Speculation on Council of Economic Advisers Disappointing

It is certainly premature to predict how an Obama administration will turn out based upon appointments to date and rumors regarding future appointments. Still, this is all we have to go on and such speculation is irresistible to bloggers. I agree with  Megan McArdle in regretting the news that Austan Goolsbee is no longer front runner to become chairman of the Council of Economic Advisers in order to have greater diversity in his appointments. The National Journal reports:

The Obama transition team is interviewing to find a woman, perhaps a minority woman, to fill the CEA chair — a Senate-confirmed position. Informed sources suggest the candidates on the CEA list now include Princeton University economics and public affairs professor Cecilia Elena Rouse, whose specialty is labor economics. The hunt for a woman, explained several sources close to the transition deliberations, is aimed at broadening the white-male cast of the White House team assembled to date (the current tally of announced picks is 3 women, 9 men).

Goolsbee, a respected University of Chicago professor, remains in contention for other administration posts, the sources added.

Megan responds:

I take nothing away from Professor Rouse.  But she’s a labor economist with a heavy, heavy specialty in returns to education.  Goolsbee, by contrast, focuses on taxation and capital formation.  Right now, I’d say the latter is our bigger concern.

More to the point, the worst financial crisis in seventy years is really not the time to see if you can brighten up the CEA offices with a nice, decorative matched set of X chromosomes.  Goolsbee has been advising Obama since the beginning; presumably, this is some sort of testimony to the esteem in which Obama holds his competence.

I wouldn’t go as far to describe this as “throwing him overboard” as Megan later does considering that he remains in contention for other posts, but I do hope that this is not a sign of the direction of the Obama administration. I primarily voted for Obama over McCain due to foreign policy (along with associated restrictions on civil liberties which come from the warfare state) and on social issues, but I had hoped that an Obama administration would present a change from traditional Democratic economic thought. Of course even if I had to choose between the Democrats and Republicans on economics, the economy and stock market still do better under the Democrats than Republicans.

It is premature to give up hope that the Chicago School will influence Obama’s economic thought, but this news is disappointing to libertarians and fiscal conservatives who have backed Obama. While some libertarians have had their views of Democrats totally warped by their overly close relationship to the right wing, a sensible interpretation can be seen at Swords Crossed:

Like Megan and other libertarians, I took solace in Goolsbee’s involvement and influence in the Obama economic team. He’s good economist in the correct sense of the term…meaning having a grasp of and respect for market fundamentals. YES! Believe it not (if you don’t waste time on Daily Kos and the like) Democratic-leaning economists can indeed be a respectful adherent to markets and all that such adherence entails…capital, tax feedback, regulations, incentive structure, behavioral concerns and so on. Goolsbee is an excellent economist in the U of Chicago tradition…just a different twist on that tradition from Milton Friedman. And if the range of our economic paradigm was between Goolsbee on the Left and Friedman on the Right, it would be a much, much better world economically speaking and I would much less cynical. Moreover, I find the politics of finding a women (and minority women at that) simply for its own sake on both counts (gender and race) to be beneath the message it seemed Obama was trying to convey.

Governing based upon sound economic policies, as opposed to identity politics, would be change that we could believe in, but as I don’t know very much about Rouse I also will not assume that because she provides diversity she necessarily won’t be a good choice.

Update: Looking at additional libertarian views, Arnold Kling does not necessarily see this as bad:

Megan knows Prof. Goolsbee better than I do, but my instinct about him is that he may lack a talent for the lateral relationship-building that is necessary to be effective in non-academic organizations.

Ms. Rouse appears to have dedicated much of her scholarly work to studying the returns to schooling. Not surprisingly (were you expecting Obama to name a Charles Murray disciple?), her research supports the proposition that the apparent returns to schooling are not due to ability alone, and that schooling itself has a significant return across all ability levels.

I see no reason to doubt her qualifications for CEA chair. Her work has not focused on macro, but when it comes to dealing with the current crisis, do we really care that she does not have a track record of producing Euler equations or calibrating general equilibrium models?

Tyler Cowen adds some information on her:

Alex posted earlier this year about Rouse’s important paper finding that education vouchers increase the quality of public schools.  Rouse was also an adviser for Kerry.

Brad Delong, a deputy assistant secretary of the Treasury under Clinton, was still predicting Goolsbee will receive the post yesterday.

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