(End of) Summers Updates

Bloomberg has a piece this morning about the debt swap fiasco at Harvard, and what it says about Larry Summers's tolerance for risk and his suitability for the Fed job. I am glad that the reporter at least mentioned the Shleifer affair as a factor in Summers's exit from the presidency, though the reference to Shleifer is too obscure to serve as anything but a reminder to the small number of people who knew about it already. The same reporter wrote a stronger piece several years ago.

Summers's defenders have a fair argument when they say that Summers can't be held responsible for the disaster caused by the inaction of his successors. The investments, goes the argument, were unconventional but smart ("brilliant," I can almost hear them say) at the time, but they required constant monitoring for changes in the interest rate picture. The losses came because Harvard waited too long once Summers was gone and, apparently, no longer micromanaging the investments.

I said that argument was fair--I did not say it was convincing. The counter-argument is that these investments were utterly inappropriate for any non-profit, certainly at the scale they were being made. In fact the logic of the defense raises more questions than it tries to answer. EITHER these investments were Larry's personal play, in which case the Harvard Corporation was letting him make billion-dollar gambles. OR these investments were subject to thorough vetting by the Corporation, in which case the Corporation should be honest enough to take responsibility for making investments that no expert on nonprofit management would defend. And let's see now--who is on the Harvard Corporation who might have been thinking about this bright idea of Larry's? Why, his old crony capitalism buddy Robert Rubin. (Cf. my 2009 Huffington Post piece.) But no, Summers's apologists are instead throwing our history professor president under the bus.

The blame lies with Faust and her administration, not Summers, said Brad DeLong, an economics professor at the University of California, Berkeley. They failed to monitor the contracts and opted to terminate them at a time when the financial panic made the cost of exiting more expensive.

That is outrageous. Fine, maybe throw in some blame for the CFO. But where are the Treasurer, the Senior Fellow, and most of all, the financial wizard Mr. Rubin, either at the time these bets were made or the time they were lost?

But enough on the debt swaps. A couple of other interesting pieces have appeared lately.

In a post modestly called The Confidential Memorandum at the Heart of the Global Financial Crisis, Greg Palast parses a curious memo of which he somehow got a copy. Here is Palast's opening:

When a little birdie dropped the End Game memo through my window, its content was so explosive, so sick and plain evil, I just couldn’t believe it.

The Memo confirmed every conspiracy freak’s fantasy:  that in the late 1990s, the top US Treasury officials secretly conspired with a small cabal of banker big-shots to rip apart financial regulation across the planet.  When you see 26.3%unemployment in Spain, desperation and hunger in Greece, riots in Indonesia and Detroit in bankruptcy, go back to this End Game memo, the genesis of the blood and tears. 

The Treasury official playing the bankers’ secret End Game was Larry Summers.  Today, Summers is Barack Obama’s leading choice for Chairman of the US Federal Reserve, the world’s central bank.  If the confidential memo is authentic, then Summers shouldn’t be serving on the Fed, he should be serving hard time in some dungeon reserved for the criminally insane of the finance world. 

The memo is authentic.

Now this is a fascinating piece. I don't know anything about Palast and I am in no position to comment on any part of Palast's interpretation of the significance of this memo. But one part of his explanation looked quite familiar.

To avoid Summers having to call his office to get the phone numbers (which, under US law, would have to appear on public logs), Geithner listed their private lines.  And here they are: 

• Goldman Sachs:  John Corzine (212)902-8281
• Merrill Lynch:  David Kamanski (212)449-6868
• Bank of America, David Coulter (415)622-2255
• Citibank:  John Reed (212)559-2732
• Chase Manhattan:  Walter Shipley (212)270-1380

No, I don't recognize the phone numbers, but there is something familiar about the idea of doing something that a law is clearly intended to prevent but technically does not prevent. It reminded me of something Summers said in his deposition in the Shleifer case.

12. I did, I believe, remark at one stage that because of the sensitivity that I had acquired in Washington to ethics rules, which at least in my experience in Washington I wasn't ever smart enough to predict -- things that seemed very ethical to me were thought of as problematic and things that seemed quite problematic to me were thought of as perfectly fine -- and so I remarked that it would be a good idea for him to make sure that he was operating within the rules of whatever legal arrangements he had with Harvard. 

As I said in an earlier post, "The flip side of suggesting that ethical rules are arbitrary, and what you need to do is adhere to whatever the rules say, is to suggest that if the rules don't prohibit it there isn't anything wrong with it and you might as well do it if it's profitable."

And while we are on the subject of profiting from technicalities in the rules, the MathBabe blog has a fascinating piece about The Lending Club, one of the many businesses on whose boards Summers serves. TLC is a social-network-enabled, person-to-person lending business. How can a social network make money in the risky business of facilitating loans between individuals? By screening borrowers on the basis of the information about them via the social networks to which they belong. But if they can make money doing that, why can't banks exploit the same information to cut their default rates? Because they legally can't. There are laws such as the Equal Credit Opportunity Act that would prevent banks from lending money, say, only to Turkish people and not to Azerbaijanis,, even if Turks were generally the best credit risks and Azerbaijanis tended to be deadbeats. By federal law, banks can't use race, or gender or a bunch of the other expected criteria, as the basis for deciding whether to lend you money.

But TLC can, or can use social network data to infer your race, gender, sexual orientation, etc. with such high probability that TLC can beat the banks and make lots of money. Why? Because TLC is a lending company that is not subject to the laws that were put in place to ensure that minority groups would not be redlined by the banks.

As MathBabe says (her real name is Cathy O'Neil), employers are already alarmingly good at screening  out applicants through guilt-by-association online searches. If you never get called back for an interview, you may never know whether it is because of something in your resume or because you have too many Black friends on Facebook. And

people denied loans from Lending Club by a secret algorithm don’t know why either. Maybe it’s because I made friends with the wrong person on Facebook? Maybe I should just go ahead and stop being friends with anyone who might put my electronic credit score at risk?

Nice business, totally legal. No wonder TLC wanted Summers on its Board -- the value of knowing the banking rules, the profitable but socially regressive abuses they were meant to prevent, and how to work around them is hard to overstate.

And finally -- last one for tonight, I promise -- Laurence Kotlikoff and Jeffrey Sachs have another strong piece today entitled "Why Wall Street Wants Larry Summers and the Rest of Us Should Not." Answer: Because he is so expert at profitable ethical compromises that fly under the radar of illegality. But the authors continue to question even what is sometimes held to be one of Summers's strengths.

If Summers had demonstrated some magical powers of macroeconomic judgment over the years, his revolving-door approach to personal enrichment might be held in a different light, at least partially. Yet Summers has not displayed such magical powers. He has failed repeatedly to anticipate financial crises, whether in Mexico, Russia, and East Asia in the 1990s, when he had the Treasury’s international portfolio, or in the sub-prime crisis. 

His crisis responses have been undistinguished as well. Most recently, Summer’s Keynesian policies piled on trillions of dollars of public debt but did very little to restore robust growth or reign in risky bank behavior. Behind the scenes Summers has also been on the biggest foes of responding effectively to climate change, another example of his big-business bias.

Again, I can't judge. Whatever Summers's policy strengths and weaknesses, and strengths and weaknesses as a crisis manager, I still think, with David Warsh, that the Shleifer affair should rule him out for the Fed or any other high office.

The closer you look at Summers’s not-so-tacit approval of the affair, the more appalling it becomes. That fact that no one in economics has mounted a defense of Shleifer’s and Summers’s conduct – not Andrei, not Larry, not any of their numerous seconds – should tell you all you need to know: their actions were indefensible. All the more alarming has been Summers’s ability to suppress criticism.  Taken altogether, my hunch is that the story is more than enough to put the kibosh on his appointment.  He can make money, give advice, mentor students, but no more running for high office.

Amen.

(Thanks to the readers who pointed me to several of these articles.)

Guest Post by David Ellerman

[David Ellerman has worked in economics, mathematics, and philosophy, spent twenty years in academia, and was an economic advisor to the World Bank from 1992-2001. He is now retired from his full time roles and is a Visiting Scholar at UC Riverside. I had never heard of him that I recall until I received this fascinating email from him unbidden. I am reprinting it here with his permission.]

I thought you might want to learn some of the backstory to the the Summers-Shleifer affair that you have so wonderfully written about in HuffPost (a link I got from David Warsh who is also a player in the story).

The general theme is the role played by the Harvard wunderkinder, Sachs, Summers, and Shleifer, in the imposition of shock therapy in many of the post-socialist countries, principally the Former Soviet Union and particularly Russia. I was part of the opposing side promoting forms of employee ownership (like the American Employee Stock Ownership Plan or ESOP) so that the people in those countries would “meet the market” as something that empowered them since the employee ownership would legalize in a sustainable private form the de facto rights that employees had acquired in one form or another in the socialist enterprises.

The shock therapy side wanted to eradicate any such de facto rights as “remnants of communism” and to throw the ownership of all enterprises of any size onto the easily manipulated stock markets through some form of voucher privatization (each citizen would get a voucher to buy shares in companies or mutual funds on the stock market in exchange for their accumulated de facto rights in their own enterprise). With all the marbles set loose on the table top, anyone with any power could tilt the table in their direction so, in country after country, we saw the rise of the oligarchs (not just in Russia) and the disenfranchising of the population and their disillusionment with the market, private property, and western democracy. No group of westerners played a larger role than the Harvard wunderkinder in this sorry period of recent history in establishing the Big Bang that eventually became the big bust for everyone but the new elites in those countries.

Jeff Sachs was first out of the blocks in the promotion of shock therapy and voucher privatization in the late 80’s (leaving his great Harvard rival in the Econ Dept green with envy). I had left academia (teaching economics, math, and computer science) to set up a consulting company in Ljubljana Slovenia (then part of Yugoslavia where the workers’ de facto rights were the greatest). As the ESOP law I helped draft with local professors (with PhDs from Penn and Cornell) was sailing through Parliament, Jeff Sachs was brought in by a group of ex-Yugoslav right-wingers to apply Harvard’s and his prestige against the bill, which they succeeded in stopping. David Warsh tells the story well in the attached Boston Globe column from 1991. But the workers, managers, and many other local groups (even Rotary Club!) rallied to defeat the Sachs voucher privatization law, so Slovenia had no privatization law for several years. Since I could not then do the consulting work I planned to do, I accepted an offer to join the World Bank (to help fight the shock therapy from the inside as it were).

That is where Larry Summers enters the picture. I first met Larry in late 89 when Larry, Lester Thurow, and I were invited to come down from Boston to NYC to have a lunch with Yeltsin in the latter’s first trip to the US. Larry was anxious to get a piece of the action that was then captured by his great rival as an economicswunderkinder, Jeff. Since Larry was not the P.T.Barnum of self-promotion like Jeff, he decided to take the institutional route and accepted the Chief Economist’s job in the World Bank. From there Larry moved on to Treasury in the Clinton Administration where he was able to engineer the Russian contracts his protégé Shleifer, and you know the rest of that story. Through it all, he promoted the themes and the people in Russia who were behind voucher privatization and the stock-marketization of the economy, e.g., Chubias and Vasielev (who was head of the stock market dept in the govt. designing the regulations etc.).

In this manner, Larry eventually eclipsed his internal Harvard rival who could not bring similar resources to the table, so Sachs turned his attention to “saving Africa.”

But the Sachs-Summers story had at least one more chapter. Larry’s contract for Shleifer at the HIID was set up under Dwight Perkins, so when Jeff took over HIID, it was a substantial part of the HIID business. This was not to the liking of Jeff’s ego. Since I was doing most of my work for the World Bank in Russia, rumors about the dubious activities of the “Center for Law-Based Economy” (Shleifer and Hays’ outfit) had been circulating for some time. The rumors were that they would write legislation and regulations “by day” and then “by night” consult with friends (and wives) to help them get the jump on the rivals for entry into the Russian financial markets. One of the big Swiss banking concerns who was edged out of getting the first license even spread the rumors far and wide outside of Moscow. The press and USAID paid little attention, but when Jeff heard the rumors, then he went into overdrive to surface the stories and force some investigations which eventuated in the Justice Dept. suit (Sarah Bloom, one of lead attorneys there, scheduled me to testify in the Shleifer/Harvard suit but they eventually settled out of court).

Since Shleifer was the one directly involved in Russia, he was particularly keen to sabotage any attempt to have an ESOP option in the Russian privatization law. When some Russians drafted by ESOP option, he went into high gear to have it killed. He enlisted an American ESOP expert to testify how bad the proposed Russian ESOP was in exchange for helping him to draft a “good Russian ESOP law” he would be the father of the Russian ESOP etc. Since I was a primary proponent of an ESOP privatization law (like we tried to do in Slovenia), the American ESOP expert arranged a “secret meeting” between Shleifer and myself, him coming down from Boston and me coming up from the World Bank in Washington to meet for a late dinner in an Italian restaurant in NYC. I wasn’t buying the deal, but they managed to scuttle the proposed Russian law without my help. Once that law was killed, the offer to help the American ESOP expert draft a “good law” evaporated.

By 1997, I had become advisor and speechwriter to the new World Bank Chief Economist, Joe Stiglitz, and I wrote speeches and papers, principally the one called “Whither Reform?”, that finally started turning the tide against shock therapy in the Bank but the damage had long since been done. Much of this sorry history is in the attached Challenge article which reviewed the situation ten years later (and there is much else on my website:www.ellerman.org ).

My point is that the human damage done by the Harvard wunderkinder, mainly Summers/Shleifer, in the imposition of shock therapy and voucher privatization in Russia (and many other countries) goes far beyond the issues that were at stake in the Harvard Suit or Larry’s tempests in the Harvard teapot during his Presidency.

Does the Fed Chair Need to be Ethical?

Yes, argue Laurence Kotlikoff and Jeffrey Sachs in the Huffington Post, and Larry Summers does not meet the standard.

Alan Greenspan presided over the worst monetary disaster in modern history in no small measure because of his lifelong belief in the morality of unbridled wealth seeking. Ayn Rand, Greenspan's guru as a young man, taught Greenspan that the rich and powerful should be unrestrained by the weaker parts of society. Greenspan put that ethically repugnant and naïve idea to work, and thereby helped to create the biggest financial crisis in history. 

Robert Rubin, Greenspan's enabler and partner in this disaster, is the reigning champion of the Wall Street-Washington revolving door that has done so much to corrupt both Wall Street and Washington. As Treasury Secretary, Rubin led the fight for financial deregulation that enabled Citicorp and Travelers Group to merge into Citigroup. Within months of leaving the government, Rubin took an enormously lucrative job at Citigroup. Nine years later, having collected a reported $126 million in compensation, Rubin helped to install his many acolytes, including Larry Summers, into the Obama White House where they would oversee the mega-bailout of Citigroup and other Wall Street firms. 

Larry Summers is the third of the Greenspan-Rubin-Summers triumvirate. He, like his patron Rubin, has excelled at the Wall Street-Washington revolving door, also heading for Wall Street in the early 2000s after helping Rubin push through financial deregulation in the Clinton period. Even in the short time since leaving the Obama White House, and knowing that he would be a candidate for the Fed job, Summers couldn't restrain himself from heading straight back to lucrative advisory positions on Wall Street with Citigroup and, reportedly, several other firms. While in the Obama White House, Summers protected the financial industry from attempts to crack down on their recklessly high and unjustified compensation. (For example, see here). Characteristically, when one of Summers' friends and colleagues at Harvard engaged in serious financial malfeasance, Summers shrugged it off, even under oath.

 That is a reference to Summers's deposition in the Harvard-in-Russia mess (see my earlier HuffPo piece, or my older one on the same triumvirate). It is widely known that Sachs and Summers are long-time rivals, but that doesn't change anything stated in this piece.

Can Obama yet be considering Summers?

Three People Worth Reading About: Summers, Parker, Dobelle

A grab bag for Sunday evening reading.

On his Economic Principals site, David Warsh wonders (as I have often enough) why there has been so little interest in Larry Summers' complicity in the mess Andrei Shleifer created during the years when Harvard was charged by the U.S. government with helping the new Russian state create an honest capitalist economy. This sorry business cost Harvard tens of millions of dollars, and it was Summers's unwillingness even to acknowledge any shame on Harvard's behalf that turned the faculty decisively against him. In this retelling, Warsh adds two novel emphases. First, Warsh notes how privileged and protected Summers has been through his entire career, and how almost none of the journalists and economists who should have made the Shleifer affair part of their narrative have chosen to do so. By refusing to say anything about this scandal, and by working their network of influence, both Summers and Shleifer have escaped almost unharmed. And second, Warsh wonders if Obama's problems with Vladimir Putin might be traced in part to the Harvard-in-Russia scandal:

The story of Harvard’s Russia scandal may not be well-known in the United States or Great Britain, but its ironies are familiar to well-informed citizens in the former Soviet Union.  Some part of the saga could have gone through Vladimir Putin’s mind in the course of his Dublin meetings with Barack Obama last month; its implications (does he know?  does he know and not care?) may have contributed to the Russian president’s thinly-veiled contempt.

This is not as far-fetched as it may sound to the casual observer. A few years ago I had a chance encounter with a scholar of contemporary Russia, who told me that Putin became enraged when Harvard was mentioned. Is it really possible that Obama is unaware of all this "tawdry affair"?

In the Boston Globe, John Powers has a lovely account of the tribute paid to Harvard's late crew coach Harry Parker. No fair-minded person could read this and not think that, with all the corruption of intercollegiate athletics, there remain a few pockets of dignity, and a few coaches who teach much better lessons than the ones students learn in the average Harvard classroom.

And also in the Globe is the latest chapter in the extraordinary story of survival and prosperity of one Evan Dobelle. Not a household name perhaps, but former president of both Trinity College in Hartford, CT and the University of Hawaii, and currently president of Westfield State University in Massachusetts. A fascinating character for his extravagance and ambition. But what interests me the most in this story is that Dobelle is doing in Massachusetts exactly what he was run out of Hawaii for having done -- playing fast and loose with other people's money. It does make you sympathize with the folks at the American Council of Trustees and Alumni, who think there are too many lazy college trustees. Did no one at Westfield, or anyone else responsible for the public trust in Massachusetts, pick up the phone and call anyone in Hawaii? The best that the board chair can say is that "He was the best candidate who was in front of us at that time" -- a classic statement of the bureaucratic principle that if the process was good, no apologies are needed for the result, no matter how dreadful.

Bonus for Globe subscribers: fabulous Dan Wasserman editorial cartoon, drawing parallels between Whitey Bulger and Larry Summers (an analogy I have used myself).

"Saving Your Children from a Harvard Education"

That is the title of Jeff Madrick's "Anti-Economist" column in the September Harper's Magazine. (Sorry, bBehind a paywall.) The particular part of a Harvard education from which Madrick wants to save your children is the part offered by Harvard economists, including Greg Mankiw and Niall Ferguson in particular, but with an honorable mention to Ken Rogoff also for his blunder about economic growth and national debt -- discovered only when he finally released his data, and never adequately retracted.

Madrick quotes from this blog in a couple of places. I'll just include his bottom line.

The embarrassing fate of Reinhart and Rogoff’s work has helped to quiet some of the calls for austerity. Perhaps it will also encourage more soul- searching of the kind Harry Lewis has undertaken. 

“One of the reasons that moral courage is lacking in the [United States] is that it is lacking in universities,” Lewis wrote recently. "As institutions, they now operate much more like ordinary corporations, fearful of bad publicity, eager to stay on good terms with the government, and focused on their bottom lines, than as boiling cauldrons of unconventional ideas sorted out through a process of disputation, debate, and occasional dramatic gestures." 

It may be a very long time before the change Lewis describes is re- versed. Until then, we should at least be less willing to accept an idea just because a name-brand university is attached to it. 

We at Harvard never acknowledge that anything our professors do is embarrassing, or worse. Not Shleifer and his conspiracy to defraud the government, not Michael Porter and his canoodling with the Ghaddafis, not Ferguson and his high-priced, homophobic speechifying, not the educational negligence in the Government Department that led to last year's "cheating scandal," not Summers and his double-dipping. There is great irony in this -- the standard excuse for institutional moral neutrality is academic freedom: it would chill discourse if any university official were to point out that these people are, to paraphrase what one professor said to me, staining the uniform the rest of us wear. Rank and file faculty also rarely speak up, because the entire incentive and reward system of the university is directed toward the opinions of our professional peers elsewhere, not toward critical love for our own institutions. Sooner or later, however, society will get fed up with us for tolerating destructive nonsense from our fellow professors, and will stop giving all of us the respect and support we need to pursue our mission.

[Added 20 Aug: It was observed to me that there is no need for me to apologize for linking to an article behind a paywall, and in fact I should be encouraging people to spend the few bucks needed to gain access to the article, and much more. Publishing longish, thoughtful essays is important and not a money business these days, so I am happy to encourage readers to help preserve it.]

Maybe a typo?

Larry Summers never ceases to amaze. Not only can he manage a huge load of outside activities on the one day a week Harvard allows professors for consulting, he can teach two different undergraduate courses that meet at the same hour! Summers is scheduled to teach both Ec 1400 (The Future of Globalization) and Ec 1420 (American Economic Policy) in the spring, one meeting MW 10-11:30 and the other meeting MWF 10-11. How will he manage? Both courses are co-taught. Maybe he will alternate, or attend one only for its Friday meetings.

For students, there is a rule against enrolling in two courses that meet at the same time like this. If it is not a typo, this would not be the first time that the faculty does not hold itself to the same standard it applies to students. But as usual, the real question is not what the rules say; it's whether it would be OK if we all did it. (Summers is also co-teaching a seminar in the spring at the Kennedy and Law Schools. He seems not to be teaching in the fall. Of course this may all be moot if he is appointed to direct the Fed, though who knows -- given his track record, maybe he can do all these things simultaneously!)

Senator Blumenthal and FISA

Richard Blumenthal (D-CT) spoke at the Law School this afternoon about the FISA court, and various pieces of legislation he is proposing that would reform some of the ways it works. For example, one proposed law would change the way the judges are appointed--Linda Greenhouse this morning notes that they are almost all Republicans, probably because they have all been appointed by John Roberts. I can't comment on the specifics of his proposals and others he is co-sponsoring, but I was glad to hear him acknowledge so forthrightly that most of Congress, including many who were involved in writing the enabling legislation, are surprised at how broadly the laws have been interpreted. He pointed in particular to the very broad (unfalsifiable, we might say) interpretation of what is allegedly "relevant" to a foreign intelligence issue and therefore OK to search, Fourth Amendment notwithstanding.

Blumenthal invited questions after his talk and I asked the one I blogged about earlier. It seems to me (but I may be wrong, can you clarify?) that some of the search programs are premised on the notion that it is neither a search nor a seizure to collect vast amounts of information indiscriminately, as long as no one actually peeks at it until sometime later when they have a warrant to retrieve something specific. Am I right, I asked, that this is the interpretation of the Fourth Amendment by which these programs are being run?

Blumenthal answered that he didn't know, because FISA court opinions have not been made public. I think it was an honest answer, but one that may have intentionally answered the easier question, which was whether particular searches of the databases (the peeks into data collected in the past) were being done responsibly. No way to know that either, but that was not my question.

There were a few news stories a week or so ago (here is one summary) about how other federal agencies were going exactly where you would expect them to go, once they know that NSA has these huge databases. They have crimes to solve and threats to ward off too. The data is already there; don't we want to look into it if it would help solve, or prevent, the next Oklahoma City bombing, an event that had nothing to do with any foreign power? So tempting. And once that precedent is established, where would we go next?

The collection of such huge databases, just because it is possible and may come in handy some day, is an invitation to mischief by future legislators. It will be easy to authorize some future category of search of some existing database being formed right now, if the category contains the crucial clue to some horror and the data exist already. The category, once defined, will be abused (we have some experience with that here at Harvard). The hard part was giving the government the authority to collect all that data in the first place. Have we done that?

Can the great American universities take root in Asia?

• Cross-posting here a column published August 5 in the South China Morning Post (Hong Kong).
• 
  
• 

Can the great American universities take root in Asia?

The news that Chicago Booth Business School's executive MBA programme would relocate from Singapore was greeted in Hong Kong with as much enthusiasm as the acquisition of a star athlete. Education Secretary Eddie Ng Hak-kim trumpeted that the move would "enhance Hong Kong's position as a regional education hub, nurture talent to support the growth of our economy, and strengthen Hong Kong's competitiveness".

He could have been Hong Kong's cricket coach welcoming Mark Chapman from New Zealand only a week earlier: "We have a very good opportunity of playing in a World Cup for the first time and with the line-up we have, I think we can do it."

But the ongoing changes in higher education are more like biological evolution than a cricket match. Extinction too is part of evolution—and several other American outposts in Singapore, including New York University's Tisch School of the Arts and the hotel school of University of Nevada, Las Vegas (UNLV), are pulling out of the city state with uncertain future plans.

Asia is trying to shortcut a process that took centuries to create the great American universities. And American universities seem to think that an intellectual Bering land bridge has opened. Suddenly they see huge areas with no natural competitors, a promising ecosystem for invasive species.

For a university ... giving up the right to political expression means giving up the pursuit of the truth

This is vanity on both sides, I expect. I wonder how we will think about today's higher education innovations a few decades from now. Perhaps some of the new institutions will prove to be failed experiments, mutations that proved not to fit the environmental niche. The Singapore government was unwilling to keep subsidising UNLV, for example, and a joint Singaporean venture with New York University School of Law is closing after spending down its sizeable government subsidy.

All is guesswork and experimentation. Will any of these American transplants survive for even a decade? And if they survive for the century, will they and their venerable American cousins have become strangers to each other, like the snapping shrimp that no longer recognise each other as relatives because the rising Isthmus of Panama separated them into Caribbean and Pacific species?

If it's too expensive for universities to do business in Singapore - and the strength of the Singapore dollar is part of the story - how will they do in Hong Kong? That may depend on the willingness of Hong Kong to continue the kinds of subsidies that drew the Chicago Business School. Hong Kong is charging Chicago a mere HK$1,000 for a 10-year lease on old officers' quarters on Hong Kong Island. I hope Hong Kong's own universities, themselves products of a continuing evolutionary process, are treated equally well. The University of Chicago is surely grateful to the people of Hong Kong for making its very profitable business programme even more lucrative.

There is a risk that Hong Kong, like Singapore, will find these subsidies unsustainable. Perhaps the government should wait a few years before celebrating its triumph. As a Singaporean official said: "If a branded school is unable to persuade its students to pay their market fees, then it suggests that the brand may not be so attractive after all."

The cream of the crop of academic exotics in Asia is the Yale-National University of Singapore campus, set to open soon. Will the environment be rich enough - in Singaporean and American funds, and Asian students - to keep it alive? So far, none of the closures seems to be related to issues that deeply concern the Yale faculty: how to teach in the spirit of open inquiry in a place where one can be jailed for criticising the government (or for homosexuality, or a variety of other things unconstrained in American universities).

At some point, American universities venturing into authoritarian states will have to square their ambitions with the values of their host countries. NYU president John Sexton's statement about his university's Shanghai campus won't wash forever: "I have no trouble distinguishing between rights of academic freedom and rights of political expression."

Tell that to the students of the Hopkins-Nanjing Center, who thought they would be able to publish a magazine with an article about student protests, just as they could have done at Johns Hopkins University or anywhere else in the US. The article was censored, and the magazine was put in limbo.

Sexton is wrong. Anything can be political, not just the liberal arts but also the professional practice of business or law. For a university in which students can expect to study social issues of any kind, giving up the right to political expression means giving up the pursuit of the truth.

The large flows of money through academia and the hunger for higher education in Asia cannot obscure the reality that American higher education evolved in a climate of uncompromising commitment to freedom of thought and freedom of speech. This ecology should be Hong Kong's greatest advantage as a higher education hub.

Cultures that do not honour those values among their citizens will not be enduring hosts to American higher education - unless the American universities betray the very values that made them great.

Harry Lewis is professor of computer science at Harvard and former dean of Harvard College. He serves as an external examiner for the Common Core curriculum of the University of Hong Kong

Larry is a Busy Man

Does Larry Summers have carte blanche to violate Harvard rules about outside activities? It's a serious question. I actually think it is possible that Harvard has granted him the kind of immunity of which Whitey Bulger can only dream.

I spent part of yesterday in a discussion with my faculty colleagues in computer science about how we could mount a new course. An unusual opportunity had arisen and several professors were interested in helping out with it but everybody is overbooked. We are enjoying huge student interest in our field, but the size of the faculty has not increased in proportion, so between undergrads, PhD students, proposal writing, and committee work, people are out flat. 

Then a little further down in my inbox was a Bloomberg Businessweek article about the wealth Larry Summers accumulated during the period from 2001 (when he stepped down as Treasury Secretary and, five months later, became president of Harvard) and 2009 (when he became Director of the National Economic Council). The change in net worth, from less than a million dollars to somewhere in the $17-40 million dollar range, is based on comparison of the disclosures he filed when he became Treasury Secretary in 1999 and his 2009 appointment to the Obama administration. That appointment ended December 31, 2010 and Summers has been back to consulting since then--we know of some of his activities but not how his wealth has increased in the past three years. (We would find out, I suppose, if he were nominated to be head of the Fed and had to do another disclosure.)

How did he make all that money? For five of those years he was President of Harvard. Now the president of Harvard used to stay away from outside commitments, compensated ones at least, but there is at least one report that Summers was an advisor to a hedge fund, Taconic Capital, while he was serving as Harvard president. Perhaps there were others; no way to know for sure. But let's assume that most of the moneymaking happened after he left the presidency, that is during the years 2006-2009.

Here are the consultancies we know about from the Bloomberg story: Citigroup, Nasdaq OMX, DE Shaw (from which he earned $5.2 million in 16 months as "managing director"). He also earned $2.7 million in speaker's fees, from Goldman Sachs and others. That is all prior to 2009.

Since the beginning of 2011, his consulting clients include Citigroup, Nasdaq, D.E. Shaw, and Andreessn Horowitz. He is also back on the speaking circuit.

Now the Bloomberg article focuses on the question of whether we should be worried that Summers' sympathies as a powerful federal official might just be influenced by the cozy and profitable relationship he has developed with these firms. Damned right we should be, especially given his poor track record in getting the very idea of a conflict of interest. 

But my question today is different. Why does Harvard put up with this level of outside activity? The consulting and speaking activities are not the only ones he has picked up lately. He joined the boards of electronic payment service Square and person-to-person lending company Lending Club. He chairs the advisory board of online education company, the Minerva Project, is a member of the board of governors of the Broad Foundations, and is a director of Teach for America. I got tired of chasing these down one at a time and just stole the rest of the list of board memberships from his for-profit web site, larrysummers.com:

ONE, Center on Global Development, the Institute for International Economics, and the Partnership for Public Service. … He holds membership in the Council on Foreign Relations, the Hamilton Project Advisory Council, the Trilateral Commission, the Bretton Woods Committee, Group of Thirty and the Council on Competitiveness.

Now maybe all these places are getting what they want from Summers; good luck to them. But is Summers being faithful to his obligations to Harvard?

At Harvard there are rules about outside activities. To pull the key phrase from a long and nuanced document, "no more than 20 per cent of one's total professional effort may be directed to outside work." Harvard professors have to file annual reports with the university administration documenting what we do outside Harvard and how we are dealing with any financial conflicts our activities my create, even when these activities fall within the 20% commitment limit.

Summers's level of outside activity is not normal for Harvard professors. Given the length of the day my colleagues work, I doubt any of them is coming close to spending 20% of their effort on non-Harvard matters. Nor is it normal for University Professors--the ones I know are among the hardest-working professors at Harvard.

So what's up? Are there special rules for the smartest man in the world? Probably not--there would be too many competitors here for that exemption.

More likely the President and Fellows of Harvard College have made a calculation, that they had better not try to stop Summers from doing whatever he wants to do. He knows everyone, he is a powerful figure even without a federal appointment, and he may be about to get another one. And of course his old mentor and protector, Bob Rubin, is still on the Harvard board.

But I wonder if there is not an actual exemption for Summers. Perhaps whatever deal Summers cut with Harvard in exchange for his resignation from the presidency included a nondisparagement clause, which could be interpreted to render Harvard liable if it ever did anything that would publicly embarrass Summers. That would give Summers pretty much complete autonomy to use his Harvard perch as he wishes.

(Summers's Harvard salary? I don't know. The 2009 disclosures showed it at almost $600,000; it has probably dropped down a bit since then. The average for a full professor at Harvard then was $165,000, a number that I believe is inflated significantly by salaries in the Medical School and perhaps the Business School. And I doubt that the Charles W. Eliot University Professorship Summers holds is like the others, backed up by an endowed gift; it's probably just a title, and the salary is paid out of unrestricted funds that come from the usual sources, student tuitions and annual giving. And why does college cost so much?)

In a way it would be a relief if Summers were named to the Fed because it would put an end to his outrageous corruption of the standards of commitment to which the rest of the faculty are held, and almost universally hold themselves. If Summers stays around, I have a proposal for the President and Fellows: Suspend all those rules rather than allowing a single egregious exception. Have a community conversation about professors' moral obligations to our students and our scholarship, to replace the regulations that special people among us apparently can ignore with impunity. Try something like the experiments with eliminating traffic signs that are happening both in the US and in Europe, to see if people will behave better with fewer rules and a greater sense of common purpose. 

It would be impossible to eliminate all the rules, because the federal agencies from which Harvard receives sponsored research funds require those reports and disclosures anyway. But the current hypocrisy about the "20% rule" is demoralizing and should not continue.

Kevin Landry and Harvard Athletics

Kevin Landry, a good and honorable man, passed away this week after a battle with lung cancer. He was 69 years old. He was a member of the class of 1966 at Harvard, and made a great deal of money in private equity; he was long head of the firm TA Associates. He was extremely generous to Harvard, contributing to benefit both teaching and athletics. He and his family donated the endowment that supports the head coach of women's ice hockey. His friends and associates have created a fund at Harvard to support cancer research. He was the alumni leader of the last Harvard campaign.

Thank you, Kevin. Harvard, and all of us who serve Harvard, owe you a lot.

I did not know Landry well, but his death as I was preparing to teach my freshman seminar on Amateur Athletics made me think of how many of the great citizens and leaders who have graduated from Harvard in the period, say, from 1950-1975 had strong athletic experiences here. Landry seems to have been more of a hockey fan at Harvard than a player, though his Middlesex School tribute remembers his football and basketball experience there. I always wonder, when I hear a tribute like this to the integrity of a sometime athlete, whether there is any connection:

And while he generally opposes raising taxes, he says he can’t defend his industry’s advantageous tax treatment, which allows people like him to pay much lower tax rates on their earnings. 

“He’s highly, highly principled. To a fault sometimes,’’ said Andy McLane, one of Landry’s longtime partners. “It sets a great example here about doing the right thing, taking the high road. He doesn’t tolerate people who hide things. He wants people to tell the truth.”

 How often do you hear that kind of talk from the captains of the financial industry these days? (This was a year ago, when he retired and everyone knew he was dying.)

But he is not the only one. Here are a few other good and honorable men from the same 25 year time period.

Peter Brooke, Harvard '52 and football. A titan of venture capital. As sweet a man as you would ever want to meet, and a person of ramrod rectitude. A tremendous moral support to me while I was dean and Peter headed the Overseers' Visiting Committee to the College.

Joe O'Donnell, Harvard '67 and baseball. As if his devotion to Harvard were not enough (he is a Fellow, and the baseball field is named in his honor), he has been a major force supporting research on cystic fibrosis, which took his son at age 12.

Tom Stephenson, Harvard '64 and football. Partner at Sequoia Capital, which has been a key player in venture funding for the information revolution. Served as US ambassador to Portugal. Endowed the Harvard head football coach position, serves as Overseer.

Don Chiofaro, Harvard '68 and football. A hugely influential Boston area real estate developer and a committed civic leader in Boston, heading up our 45th reunion efforts.

Jerry Jordan, Harvard '61 and football. A scholarship kid at Harvard who has made big commitments to financial aid at Harvard, as well as to athletics ("Jordan Field").

Bill Fitzsimmons, Harvard '67 and ice hockey. Harvard's Dean of Admissions and Financial Aid. What more needs to be said? The most respected figure in his field.

Scott Harshbarger, Harvard '64 and football. Very popular Attorney General in MA, also headed Common Cause, ran for governor and could do it again. In private practice now but taught at HLS.

Paul Guzzi, Harvard '64 and football. President of the Boston Chamber of Commerce, and a regular advisor to Harvard in various ways.

Dick Cashin, Harvard '75 and crew (two time Olympian). Another generous and upright alum who credits his athletic experience with some of his success. In a wonderful tribute to recently deceased coach Harry Parker, Cashin says, "My mother said, 'Your father gave you your brains, I gave you your drive and Harry Parker put it all together.'"

There are many others I could add to this list, and there are many other forms of thanks I could offer for the loyalty and support these people have shown Harvard. Several of them are of Irish or Italian ancestry and came from blue-collar families; their athletic prowess was an early way they were able to show their capacity to succeed.

But that is not my point about them. I wanted to make the list just long enough to say something about a couple of these people while providing them a layer of of anonymity.

In Excellence Without a Soul, I tell this story:

The bearded, bespectacled young dean of students in one of the Houses stopped me after a meeting of the Administrative Board. “Is it true,” he asked, “that they are trying to cut the number of ath- letes?” It was true; the Crimson had reported, correctly, that the presi- dents of Ivy League colleges were planning to reduce the ceiling on the number of football admittees in the freshman class to at most thirty, maybe twenty-five, from the current thirty-five. I was surprised he was interested; I didn’t recall having seen him at any games. “That would be terrible,” he continued. “They add so much to the House. They are the only people here who know how to lose.” 

This really happened, and it is one of the smartest things anybody (including me) said while I was dean.

Two of the gentlemen in the list above have won my everlasting respect by handling disappointment well. In each case, an institution they loved, and to which they had devoted a great deal of everything they had to offer, made decisions to which they were deeply opposed. Many of the successful and wealthy people I know would have responded by picking up their marbles and going home. Each one of these people  has plenty of other charitable and civic interests and could have said: "If X wants to go there, I don't need them--they can find somebody else to ignore." In both cases, these guys instead took some time to catch their breath and think hard about what really mattered to them, and rejoined the team more determined than ever to be constructive and to help the institution succeed.

In a world in which immediate gratification and self-interest are such driving values, the experience of playing and losing team sports when young teaches the toughness and resilience on which the pursuit of excellence depends.

The Bowen-Shulman book, The Game of Life, claimed that the data on today's college athletes showed that such sentimentality about the lessons of athletic competition is unwarranted for today's students. This surely has not been a good year for college athletics in its quasi-professional form, what with the Penn State scandal and all. A large number of anonymous grumblers over the past year have unfairly tried to turn the Gov 1310 mess from a scandal about a course into a scandal about the students who were sucked into the course.

I am far more optimistic about the value of competitive athletics the way they are conducted at Harvard. I know many of these people share that optimism. And if anybody at Harvard thinks it would be wise to scale back our athletic program or to moderate our ambitions, I hope they have the sense to call the likes of these people and ask them what they think.

The Report Harvard Should Have Asked For

Back in January, when MIT's president charged Professor Hal Abelson with heading a committee on the Aaron Swartz case, I wrote a blog post entitled MIT Does It Right. I was comparing MIT's openness and introspection with Harvard's chilly defensiveness about the infamous "Cheating Scandal" of 2012-2013, which I prefer to call the "Gov 1310 mess."

Harvard needs to be as honest with itself as MIT is being. In some ways the tragedies are disproportionate; the Gov 1310 mess has cost no lives that I know of, though I understand that some students were under severe psychological stress, lost weight, and so on. On the other hand, it seems that many dozens will have their lives permanently altered by the experience and the black mark that goes with it on their transcript. 

From my conversations with families and students involved in the Gov 1310 case, what strikes me is how un-family-like they feel their interactions with the university have been. Harvard's disciplinary process is meant to be paternalistic; to be sure parents must sometime discipline their children while still loving them. There is not much sense out there among the Gov 1310 students I know that Harvard loves them. 

Good for MIT for recognizing that its reputation will, in the long run, be enhanced if it tries to figure out if and where it went wrong with Aaron Swartz, and that the best way to do that, in a family setting, is to ask a wise uncle to figure it out and report to the community. I wish Harvard had the same attitude.

The Abelson report is now out. (Here is a link to it.) It is an extremely honorable and good report. It very carefully reconstructs the timeline, documenting insofar as possible every relevant conversation and decision that was taken. That was difficult to do, because, for example, both MIT and Swartz had outside counsel (Swartz had several different ones at different times). Figuring out whether and why some party at MIT was or was not included in a conversation about which lawyer is talking to which state or federal official must have been a nightmare (lawyers typically are not the most open folks about their back office conversations).

All that effort was needed to settle some critical questions people were asking, such as "Why did MIT call in the feds?" (It didn't; the feds showed up alongside local law enforcement, and there was nothing MIT could have done about that.)

The Harvard and MIT cases are different in important respects, so the responses to them could not have been identical. As I noted in January, nobody at Harvard seems to have died because of Gov 1310 (though I am not so confident that no one came close to dying). As a result, there is probably no single thing about the Gov 1310 mess that everybody in the Harvard community would agree is regrettable, in the way that the sad memory of Aaron Swartz hangs over every page of the MIT report.

Still, this report shows that Harvard could learn a lot from MIT about how to run a university.

The quality of the final report stems from President Reif's charge letter. I have already suggested what the first part of the charge was--to figure out what happened when. But the charge has two other parts:

(2) review the context of these decisions and the options that MIT considered, and (3) identify the issues that warrant further analysis in order to learn from these events.

So the tick-tock part of the report is followed by a list of MIT's key decision points, and an analysis of alternative decisions that might have been taken (including, in some cases, a conclusion that no other options truly existed). And the report concludes with a series of questions, mostly answered with more questions, some of which will, with the benefit of a complete factual record of this case, result in more discussion of principles and policies.

Only one part of the Gov 1310 mess has been researched as has been done for the entire factual and decision lineage of the Swartz case. That is, of course, the email searches, the subject of the Keating report. That report, as I have noted, is factually incomplete in at least one important respect (was there or was there not a faculty email privacy policy, and did Harvard's lawyers know about it?). It is also strikingly generous in its interpretation of the motives of more senior Harvard officials, by comparison with the ominous silence about the motives and intentions of one very junior administrator. In that respect, unlike any part of the MIT report, it reads as though it was designed to protect the bosses and let the serfs fend for themselves.

But neither the Keating report nor any other Harvard report researches the entire sorry affair and asks what lessons can be learned from it. (A committee on academic dishonesty made a preliminary report to the faculty which has not been made public as yet, but it specifically disavows being a response to the Gov 1310 mess.)

By contrast, the MIT report raises broad questions, and those questions begin a process of introspection unlike anything that has happened at Harvard. What we most needed in the aftermath of the Gov 1310 case was report on (2) and (3). What were the key decisions on the road from the first charges by the Gov 1310 professor to the issuance of a press briefing, the comparison of every exam paper to every other, and the severance of scores of students? All that has been said is that we followed our procedures scrupulously, as though there were no decisions to be made at all; everything that happened was entailed by the actions of those cheating students. I doubt anyone thinks that is really true; the board could have decided that the professor had made such a mess of his course that there was no sense in trying to untangle it all. So decisions clearly were taken. Without an analysis of what happened and how the key decisions were reached, open for scrutiny and debate in the community like the MIT study of the Swartz case, the community can have no confidence that we have learned anything.

Having analyzed the decisions, the MIT report asks, in various ways, "What does all this tell us about what kind of Institute are we becoming? Is it what we want? Is it inevitable?"

A good example appears on page 99, where the report states:

More generally, has MIT become overly conservative in its institutional decision-making around these incidents? More than once in our interviews, the Review Panel heard members of the MIT community express a feeling that there has been a change in the institutional climate over recent years, where decisions have become driven more by a concern for minimizing risk than by strong affirmation of MIT values. Several people interpreted the Institute’s response in the Swartz case in that light. And some critics have chided MIT for playing such a passive role when Swartz’s actions were motivated by principles that MIT itself champions. Yet we think it is important to view this tragedy in light of a history that may not conform with a myth of a golden past. For this reason we have referred repeatedly to some prior experiences. 

One distinguished alumnus said to us, “MIT seemed to be operating according to the letter of the law, but not according to the letter of the heart,” even while he expressed his enormous respect for the MIT leaders who had to grapple with these decisions. Is his concern on target? MIT aspires to be passionate about its principles, but we must also behave prudently as an institution. Of all the decisions MIT’s leadership must make, those that require negotiating a balance between prudence and passion are some of the most wrenching. How can we make those choices easier to confront? 

These are wonderful words, unlike anything anyone has said about Harvard recently. Yet surely tests of the key question--have decisions become driven more by a concern for minimizing risk than by strong affirmation of our institutional values--happen all the time at Harvard. Not only does this question not get asked--about the Gov 1310 mess or its caboose, the Harvard emailgate scandal--but I wonder whether anyone could state what our institutional values now are. (They certainly can't be found in our campaign manifesto.) The report is able to say something nontrivial about MIT's culture, on p. 98, without fear of contradiction:

MIT celebrates hacker culture. Our admissions tours and first-year orientation salute a culture of creative disobedience where students are encouraged to explore secret corners of the campus, commit good-spirited acts of vandalism within informal but broadly— although not fully—understood rules, and resist restrictions that seem arbitrary or capricious. We attract students who are driven not just to be creative, but also to explore in ways that test boundaries and challenge positions of power. 

That is a wonderful statement about one aspect of MIT's soul. MIT knows what its soul is, or at least the Abelson committee knows. What would a comparable statement about Harvard say? Does Harvard even have a soul? Leave aside the graduate schools. Does Harvard College have a soul? Has any president, provost, dean, or committee chair talked about it lately?

The MIT report uses two terms that are these days absent from Harvard discourse, in spite of our pride in our hoary ancestry. One is "institutional culture" and the other is "institutional memory." Of course Harvard has traditions, but those are something else--tea time at Lowell House, a Latin address at Commencement. Institutional culture is what holds a place together, what differentiates mere changes, which happen everywhere, from sea changes, which are changes to something that always stays the same. And institutional memory is needed to connect today's challenges to those of the past, never exactly the same but sometimes illuminating. There is no indexing system that can match human memory and pattern-matching ability to identify such approximate precedents, and the MIT report regrets that its institutional memory failed in the Swartz case.

The Swartz and LaMacchia cases were separated by 20 years. Insofar as the Review Team has been able to determine, despite the similarities in the two cases, there was no institutional memory inside of MIT spanning these 20 years, and so no mention of David LaMacchia as a precedent in any deliberations around Aaron Swartz by the MIT administration or the Office of the General Counsel, and no discussion of MIT’s attitude towards a charge of unauthorized access 

(LaMacchia was a student who set up a peer-to-peer file sharing service on an MIT public workstation.)

These things, institutional culture and memory, are hard to talk about at Harvard--perhaps harder to talk about than at MIT, so fearful we are at Harvard of being seen as stuck in our history when all the buzz is about innovation and dynamism and youth and entrepreneurship. But there is plenty of institutional culture and memory that should have guided the decisions and deliberations in the Gov 1310 mess. In a blog post right after Swartz's death I recalled a bit of what Harvard had done, well and badly, in its handling of several minor miscreants of our own: Bill Gates, Aaron Greenspan, Mark Zuckerberg. A reminder of the merits of gentle hands and of the value of administrative humility when confronted with novel sorts of rule-stretching and rule-breaking. 

In a letter Abelson sent the MIT community at the beginning of his committee's efforts, he quotes a John Sununu op-ed: "This is a crisis of values and judgment, and it requires a change in attitude, starting at the top," and then asks the tough question, which Harvard should be asking itself too: 

Are we becoming a place that, in the words of legal scholar James Boyle, “confuses order with rectitude”? 

As I suggested back at the beginning of the Gov 1310 mess and suggested again when it was all over, there are many questions about Harvard's institutional culture that need to be asked. How could a department allow a professor to be so negligent year after year in the conduct of his course? If the same thing happened again, would Harvard again throw out scores of students, teaching them all the wrong lessons about power and integrity and souring them on the University forever?

Are we really so afraid of being sued that we dare not learn anything from our mistakes, or even follow MIT's example by publicly asking if we made any?