In an interview with the Public Broadcasting Service (PBS), you said, "If one wants to understand why some countries are more successful and some countries are less successful, the answer lies overwhelmingly in their own policy choices." Is there a correlation between nations' integration of academic research into policymaking and their success in the world economy?
I would not want to identify successful integration of academic research as the dominant determinant of a country's success. On the other hand, there is no question that US prosperity over the last 50 years has had a great deal to do with research that has come out of universities, whether it is the Massachusetts Institute of Technology (MIT) and Route 128, Stanford and Silicon Valley, or, in a previous period, the land-grant colleges. There is enormous potential for academic research to have a positive impact.
In terms of national policy, countries that have proceeded thoughtfully have done very well: for example, the job that Mervin King, a former economics professor, is doing as the head of the British Central Bank; the crucial role that Domingo Cavallo, an economics professor, played in Argentine economic reform; or the very influential work that Stanley Fisher, a former MIT economics professor, has done at the IMF. All of these are cases where an academic background and academic knowledge contributed very substantially to successful outcomes.
The New York Times credited you as being the principal architect of the Mexican economic recovery following the 1995 Mexican economic crisis. Could the integration of academic theory and policy have prevented the Mexican economic crisis of 1995? Did you use theory to structure Mexico's recovery?
Nobody is going to be able to predict market crises. If a market crisis is easily predictable, somebody can profit by buying or selling. It is in the logic of market crises that they are not going to be completely predictable. Experience with stabilization programs and experience coming from the vocabulary of economic research was an enormously valuable thing for me; for President Ernesto Zedillo, who has a Yale University Ph.D. in economics; and for Mexican Finance Minister Guillermo Ortiz, who has a Stanford University Ph.D. in economics. I think our shared vocabulary of economics and shared set of economic theories were enormously constructive in working through the response to that crisis. We absolutely did use academic theory to address the crisis.
You have stated that economic theory has a particularly strong impact on policymaking. Do you think that other academic fields such as international relations have a similar influence?
There is no question that what US President John F. Kennedy learned at Harvard as he wrote his undergraduate thesis Why England Slept was very important in shaping the approach he took toward Asia and Vietnam. Henry Kissinger was enormously influenced by his study of Metternich and the stable order that was created for 100 years by Metternich's diplomacy. Samantha Power's book A Problem from Hell is serving as a spur to do more--and yet we are still doing too little--with respect to Darfur.
Of the Asian financial crisis, you told PBS, "We had a sense that this was a new phenomenon--that this was probably the way the world was going to be with markets increasingly interlinked, even if it had not been the way markets had always been. This is one of the things that encouraged us to take bolder kinds of responses." Do new situations and crises lead policymakers to look to academia?
It is always better to be ahead of the curve than to be behind the curve. The kinds of ideas that were being pursued were very much affected by economic research. It was a remarkable commentary that I sat during the Asian financial crisis with Chinese Premier Zhu Rongji in the same room where Mao received Nixon for the first time, where people had been executed hundreds of years ago in China. …