The NY Times celebrates the successful leadership provided by Richard Levin at Yale for almost 20 years. From this one data point, can we jump to the conclusion that the world would function better if economists were in charge? Harvard was well run when an obscure economist was recently its President. What became of that modest man? Brown University and Northwestern University are now running my field experiment but no branches of the University of California are willing to take my treatment (i.e naming an economist to lead). Does that surprise you?
As long time readers of this blog know, I have written about what would happen if Paul Krugman and Robert Barro managed to be named co-Presidents of the United States. Other economists found my piece to be funny but called me politically naive claiming that the Ph.D. economists when faced with political constraints would start acting like politicians! My critics claimed that the incentivized economists (now serving as President) would do all the crazy stuff that economists critique real politicians for doing.
On some level that's a sad claim. If taken literally it means that our "leaders" know that they are doing silly stuff but that they have to take these misguided actions to keep political power. My less cynical theory is that leaders often have good intentions but don't know the "production functions" of how inputs map into output and don't know the size of key behavioral elasticties such as the slopes of demand curves and supply curves. Economists have a better understanding of how to design incentives and how to create mechanisms that encourage those with private information to reveal it.
