Dr. Mussa, who defended the IMF’s role in Asia, shot back, “Those who argue that monetary policy should have been eased rather than tightened are smoking something that is not entirely legal.”
“This is a controversy that goes on,” said Alan S. Blinder, a Princeton University economist who had been the Federal Reserve System’s vice chairman during the Bill Clinton administration.
(James K.W. Atherton/THE WASHINGTON POST) - Michael L. Mussa in 1988, when he was part of the three-member U.S. Council of Economic Advisers.
“One of the points Mike Mussa was making, a correct point by the way, is that once a government has gotten to the point it can’t borrow any longer, it must balance its budget. Balancing a budget in a recession may be a bad fiscal policy idea, as Stiglitz and many people have said. But if you literally can’t borrow any longer because you’ve lost credit worthiness in a crisis, there isn’t any choice unless someone comes and bails you out, including the IMF.”
Dr. Mussa was not allergic to self-criticism, as he showed in his 2002 book, “Argentina and the Fund: From Triumph to Tragedy.” In the book, he argued that the IMF had lent too generously to Argentina at a time when the country had staggering budget deficits. Thousands of people were thrown into poverty after the country defaulted on its debts in the early 2000s.
Risks such as lending to troubled countries always carried the potential for “moral hazards,” Dr. Mussa said. That is, the practice exposed the IMF to criticism that throwing money at failing economies would only encourage bad behavior.
Responding to IMF detractors, he liked to invoke the sinking of the Titanic.
“There are some,” he said facetiously, “who believe the real disaster in the North Atlantic on that cold April morning was not that the Titanic sank with the loss of 1,500 lives. It was instead that 800 were saved. Think of it. If we had had a policy of no rescues, we would have sent a clear message that ocean safety has to be of paramount concern to passengers, crews and ocean shipping lines.”
Michael Louis Mussa was born in Los Angeles on April 15, 1944. He received a bachelor’s degree in economics and mathematics from the University of California at Los Angeles in 1966. His economics doctorate was from the University of Chicago in 1974.
He was on the economics faculty at the University of Rochester from 1971 to 1976, followed by a research fellowship at the London School of Economics. In 1981, he received the University of Geneva’s prestigious Prix Mondial Nessim Habif for research in international economics.
Dr. Mussa never married. Survivors include a brother.
“My favorite economic policy tool is prayer,” Dr. Mussa once said. “It is not demonstrably less effective than the others, and it carries none of the bad side effects.”
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