Larry Summers and Ethical Compromise

One of the troubles with academics blogging about the "real world" (that is, everything outside academia) is that it is easy to dismiss what we say on the basis that we are ivory-tower pinheads who don't know how the real world works. We preach our moral and political idealism from our privileged positions, goes the argument, but the real world is messy and complex. To get anything done you have to make compromises all the time in pursuit of larger objectives, and the important thing is to stay on the right side of the law. There is a certain truth in the premise that academics, especially the ones with tenure, have the privilege of being idealists, and that is why I am so disappointed that so few of us speak up. But there is a huge gray area between unlawful and ethical behavior, acts that are not illegal but good people don't do, no matter how profitable or how self-serving. Of course there are no bright-line rules about where to draw a boundary. Many of the questions about Larry Summers come down to this: Does he even realize that there is a difference between unlawful and unethical? Summers has derided the attempts to set ethical rules for government officials. When deposed in the Shleifer case, he said,

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 mere were thought of as perfectly fine. … there was no per se disqualifying of the validity or morality of advice based on the holdings of financial positions in the entity, area, place, type of investment, or anything else with which the advice was given.

I have blogged on this point before. For a professor (and especially a University Professor at the WGU), this is a devastating failure, because when a worldly professor (and particularly a rich and famous economist) questions the distinction between legal and ethical, students will follow his lead. As I wrote of Summers,

He loves to split legalistic hairs, and denies that ethical conduct exists outside the context of such hairsplitting. And he is living proof that if you do something wrong and simply refuse to acknowledge it, never apologizing and, when put on the spot, wriggling out of the question on the pretext of technicality, you can live to succeed and rise to power once again. Students are no fools; they see what grown-ups say and do and how it pays off. It will be bad enough if Obama appoints Summers, but the panting adulation he will receive in Harvard publications and Web pages will be powerful signals to Harvard students to go and do likewise.

This sort of amoral evasiveness is, of course, not all that great a quality in the Fed chair either. Two items came to my attention this week that focused me on trying to define what exactly is wrong in this stew of personality and ethics. One piece is a post on the MathBabe blog. Its author, Cathy O'Neil, summarized Summers's involvement in the Shleifer mess quite eloquently:

Some people still think Larry Summers got fired from being the president of Harvard because of the ridiculous comments he made about women in math (see my post about this here) or because of the comments he made about Cornel West. Actually, the truth is something worse, and for which he should actually be in jail. It’s also something that makes Harvard look bad, so maybe that’s why it’s less known. … I was inspired to write this by being disgusted at continued rumors that he could get yet anotherprestigious job. It’s like this guy can’t fail spectacularly enough! Let’s give him another chance! 

Let’s set the record straight: Summers was directly involved with defrauding the U.S. Government (see below) and Russia. He admitted to not understand conflict of interest issues (see below). It is particularly appalling, knowing these things, that he would be considered for the World Bank head, which presumably requires nuanced understanding of such issues.

That's right -- she wrote this a year and a half ago, when Summers was up for the World Bank job. This week I came across an even older post, from 2011, in which she drills down on what she learned about Summers, and about herself, from working with him at D.E. Shaw. First she offers a tutorial on the concept of "dumb money":

Once you understand the mentality, it’s easier to understand the “dumb money” phrase.  It simply means, we are smarter than those idiots, let’s use our intel