Top White House economic adviser Lawrence Summers, asked whether he has second thoughts about economic policies he oversaw in the 1990s, said the current crisis requires him to take a new approach.
“Look, I think the world has changed in very profound ways since the 1990s,” said Summers, who served as Treasury secretary in the Clinton administration. He spoke Thursday at The Economic Club of Washington, D.C.
“Credit default swaps were a blip in the financial system at the end of the 1990s,” Summers continued. “The scale of derivative transactions has increased, probably not quite by an order of magnitude, but close since the end of the 1990s. And I think it’s fair to say that very, very few people predicted or fully foresaw some of the structural weaknesses laid bare by the events of the last couple of years.”
Summers said that policies should be decided on an issue-by-issue basis, a point he underscored by retelling the response by economist John Maynard Keynes to someone who questioned a shift in his views.
“When new information arrives I change my mind,” Keynes told the questioner, according to Summers. “And you?”
Summers earlier in his interview Thursday said he thought he was able to make the world a better place in the 1990s, when he served as President Clinton’s Treasury secretary.
“I think I’m proud to have played a role in the economic success in the 1990s,” he said. “Part of the reason I went into economics and part of the reason I went into macroeonomics was that I realized that managing all of this stuff — budgets, banks, flows of capital, interest rates — for better or worse, really did touch the lives of millions of people in very important ways. And I think in the 1990s we were fortunate that we were able to manage those policies in relatively successful ways and I think it really affected the lives of a very large number of people in ways that made those lives better.”
Summers, known for his intelligence and blunt demeanor, also joked about why he entered economics, a field his family has already excelled in.
“I saw what some of the real hot-shot mathematicians and physicists at MIT were like and I decided that perhaps another direction might be optimal sort of an experience,” he said to laughter.