What's the Big Idea?
How did Christina Romer do as an Obama economic adviser? Ask Christina Romer.
So, how do we assess the performance of Christina Romer, who is stepping down after 19 months as the chair of President Obama's Council of Economic Advisers to return to the University of California at Berkeley? It just so happens that one person particularly qualified to judge CEA chair Christina Romer is, well, professor Christina Romer.
Back in 2002, at a Federal Reserve Bank of Kansas City conference, Romer, then a Berkeley professor, presented a paper titled "The Evolution of Economic Understanding and Postwar Stabilization Policy." The study, co-authored with her husband, David Romer, reviewed decades' worth of economic policy, statements and forecasts by successive administrations and the Federal Reserve, assessing the policies and beliefs of officials since the end of World War II. As part of their painstaking research, the Romers even parsed the text of past Economic Reports of the President -- the same report that Christine Romer led in her administration post.
They concluded that economic wisdom does not move in a straight line from less knowledge to more. Rather, policymakers evolved from a "crude but fundamentally sensible model" of the economy in the 1950s to a "more formal but faulty" approach in the 1960s and 1970s, and then to a view that was "both sensible and sophisticated" in the 1980s and 1990s.
Concerns about how to balance growth and inflation were ever present in this period, but the pendulum shifted dramatically over time, with different administrations judging the trade-off very differently. In her time at the CEA, Romer was an advocate of the stimulus package Obama signed into law early in his presidency and has pushed for more spending to spur growth.
In their study, the Romers also found that internal economic forecasts generally improved in the 1980s and '90s, losing some of the excessive optimism of previous years -- a bit of an irony since, as CEA chair, Romer came under fire for forecasting that the stimulus was going to keep unemployment from surpassing 8 percent. (It passed 10 percent last fall and now stands at 9.5 percent.)
Still, the paper concludes with a note of optimism, suggesting that policy shifts are driven less by ideology and political objectives and more by changes in our understanding of how the economy functions -- meaning that policy should improve over time, though with some twists and turns along the way. Now Romer will have a chance to expand the study back at Berkeley to include her own public record, or expand her record if she is picked to run the Federal Reserve Bank of San Francisco.