Prize winner Lawrence H. Summers on his approach to economics: “Strong convictions weakly held”
Lawrence H. Summers, recipient of the 2023 Prize, discusses different approaches to shaping economic policy. (Image credit: Ryan Zhang)
For more than 40 years, Lawrence H. Summers has toggled between the worlds of academia and government — and profoundly impacted economic policy from both spheres.
On March 3, the veteran of three White House administrations and longtime professor at Harvard University was recognized for his considerable achievements with the 2023 Prize — an award given every year to a scholar or policymaker who has deeply influenced economic policy. In accepting the award at the Economic Summit, Summers reflected on how economics researchers and government leaders differ in how they shape policy.
Scholars looking to influence economic policy should shed light on questions that don’t have answers — or haven’t yet been asked, Summers said. Government officials in roles like the ones he held, in turn, try to sell established economic insights to decisionmakers, drawing on the “inventory of good ideas” generated by academics.
For policymakers, having a repository of ideas comes in handy at critical moments, he said. “Sometimes the transition from inconceivable to inevitable can be extraordinarily rapid,” Summers said.
The most effective economists in academia and in government share a common trait: pragmatism. “Strong convictions weakly held” is how Summers summarized his own evolution as an economist — quoting Marc Andreessen, the veteran Silicon Valley venture capitalist who helped create the first internet browser.
Looking back on his stints in government, Summers — who served as former Treasury Secretary, director of the White House National Economic Council, and Chief Economist of the World Bank — recounted how his own strong convictions proved to be weakly held as he adapted to evolving economic conditions.
“I [have] found myself with very different views at different points on how fiscal policies should move,” he said.
Summers’ delivered his remarks in the closing keynote address at the Summit, which also included his thoughts on a variety of pressing economic issues.
“We are thrilled to recognize Larry Summers with this year’s Prize,” said Mark Duggan, the Trione Director of and the Wayne and Jodi Cooperman Professor of Economics at Stanford, in announcing the award. “His wide-ranging contributions to economic policy in the U.S. and around the world through his academic research, public service, and mentorship of students and others early in their careers have had an enormously positive impact throughout the world. His influence continues to the present day, as he has provided a steady stream of helpful insights and timely research on fiscal and monetary policy throughout the past three years as policymakers struggle to navigate the unprecedented challenges brought by the pandemic.”
At the 2023 Economic Summit — which convened hundreds of leaders in policy, business and academia — Summers called it a “privilege” to be recognized by and praised the institute’s “extraordinary” work. “Its emphasis on economic policy research done by serious scholars has really stood up for the values and the objectives to which I’ve devoted my career,” he said.
.
Multiple spheres of influence
Summers earned his B.S. from M.I.T. in 1975 and his Ph.D. from Harvard in 1982. In that same year he joined his PhD advisor (and previous Prize recipient) Martin Feldstein as a Domestic Policy Economist with Ronald Reagan’s Council of Economic Advisers. One year later he returned to Harvard and was awarded tenure at the age of 28, one of the youngest in Harvard’s history. During the subsequent eight years, Summers produced a hugely influential body of economic policy-relevant academic research, served as Editor of the Quarterly Journal of Economics, and advised more students than perhaps any other Harvard faculty member. He also received numerous prestigious awards, including the National Science Foundation’s Alan T. Waterman award in 1987 (the first social scientist to ever receive this) and the John Bates Clark Medal in 1993 (at that time awarded every two years to the most outstanding American economist under the age of 40).
Summers returned to public service in 1991 and served for two years as the Chief Economist at the World Bank and was responsible for the 1993 World Development Report “Investing in Health” and for focusing attention on the importance of girls education which he labeled the highest return investment in the developing world. He then spent eight years at the U.S. Treasury Department during the administration of Bill Clinton, initially as Undersecretary of the Treasury for International Affairs (1993-1995), then as the Deputy Secretary of the Treasury (1995-1999), and finally as the Secretary of the Treasury (1999-2001). While at Treasury, Summers helped to shape the U.S. response to several international financial crises, including in Mexico, Russia, and Asian emerging markets.
In 2001, Summers returned to Harvard as President of the University, where among his many accomplishments he had the original idea to simplify Harvard’s financial aid and make it clear to any student or prospective student whose family had an income below a certain level that it would not have to pay anything – for tuition, room and board, or books – to attend. The Summers plan led to a sharp increase in the number of first-generation students applying to and attending Harvard, and the program was copied by Yale, Stanford, Princeton, and others. He also appointed the first female Dean of Harvard Law School, Elena Kagan, who was a great success and subsequently joined the U.S. Supreme Court.
Summers joined Barack Obama’s economic team as the Director of his National Economic Council. As the President’s chief economic adviser he helped to guide economic policy during the 2008 financial crisis and the deepest recession that the country had experienced since the Great Depression.
After completing his service at NEC, Summers returned to Harvard, where he is the President Emeritus and Charles W. Eliot University Professor of Economics. He also directs the University’s Mossavar-Rahmani Center for Business and Government. Summers continues to advise students and produce policy-relevant academic research at an impressive pace. For example, his recent research with his former advisee Natasha Sarin regarding the returns to IRS spending was influential in the design of the Inflation Reduction Act last year and his warnings about inflation going back to early 2021 have proven prescient.
In 2010, The Economist dubbed his policymaking approach the Summers Doctrine — an approach the publication “a microeconomic ‘laissez faire’ mentality with macroeconomic activism.”
“Larry Summers was an easy choice for us,” said John Shoven, a former director, senior fellow emeritus, and member of the Prize selection committee. “His decades of service to better economic policy are truly extraordinary.”
The Prize, founded in 2010, was inspired and first funded by George Shultz, who served as President Richard Nixon’s budget director and secretary of Labor and Treasury and later led the State Department in the Reagan administration.
Recipients of the Prize are selected by Duggan; Shoven; Monika Piazzesi, a Senior Fellow and the Joan Kenney Professor of Economics at Stanford; Jon Levin, a Senior Fellow and the Dean of Stanford’s Graduate School of Business; and Jim Poterba, president of the National Bureau of Economic Research.
Up until 2022, the Prize was awarded biannually. Previous recipients are: Ben Bernanke (2022), Brookings Institution Distinguished Senior Fellow and former Chair of the Federal Reserve and of the President’s Council of Economic Advisers; Nicholas Stern (2020), the IG Patel Professor of Economics and Government at the London School of Economics and lead author of the influential Stern Review on the Economics of Climate Change; Bill Bradley (2018), former U.S. Senator and a key architect of the 1986 federal Tax Reform Act; Alice Rivlin (2016), a former vice chair of the Federal Reserve, director of the White House Office of Management and Budget, and founding director of the Congressional Budget Office; Stanley Fischer (2014), former governor of the Bank of Israel and vice chair of the Federal Reserve; Martin Feldstein (2012), a Harvard professor and former chair of the President’s Council of Economic Advisers; and Paul Volcker (2010), a former Federal Reserve chair.