Sacramento Bee: UC Berkeley economists playing key role in new administration

(Nothing to do with football, but I thought this would be interesting to most cal alumni.)

By Dale Kasler

Link.

Sure, there's a recession, but the arrows are pointing up for economists at the University of California, Berkeley.  Christina Romer, a professor here since 1988 and an expert on the Depression, was named by President-elect Barack Obama to chair the White House Council of Economic Advisers. She follows her colleague Laura Tyson, who held the post in the Clinton White House, and becomes the latest economist from Berkeley to snare a top job in a Democratic administration. Tyson and another Berkeley professor, Bill Clinton's labor secretary Robert Reich, are advising the Obama transition, and speculation is growing about others who might head to Washington.  Berkeley could be "losing our professors to the administration at an astonishing rate," said economist Brad DeLong, who was Clinton's deputy assistant treasury secretary. More than that, Romer's appointment is seen as validation of a Berkeley school of thought that says government shouldn't shrink from fixing the economy. That meshes with Obama's call for huge public works spending to create jobs.

"If Berkeley brings anything to Washington, it's that there are times when the government must intervene in the economy," said graduate student Jonathan Rose, who has studied under Romer. Berkeley's influence extends to other fields. Nobel Prize-winning physicist Steven Chu, director of the Lawrence Berkeley National Laboratory, is Obama's nominee for energy secretary. But much of the buzz is about economics, and there's some satisfaction that Berkeley-esque ideas seem to be gaining at the expense of the "Chicago School" – the free-market ideas of the late Milton Friedman and others at the University of Chicago that dominated Washington for much of the past generation. "There's always been an anti-Chicago school," DeLong said. "I wouldn't say it's clustered around Berkeley specifically, but we're certainly in there pitching."

Some here don't see Berkeley as a "school," with an overarching philosophy. Rather, they see Berkeley as a collection of realists who simply adjust to the times. Nowadays, that means government activism, which is becoming increasingly mainstream as the recession deepens.  "Notwithstanding Berkeley's reputation as being a hotbed of liberal or lefty activism … the faculty here who are involved in economics or economic policy are quite pragmatic," said Reich, a professor at the public policy school. "Government, regardless of one's ideology, has got to play a major role in getting us out of this mess." The lines indeed have blurred between right and left, between Chicago and Berkeley. Obama's longtime economic adviser, Austan Goolsbee, is a professor at the University of Chicago's business school and a free-trade centrist. Obama taught at Chicago's law school. "There are lots of people at Chicago that Berkeley would like to hire, and there are lots of people at Berkeley that Chicago would like to hire," said Chang-Tai Hsieh, who researched the Depression with Romer at Berkeley and now is an economist at Chicago. Still, there's an obvious kinship between Berkeley and Democratic administrations, prompting some conservatives to warn of excessive government control over the economy.

"The idea that a handful of people who went to Harvard – or Berkeley, now – know better than 300 million Americans … is fundamentally elitist," said conservative icon Grover Norquist. Obama attended Harvard Law School. Many here say Romer, and whoever follows her to Washington, D.C., will be more aggressive than the Bush administration about the recession. "(Current Treasury Secretary) Henry Paulson's made a bunch of mistakes in the past six months by not being activist enough," DeLong said. "She won't make that mistake."

Romer, who turns 50 on Christmas Day, isn't giving interviews. Around the economics department on campus here, the only hint of her new fame is an unsigned congratulatory note, printed out on a white sheet of paper and pinned to her door. Her research papers show a belief in actively using budget and monetary policy to spur economic growth. She is a scholar of the Depression, a specialty she shares with Federal Reserve Chairman Ben Bernanke, and has written papers saying the government erred by not pumping more money into the system in the 1930s. Romer and Bernanke "share that view, that it was a big mistake," Tyson said. "That took it from a stock market crash and a recession into a global Depression." Romer's appointment has created excitement on campus. Recently, at the economics department's weekly reception – a casual affair in a bare-bones room, with an Australian shepherd wandering about largely unnoticed – students munched on cookies while talking about exams, research papers and the gossip about who else might go to Washington. Reich's name surfaced, although he said in an interview that he's probably staying put. The same with Tyson. Another possibility was budget expert Alan Auerbach ("News to me," he said in an interview). The only obvious departure is Romer's husband, David, also an economist here. "We're a little concerned about filling openings," said graduate student Mike Urbancic. "Things are going to be a little thin."