Saturday, February 25, 2006

Summers and Shleifer

Apparently there was more to Summers' resignation than politically correct backlash and rejection of his arrogant management style. One of the issues behind the new FAS vote of no confidence was the so-called Shleifer affair. Summers has been protecting Andrei Shleifer, a star economist (John Bates Clark medal winner) and protege, despite a scandal involving Shleifer that cost Harvard over $40M (including legal fees) to settle with the US government. Shleifer remains on the Harvard faculty, despite the well-documented malfeasance.

Strangely, the story was little covered by big media (WSJ, NYTimes), and it took a 25,000 word investigative piece by Institutional Investor (based on court documents including 60 depositions and over 1000 exhibits) to reveal the sordid details of Shleifer's involvement with Russian privatization and misuse of US funds through the Harvard Institute for International Development. I am sure copies of this article have been circulating widely among Harvard faculty. (See here for an amusing account of how a Boston jury was completely unimpressed by Harvard lawyers' narrow technical defense that Shleifer was not bound by conflict of interest rules. The jury took only two hours to decide unanimously against Harvard and Shleifer.)

Then, in quiet contrast, there is the case of economics professor Andrei Shleifer, who in the mid-1990s led a Harvard advisory program in Russia that collapsed in disgrace. In August, after years of litigation, Harvard, Shleifer and others agreed to pay at least $31 million to settle a lawsuit brought by the U.S. government. Harvard had been charged with breach of contract, Shleifer and an associate, Jonathan Hay, with conspiracy to defraud the U.S. government.

Shleifer remains a faculty member in good standing. Colleagues say that is because he is a close longtime friend and collaborator of Summers.

Another amusing Summers anecdote, from the Boston Globe (Ellison, an anthropologist, was Dean of the Graduate School under Summers. Summers, an MIT man, is not exactly what you'd call a smooth diplomat :-)

Over lunch not long after Summers took over the presidency in 2001, Ellison said, Summers suggested that some funds should be moved from a sociology program to the Kennedy School, home to many economists and political scientists. ''President Summers asked me, didn't I agree that, in general, economists are smarter than political scientists, and political scientists are smarter than sociologists?" Ellison said. ''To which I laughed nervously and didn't reply."

Of course, Summers was correct if average GRE scores are any guide ;-)

1 comment:

Kennon Gilson said...

Old news to Libertarians, who denounced Harvard-led pseudo-"privatization" in Russia years ago. Wonder if this guy is the patsy?

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