiw were bridge partners and they have the camaraderie and preternatural ability to wordlessly communicate that comes from expertize at that genteel but vicious game. But Mankiw can also be a populist and is a great expositor of complex ideas, a fact that Obama hopes will help in persuading at least some House Republicans to occasionally vote for some of his economic plans.
There is another factor at play. True to predictions, Larry Summers has proved hard to control within the West Wing. Orzag and Geithner have not been able to do it. In any case, they are fantastically busy trying to implement Obama’s healthcare policies and manage the financial crisis. Furman and Goolsbee , who were both students in Cambridge, are in awe of their former teacher and find it hard to contradict him. Summers and Mankiw respect each other, or at least Mankiw respects Summers! Obama has watched Biden and Clinton argue over Afghanistan policy. As a lawyer, Obama has always favored the “team of rivals” approach and wants to replicate it in economic policy.
Only one thing stands in the way. Mankiw has amassed a huge fortune by selling economics textbooks all over the world. He is incorporated in Switzerland as a Verein for tax purposes. A verein is an association of independent businesses and each international textook is an independent “firm” within the Mankiw Verein. This has several tax advantages and seems to be all quite legal. But with the current furor over AIG bonuses the administration wants to tread carefully.
Jeff and Sandeep
28 comments
Comments feed for this article
April 1, 2009 at 7:28 am
Levitt and Mankiw join the Obama Administration « The Blast
[…] and Mankiw join the Obama Administration April 1, 2009, 7:27 am Filed under: economics This could be cool. Another landmark economist from the ‘Chicago School of Economics’ (in addition to […]
April 1, 2009 at 8:04 am
Doug Fechter
April Fool
April 1, 2009 at 10:08 am
None of the Recent Posts on This Blog Were April Fools’ Jokes … - Freakonomics Blog - NYTimes.com
[…] this one is. At least I hope so. Otherwise I just lost myself a co-author. Excerpt: Continuing to make bold […]
April 1, 2009 at 10:17 am
Freakobamics? | Na Prática a Teoria é Outra
[…] Blog diz que o cara do Freakonomics vai para a equipe do Obama. Marginal Revolution repassa a notícia. Cara de primeiro de Abril, não? Mas até que seria legal. […]
April 1, 2009 at 10:32 am
cpaguirre
PLEASE tell us this is in fact an April Fool’s joke. How awful if this were truth. Actually, it has to be false. How mean!
April 1, 2009 at 4:22 pm
Newest Members of Team Obama - Economics -
[…] April 2009 (17)March 2009 (168)February 2009 (1)January 2009 (2)December 2008 (1)November 2008 (3)October 2008 (1)September 2008 (3) They were announced earlier today (April 1). […]
April 1, 2009 at 5:45 pm
Timothy
It is an interesting analysis.
April 1, 2009 at 7:03 pm
KJ
Word on the hill is Obama is looking for a role for Dick Cheney as well!
April 2, 2009 at 2:48 am
meandme
testing
April 1, 2009 at 7:11 pm
timnuccio
Why did I think this was an April fools joke before I read it?
April 1, 2009 at 7:36 pm
Top Posts « WordPress.com
[…] Levitt and Mankiw join the Obama Administration Continuing to make bold moves in the first 100 days of his administration, Obama will announce this week two […] […]
April 2, 2009 at 12:08 am
twobigboobs
What happened to the “change” Obama was representing? Wait a minute, as a matter of fact, didn’t he criticize John McCain for being “a continuance of the Bush economic policies” ??? So… he is hiring Mankiw for his administration. hmmmm hypocrisy?
April 2, 2009 at 2:17 am
Austin
So, Obama is going to bring on board more of the idiots responsible for the economic crisis. Now, that’s what I call change!
April 2, 2009 at 2:58 am
4best4worst’s Blog
[…] Levitt and Mankiw join the Obama Administration […]
April 2, 2009 at 6:27 am
Levitt and Mankiw to Washington! - TestMagic Forums
[…] and Mankiw to Washington! Bad news for folks going to Chicago and Harvard… I’m curious to see Mankiw in a Democratic administration… _ _ _ _ SIG _ _ _ _ […]
April 2, 2009 at 8:35 am
malia
there will be freakonomics 3, for sure
April 2, 2009 at 3:29 pm
Tidbits « Vaughanomics
[…] and Greg Mankiw (former CEA chair under President George W. Bush. Here is the inside scoop: Levitt and Mankiw join the Obama Administration. I must tip my hat to President Obama. I cannot remember an Administration with a more […]
April 3, 2009 at 11:37 am
Andrew
You idiots, if you knew what you were talking about you would know that Mankiw and the Bush Administration actually warned congress about this whole mess in 2003 and the DEMOCRACTIC congress BLOCKED any attempt to do anything about it. Btw, I’m not a republican, I just like facts.
Mankiw and Levitt are both incredible economists, we would do well to listen to their insight.
April 3, 2009 at 4:39 pm
NATIONAL NEWS - Freakonomics « The Global Exclaimer
[…] Obama Picks a Winner (not) […]
April 8, 2009 at 8:29 am
Price of Marriage « Cheap Talk
[…] willing to do the work. This the kind of thing Steve Levitt is so good at. But since he is moving to the Obama administration maybe some other bright young thing will write the paper. Tagsart banana seeds blog books […]
April 20, 2009 at 10:28 pm
Via Dolorosa…. « 4best4worst’s Blog
[…] Levitt and Mankiw join the Obama Administration […]
June 22, 2009 at 9:46 am
Billig a kasse
Great post man, keep up the good work 😉
August 2, 2009 at 4:27 am
taletid
Nice post…
August 3, 2009 at 1:13 pm
billige mobiler
I kan only agree with our post. good work.
August 8, 2009 at 1:06 pm
mobiltelefoner abonnement
Really nice post. I get your point:)
August 9, 2009 at 11:24 am
billig mobil
I’m can’t agree with all of it, but for det most parts i think it’s a really god post..
December 3, 2012 at 7:52 pm
Anonymous
Can I just say what a relief to discover somebody who genuinely understands what they are talking about on the web. You actually realize how to bring a problem to light and make it important. More and more people have to look at this and understand this side of the story. I was surprised that you aren’t more popular since you most certainly possess the gift.
August 23, 2014 at 5:33 pm
Home renovation contractor savannah ga
I read this post fully regarding the comparison of newest
and preceding technologies, it’s awesome article.