Some people have accused me of an ethical lapse because I served briefly on an Enron advisory board in 1999 - even though I disclosed that relationship the only time I wrote about the company (rather favorably) for Fortune, back in May1999, and again the first time I wrote about the company (in a highly critical article) for the New York Times, which I did in January 2001. Since then I've been pretty hard on Enron, to say the least: I criticized the firm's role in the California energy crisis, and have not been kind as the firm's own problems have surfaced.
By the way, here's the piece I wrote in Fortune. It looks a bit naive now, but it's a love letter to markets, not to Enron.
So what was my relationship with Enron? I was offered a $50,000 fee for a year's participation in the advisory board, which would entail attending and presenting at two meetings, each of which would extend over two days. The year I was on the board only one meeting took place; the other was canceled because of weather.
These meetings were not about Enron business, nor were they about policy in areas closely related to Enron business; basically they were seminars on world affairs. From my point of view this was much like a paid speaking engagement, of the kind that is common for academic economists, at least those who work on issues that bear on matters of business interest, like the state of the world economy. The only difference was that in effect I had agreed to deliver several talks, and join in an extended discussion of other peoples' talks.
At the one meeting I attended, I talked about the Asian financial crisis, then still in full swing.
My critics seem to think that there was something odd about Enron's willingness to pay a mere college professor that much money. But such sums are not unusual for academic economists whose expertise is relevant to current events. And there were other academics, such as the Harvard Business School's Pankaj Ghemawat, on the panel; presumably they had the same arrangement.
Remember that this was 1999: Asia was in crisis, the world was a mess. And justifiably or not, I was regarded as an authority on that mess. I invented currency crises as an academic field, way back in 1979; anyone who wants a sense of my academic credentials should look at the Handbook of International Economics, vol. 3, and check the index. Here's my current cv .
And I wasn't an ivory-tower academic. In 1994 I had published an article in Foreign Affairs, "The myth of Asia's miracle", which was skeptical about the region's economic prospects, and seemed vindicated by the crisis that broke out three years later. In August 1998 I had advocated temporary capital controls as a way to deal with the crisis, just days before Mahathir put them into effect in Malaysia. Also in 1998 I had taken on the Japanese situation, with a series of papers that introduced the idea of inflation targeting as a way out of the trap; "It's baack: Japan's slump and the return of the liquidity trap" was published in Brookings Papers in late 1998; ever since, inflation targeting has been a central subject of debate in Japan.
Because of my role in the debates of the time, I was asked to advise various Asian and Latin American countries (offers which still come in), but declined.
I mention all this not as a matter of self-puffery, but to point out that I was not an unknown college professor. On the contrary, I was a hot property, very much in demand as a speaker to business audiences: I was routinely offered as much as $50,000 to speak to investment banks and consulting firms. They thought I might tell them something useful. For what it's worth, Citibank officials said - you can check it out with a Nexis search - that a heads-up I gave them in 1996 about the risks of an Asian currency crisis saved them hundreds of millions of dollars.
If it still seems implausible that my advice might be worth that much, think about how I have been warning about Argentina for the past year and a half; a company that had listened to me and reduced its exposure would be rather grateful, don't you think? Instead, of course, I gave the advice for free in the Times.
The point is that the money Enron offered wasn't out of line with what companies with no interest in influence-buying were offering me. You may think I was overpaid, but the market - not Enron - set those pay rates.
When I accepted the position at the New York Times, I severed the Enron connection, and also dropped any paid speaking and consulting that might violate the strict Times conflict-of-interest rules.
My critics, ignoring the fact that I have been extremely tough on Enron, seem desperate to find something unethical in all of this. Sorry: there's nothing there.
For a further note about academics and consulting, click here . Also, a note about how some people have managed to misread what I wrote.