You have experience working in private and public sectors. Why did you choose to go to academia?I cherish my years at both McKinsey and the CEA, and I grew tremendously during both of them. But academia is where I can dedicate myself to the two challenges I find most fulfilling: researching truly difficult and important questions about how society does and should work, and teaching and learning about answers to those questions with remarkable students. It might help to know that I was hooked on economics as soon as I discovered it, during an independent study in high school. When I saw its power to explain how individuals interacted to create the world around us, I knew I had found a discipline that would allow me not only to ask big questions but also to try to answer them. In fact, I often say that economics is where the rubber meets the road on society’s biggest questions, and I think that as much as anything else explains why I’m a professor.
In your professional life, you worked at McKinsey as well as at the Council of Economic Advisers. How different and/or similar was it to advise business and political leaders?In terms of content, the jobs are quite different, as McKinsey clients and the U.S. President have very different decisions to make. But in terms of style, the lessons I learned at McKinsey were directly transferable to the CEA. Clarity of thought, judicious use of data, and focused communication were essential ingredients in both cases. After all, consultants and economic advisers play similar roles: helping decision-makers think through the tradeoffs they face and bringing outside knowledge or evidence to bear on their decisions.
As a BGIE Course Head, what do you hope MBAs take away from the course?My friends in Section H would be able to answer this for you, because I’ve talked a lot about this question with them this year! I hope students tell people that we do four things in BGIE they will take with them into their careers and lives as responsible, influential citizens. First, we learn and apply a set of tools and ideas for understanding the economy and society, so that we can analyze and understand new situations as they arise. These tools come primarily from the intellectual disciplines of economics and political science. Second, we examine the state of the world and its institutional foundations of capitalism so that we know where we currently stand and the history of how we got here. Third, we practice persuading each other with, and being persuaded by each other for, good reasons. That skill is, in my opinion, one of the most important we can teach at HBS, and it is especially important for the sorts of questions BGIE asks, where diversity of opinion is rampant and vital. And finally, we ask and discuss big questions about our world and our place in it. These questions span a wide range, but in the end they center around the following fundamental question: what is progress, and how do we make it?
Your current research focuses on optimal taxation. If you were given sole authority to reform the US Tax Code, what would be the top three changes you would like to implement?It may surprise you to know that I think the U.S. Tax Code is not as broken as many people suggest. In fact, my research has led me to the belief that our policymaking and political processes have led us to a system that, though riddled with suboptimal details here and there, balances starkly different visions for an optimal tax system rather well. That said, one change I would like to make is to introduce a value added tax (VAT). I would start with a small VAT to assuage concerns that it was intended to either expand the size of government or to make the tax system less progressive. But the administrative simplicity of the VAT and its ability to raise funds with minimal distortionary costs suggests to me that the United States is making a mistake in being one of the only developed countries without it. A second change I would make is to put in place a tax on carbon. The economic and environmental logic for it is straightforward, even if current politics make it difficult. Finally, I would expand the Earned Income Tax Credit to be more generous and cover more workers. The EITC strikes a balance between political principles while getting help to struggling workers and their families. It is rare to find a policy that can command bipartisan support as the EITC does, and we should take advantage of such a rare situation when we find it.
Do you believe that HBS students who fundamentally disagree with the politics and tenor of the current administration can still effectively serve in White House Office positions like the one you occupied? I’m sure HBS students could serve effectively despite such a fundamental disagreement, though they may well decide not to try. I would distinguish between disagreement with policies and politics. Disagreement with policies should not discourage someone from working in the White House unless they are at a senior policymaking level. More junior advisors, as I was at the CEA, often disagree with the policy positions of the President, and in so doing they can play an important role in internal debates. Disagreement with politics is another matter, and if one’s discomfort with an administration is due to ethical concerns, the case for serving is substantially weaker.
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