Austan Goolsbee

Why He Matters

Goolsbee hails from the conservative school of economic thought represented by Milton Friedman and the University of Chicago. His belief in the Internet as a democratizing economic force is his claim to fame.

Goolsbee believes in free markets, small government and lower taxes, but not necessarily for the rich. He also stresses supporting the middle and lower classes, making him a popular adviser to Democrats like 2004 presidential candidate Sen. John F. Kerry (D-Mass.) and President Barack Obama.

Goolsbee earned his reputation by embracing the strain of economic theory that relies on data and people's psychological tendencies to make empirical judgments about the world. Such thought was popularized by Steven Levitt, author of Freakonomics and a good friend of Goolsbee's.

Goolsbee was the first economist to explain the potential of the Internet to democratize the business world. "When the Internet first came on the scene there was a dispute within the profession, one side saying the Internet is essentially going to make it a lot easier for companies to price-discriminate,” Goolsbee said. “The other side was saying the Internet is the great equalizer, it is going to make markets close to perfectly competitive, there shouldn't be any profits and it should make people much more price-sensitive. I am probably the leading guy associated with that. Now, I got lucky that it basically looked like my paper was right," he added.Grant, Jeremy, "Tomorrow's gurus: Becoming a professor at 25 brings unexpected hurdles," National Post, Nov. 2, 2005

Goolsbee joins the White House Council of Economic Advisers alongside fellow members chairwoman Christina Romer and Cecilia Rouse. In November 2008, Obama also named Goolsbee chief economist on the newly established President's Economic Recovery Advisory Board, which will be chaired by Former Federal Reserve chairman Paul Volcker.

Conservative columnist George Will predicted Goolsbee would be a welcome presence in a Democratic White House. "Goolsbee no doubt has lots of dubious ideas -- he is, after all, a Democrat," he wrote. "But he seems to be the sort of person -- amiable, empirical and reasonable -- you would want at the elbow of a Democratic president, if such there must be."Will, George F., "The Democratic Economist," The Washington Post, Oct. 4, 2007

Path to Power

Born in Waco, Texas and raised in Whittier, Calif., Goolsbee's parents named him after Stephen F. Austin, the leader of Texas’ forces in the battle of The Alamo and famed in Texas lore. However, Goolsbee's father wanted to spell Austan with an 'a' “because he was convinced that Austan would be a unique person.”Guy, Sandra, "Obama's man on the money; Wunderkind Austan Goolsbee has the president-elect's ear on fixing U.S. finance," The Chicago Sun-Times, Nov. 11, 2008

And he was in the world of economics. Goolsbee was a champion debater in high school before moving on to Yale, where he graduated in 1991.McTague, Jim, "Obama's Plan for the Tax Man," Barron's, Feb. 4, 2008 He then moved on to the Massachusetts Institute of Technology where he earned a doctorate in 1995. Joining the University of Chicago's economic team at age 26, he quickly became an outspoken proponent for Democratic ideas, even though he never really considered himself liberal.Lazaroff, Leon, "Economist at U. of C. gets credit from Kerry," Chicago Tribune, Sept. 23, 2004

By 28, he had written papers that attempted to disprove a popular Reagan era belief that raising taxes on the rich generates less revenue because the rich will hide income or work less, leading to smaller income for the government.

Goolsbee's first foray into politics came in 2004, when he worked as an informal adviser to Sen. Kerry's presidential campaign. In that position, Goolsbee found that President Bush's plan to use private investment firms to manage Social Security funds would cost $940 billion in fees over 75 years.Weisman, Jonathan, "The Politics of Social Security; Kerry to Use Study to Call Bush Plan a Wall Street Windfall," Washington Post, Sept. 22, 2004

During the 2004 campaign, Goolsbee got a call from a candidate running for a U.S. Senate seat in Illinois. That candidate was President Barack Obama. Obama's competitor, Alan Keyes, had called for a tax holiday for descendants of former slaves for two generations. Obama wanted to know how much this would cost. "Goolsbee estimated the cost of Keyes' tax holiday at between $7 trillion and $9 trillion." Keyes dropped the proposal soon after Goolsbee's analysis went public.McTague, Jim, "Obama's Plan for the Tax Man," Barron's, Feb. 4, 2008

Goolsbee hadn't known of Obama when Obama was teaching at the University of Chicago’s Law School. But after the Keyes incident, the two men became friends. "He and I saw eye-to-eye on economic stuff,” Goolsbee said. When Obama needed an economic adviser for his nascent presidential run, he quickly turned to Goolsbee.Uchitelle, Louis, "Bending Ears On Economics As '08 Nears," The New York Times, Nov. 8, 2007

Obama nominated Goolsbee as chief economist of the Economic Recovery Advisory Board in November 2008. Goolsbee also serves on the White House Council of Economic Advisers.

The Issues

Although Goolsbee hails from the conservative school of economic theory endorsed by Friedman at the University of Chicago, his theories tend to favor Democratic constituencies: the middle and lower classes.

He is essentially pro-free trade and against supply-side economics, arguing in a January 2008 New York Times editorial that cutting taxes for the rich simply does not raise government revenue, despite arguments by some conservative policymakers.

But he will have to make amends on his previous position on subprime mortgages. In a March 2007 Times editorial, Goolsbee said that regulators risked lowering home-ownership rates by overreacting to sub-prime lending practices.

“When contemplating ways to prevent excessive mortgages for the 13 percent of subprime borrowers whose loans go sour, regulators must be careful that they do not wreck the ability of the other 87 percent to obtain mortgages,” he wrote. “For be it ever so humble, there really is no place like home, even if it does come with a balloon payment mortgage."Goolsbee, Austan, "Irresponsible" Mortgages Have Opened Doors to Many of the Excluded," The New York Times, March 29, 2007

The Network

Goolsbee's main contacts come from the University of Chicago. Fellow professors of economics, Steven Levitt and Richard Thaler, co-author of "Nudge: Improving Decisions about Health, Wealth and Happiness," are in Goolsbee's inner circle.

During the campaign, Goolsbee worked closely with Paul Volcker, Robert Rubin and Jason Furman, Obama's senior economic adviser and an economist at The Brookings Institute. He also did some informal work advising Sen. John F. Kerry in the 2004 presidential race.

Goolsbee wrote regular columns for the New York Times and Slate.com (A publication owned by The Washington Post Company).

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