When Do You Get Economists as Policy Makers?

In Fall 2008, the Democratic candidate for president, Barack Obama, asked then-president and chief executive officer of the Federal Reserve Bank of New York, Timothy Geithner, whether he would consider serving as treasury secretary in a future administration. According to his autobiography, Geithner pointed out that he lacked the necessary political skills. The newly elected president from the ‘left’ party on the American political spectrum nevertheless chose the ‘economist’ after the election, and in the midst of a financial crisis. The new treasury secretary received daily training from the president’s chief of staff in an attempt to bolster his political skills but never really felt comfortable in his political role. Is this anecdote representative of a broader phenomenon? One set of authors, writing more than two decades ago about the rise of economists in governments, argued that ‘the demand for economists rose radically with the sense of crisis’, and later work notes that governments may appoint economists to top positions when the economy is in trouble. But other scholars emphasize that left parties have credibility problems in government, and do less badly with markets when they have constraints on them, such as International Monetary Fund programs or domestic institutional barriers to change. The Geithner anecdote could be representative of left-leaning presidents appointing economists to improve their credibility with markets.