What are some useful and objective measures which we can use to judge the performance of President Obama and his new team? How would Greg Mankiw judge Obama four years from now?Consider a related question: How would you judge the competence of a doctor if you could observe him treating only a single patient?
What you would not do is judge him by the outcome. Even the best physicians have patients die. And even witchdoctors can have patients recover. Randomness is a fact of life (and death). In the case of a medical doctor, the answer seems clear: Instead of looking at the outcome, you would judge him by the decisions he makes and treatments he prescribes. That is, you would examine whether he followed best practices for the circumstances he faced.
Similarly, randomness is a fact of economic life, and it would be a mistake to judge a president by the economic outcome during his administration. It is better to look at the decisions the president made, and to acknowledge that the outcome is a function of those decisions and many other factors not under his control. As an economist, I have views about what best practices are for economic policy, and I judge presidents by how closely they adhere to those principles.
Unfortunately, that evaluation process is not quite as simple and objective as the reader might have hoped for. But I don't think there is a better alternative.
Now some people may be tempted to read the above commentary and call it self-serving. After all, the economy looks pretty bad right now, so maybe I am trying to excuse President Bush and, indirectly, myself as one of his economic advisers.
Not so. If you want to judge presidents and their economic advisers by outcomes, that would be all to my benefit. I arrived in Washington to head the CEA in February 2003 and left in February 2005. (Harvard has a two-year rule for faculty leave). During that time, the economy grew at a healthy annualized rate of 3.6 percent, and the unemployment rate fell half a percentage point. As judged by outcomes, I look pretty good! But I will be the first to admit that this argument is deeply silly.