Why an economist?
WellesleyWeston Magazine: You have had a remarkable career both in the public and private sector. What is it about economics that piqued your interest?
Greg Mankiw: I first became interested in economics during my freshman year at Princeton. One of my friends was taking a microeconomics class; I started reading her textbook and found that I like economics, a lot. In many ways I am a prototypical economist. Economists share a couple of characteristics: they tend to be naturally better in math and science—economics is fairly quantitative—and they are generally more interested in public policy and social issues than in the substance of science. I have always been interested in politics—dinner conversation in my home often centered on what was happening locally and in Washington. But politics by itself seemed vague, random, and subjective. Economics appealed to me because it brought an analytic perspective to social policy questions.
On complexity of US political system:
WW: In your experience heading the Council of Economic Advisors, how much does economics really affect public policy?
GM: The Council has only an advisory function. It has no decision-making power over anything. My day started with a 7:30 am meeting every morning in the Roosevelt Room, the conference room right next to the Oval Office, with members of the White House senior staff. Everyone was fully prepared for the meeting, having already read the news of the day. This was quite a shock for an academic—no one at Harvard would ever dream of calling a meeting at 7:30 am!
I also met regularly with the Administration’s economic policy team—the head of the National Economic Council, the Secretary of the Treasury, the Commerce Secretary, and the Head of the Office of Management and Budget. We coordinated the economic policy effort with a goal of providing either a recommendation or a menu of options for the President to consider regarding the economic policy issues of the day. Several times a week we would meet with the President to discuss the pros and cons of our recommendations. Ultimately, he was the decision maker.
But that’s not the end of the story. When I went down to Washington, I thought the political constraints [on economic policy] would come through political advisors, people like Karl Rove, but they usually came from Legislative Affairs, the group that acts as a liaison between the President and Congress. Congress provides powerful political constraints. From the outside it often seems like there are only two teams in Washington: Republicans and Democrats. But it is really far more nuanced that. There is the Administration and the Congress; and within Congress, there is the Senate and the House; and there are coalitions within each of them. Everyone is looking over their shoulder trying to figure out what they can get passed; everyone is promoting their own agenda. It is very easy to get frustrated, thinking, “Gosh, it’s really terrible we can’t get our economic agenda through and we have all these great ideas.” But then you realize that these checks and balances are precisely the system for which the founding fathers were aiming.
It is the same everywhere. That is why all economists must read this note from Blinder before advising governments/taking up policy roles.