Would we trust a Nobel-prize economist to pick the head of the IMF?

The media has been bandying about the idea that the head of the IMF must be an economist. I don’t necessarily agree, but it would be an interesting thought experiment to see who economists pick to lead the IMF.  And who better to ask then the ones at the top of their profession – those that win a Nobel prize. Below is a list of Nobel prize winning economists from the last 10 years and what they have said about the choice.

Only 3 seem to have made public comments. Interestingly Krugman opts for a candidate who is technically out of the running (passed the IMF manging director’s retirement age), Stiglitz seems to argue that Lagarde would be a good choice, while Spence says the whole process is being rushed and should slow down a bit. That isn’t much of a consensus to go on.

If I were going to ask the rest of the Nobel prize winners what they think, I would be listening pretty intently to Elinor Ostrom. She is the only woman on the list, and she write about a subject which should be considered more closely – economic cooperation and collective action. While Ostrom’s research has focussed on the micro-level, such as natural resource management by forest dwellers in South Asia, surely the lessons she has learned about governance and collective action would be useful to an international institution trying to foment monetary and financial cooperation. The power dynamics and incentive structures of the 189 finance ministers who own the Fund probably don’t differ that much from a Zanjera irrigation community in the Philippines. Who do you think Ostrom would pick?

Summary of Nobel prize winning economists’ statements on the selection

Nobel year Winner(s) Quotes about the process and candidates
2010 Peter A. Diamond, Dale T. Mortensen, Christopher A. Pissarides
2009 Elinor Ostrom, Oliver E. Williamson
2008 Paul Krugman

“Stan Fischer really would be the best choice.”

“We’re living in times that require creative, independent thinking. An IMF managing director who serves as the front man or woman for the usual suspects, for conventional wisdom in unconventional times, is not what we need. And that’s what I fear Christine Lagarde, by all accounts an impressive person, but not someone with strong independent judgment on economics, would be.”

2007 Leonid Hurwicz, Eric S. Maskin, Roger B. Myerson
2006 Edmund S. Phelps
2005 Robert J. Aumann, Thomas C. Schelling
2004 Finn E. Kydland, Edward C. Prescott
2003 Robert F. Engle III, Clive W.J. Granger
2002 Daniel Kahneman, Vernon L. Smith
2001 Michael Spence “The openness of the selection process for a new IMF leader will be key not only to the future legitimacy of that institution but to the very notion of cooperative global economic management.

“There is much more at stake than ending up with one of the several superbly capable candidates. The process itself is critically important.”

“What is needed is time, and a process involving all the shareholders of the IMF, large and small, leading to a reasonably objectively based consensus on the next leader. Not all of that process can or should be conducted in public. Transparency has its limits. But at the end, the outcome should be strongly endorsed by advanced and emerging economies. That will be the signal that the process has worked. It will also be the crucial solid foundation of initial support for the new IMF leadership.”

Joseph Stiglitz “Much as I would like to see someone from the emerging markets and the developing world head the IMF, the first priority is to choose a leader with the requisite skills, commitments, and understandings in an open and transparent process, someone who will continue along the reform path on which the Fund has embarked.”

“Whatever the outcome, the IMF, the World Bank, and the international community need to reaffirm their commitment to an open and transparent process – and ask how that process can be improved. For example, rather than nominations from governments, which often are reluctant to support excellent candidates from opposition parties, an international nominating committee could put forward names. Similarly, changes in voting procedures (public voting by countries, rather than through constituencies, or a requirement that candidates win the support of a majority of developing and emerging countries) could persuade more emerging-market officials to put their names forward.”

“One of the leading candidates to be the IMF’s next managing director has turned out to be a Frenchwoman, Christine Lagarde, who, as France’s finance minister, helped lead her country through the Great Recession. She has been an outspoken advocate of financial-sector reforms, and has won the respect of all of those with whom she has worked. Politics is not always kind to good candidates. The world should be thankful that there is at least one. Where she was born should not be an impediment to her prospects.”

George A. Akerlof

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