January 17, 2012
WASHINGTON—Michael L. Mussa, a renowned international economist who had been a senior fellow at the Peterson Institute for International Economics since 2001, and who was a former chief economist of the International Monetary Fund (IMF), died on January 15. Mussa, who was 67, died of heart failure at George Washington University Hospital in Washington, DC. He served as chief economist at the IMF (1991–2001) and was a member of the Council of Economic Advisers (1986–88) under President Ronald Reagan. Previously he had been a professor of economics at the University of Chicago Business School and at the University of Rochester.
As a senior fellow at the Peterson Institute, Mussa was well known for his semiannual forecasts of global economic growth, conveyed with tough assessments, clarity of expression, and biting wit. The Wall Street Journal, in a January 17 page 2 article on Mussa's death, said his influential and highly regarded forecasts were "delivered consistently with blunt words and wisecracks for policymakers and fellow economists." At both the IMF and the Peterson Institute, he was known for unsparing analysis and deep intellectual curiosity and knowledge about a full range of subjects, including history, political science, and government.
C. Fred Bergsten, Director of the Peterson Institute, noted: "Mike Mussa was one of the most talented international economists of his generation. He was an indispensable, respected, trusted, and beloved colleague at our Peterson Institute for International Economics for the past decade. We deeply regret his premature passing and will miss him sorely."
Sir Mervyn King, Governor of the Bank of England, said in a message to the Institute: "Mike refused to be intimidated by any political considerations. The combination of his intellect and his courage made him a formidable player in the crises to which we have unfortunately become so accustomed in recent years. I will never forget his clear dissection of the proposed programs for Brazil and Argentina when he forced the international community to face up to realities. "
The Managing Director of the International Monetary Fund, Ms. Christine Lagarde, issued a statement saying in part: "For nearly a decade, he served the IMF and the international economic community with great distinction….Michael Mussa was a public servant of the highest caliber and an esteemed intellect that will be missed, although his contributions to the economic community and the IMF will live on."
In 2009 Mussa challenged those who said there would be little or no recovery from the recession and lately asserted he had been proven right even though the recovery has been disappointing largely because the housing sector remains weak. More recently he expressed doubts about the efficacy of sizeable further economic and fiscal stimulus for the US economy. He was often scathing in his criticism of what he considered to be public policy failures in regulating financial institutions, responding to recessions, or rescuing troubled countries in Europe or the developing world.
Michael Louis Mussa was born in Los Angeles in 1944. He received his AB in Economics and Mathematics (with honors) from the University of California at Los Angeles (UCLA) in 1966 and his PhD in Economics from the University of Chicago in 1974. He was a member of the faculty of the Graduate School of Business of the University of Chicago (1976–91) and was on the faculty of the department of economics at the University of Rochester (1971–76). During this period he also served as a visiting faculty member at the graduate center of the City University of New York, the London School of Economics, and the Graduate Institute of International Studies in Geneva, Switzerland. He received numerous honors and awards for his contributions to international economics, macroeconomics, monetary economics, municipal finance, and economic forecasting. He was a member of Phi Beta Kappa, a fellow of the Econometric Society, and a recipient of the 2008 Adam Smith Award from the National Association for Business Economists.
Mussa was one of the first to demonstrate empirically how the short-run variability of exchange rates differed systematically under alternative currency regimes. He also made important advances in the profession's understanding of how expectations rendered the behavior of exchange rates similar to that of other asset prices, like equity prices. He argued that official intervention in exchange markets could affect exchange rates by changing the market's view about the future stance of monetary policy.
On the occasion of Mussa's 60th birthday, the IMF held a conference to acknowledge both his scholarly work and his ability to present his analysis of difficult economic issues in a way that made sense to practically everybody and that was made even more digestible with a dose of good humor. Two of his favorite quips convey the flavor of his style and intellect. On the dangers of relying too much on specialists in designing a broad economic strategy, he sometimes said: "If you let plumbers be architects, don't be surprised if you wind up with a house that has nothing but bathrooms." On the merits of economic policy tools: "My favorite economic policy tool is prayer: It is not demonstrably less effective than the others, and it carries none of the bad side effects." The same conference featured a "Mussafest" wine tasting as a tribute to Mussa's sophisticated appreciation of wine.
As numerous colleagues attest, Mussa was both admired and criticized for the candor with which he expressed his views on economic policy. In his 2002 book on the Argentine crisis, Argentina and the Fund: From Triumph to Tragedy, which became the number 2 bestseller in Buenos Aires, Mussa criticized the IMF for what he contended were two important mistakes in its policy advice to Argentina. He argued that the Fund had not been insistent enough that Argentina adopt responsible fiscal policies in the run-up to its crisis and further faulted the Fund for providing financial support to Argentina long after it was clear that the country would not be able to avoid default on its debt or maintain its currency peg.
Mussa's irreverent way of expressing his views was demonstrated at the Federal Reserve Bank of Kansas City's Jackson Hole conference in August 2005. Raghuram (Ragu) Rajan, one of Mussa's successors as chief economist of the IMF and former colleague at Chicago, presented a now-famous paper in which he was skeptical of the view that financial markets had developed self-stabilizing mechanisms despite their growing complexity. Lawrence Summers and many of the Federal Reserve officials in attendance skewered the paper. Mussa asked for the floor and opened challengingly: "Well, I like Ragu's paper!"
Mussa is survived by his brother, Roger Mussa of Los Angeles. A memorial service to celebrate Michael Mussa's life and his contributions to economics will be held later this winter at the Peterson Institute for International Economics.
About the Peterson Institute
The Peter G. Peterson Institute for International Economics is a private, nonprofit, nonpartisan research institution devoted to the study of international economic policy. Since 1981 the Institute has provided timely and objective analysis of, and concrete solutions to, a wide range of international economic problems. It is one of the very few economics think tanks that are widely regarded as "nonpartisan" by the press and "neutral" by the US Congress, its research staff is cited by the quality media more than that of any other such institution. Support is provided by a wide range of charitable foundations, private corporations and individual donors, and from earnings on the Institute's publications and capital fund. It moved into its award-winning new building in 2001, and celebrated its 25th anniversary in 2006 and adopted its new name at that time, having previously been the Institute for International Economics.