Institute for the World Economy: Felbermayr successor internally filled

Kooths and Görg are renowned economists. There are no doubts about their qualification for the temporary top position. “They’ll do it well, that’s why I put my hand in the fire,” says a companion. But the need for an interim solution alone bears witness to a cardinal problem facing the German economy.

Encrusted structures complicate the work at the institutes, especially at their top positions. This is less the fault of those responsible than that of the architecture of the facilities. This applies in particular to the six largest economic research institutes in Germany, which operate under the umbrella of the Leibniz Association and are supported by the federal and state governments.

Simply agreeing on a candidate for a top position is hard work. As a foundation under public law, in the case of the IfW, not only those responsible for the institute have a say, but also the state of Schleswig-Holstein, the federal government, the Leibniz Association and the Christian Albrechts University in Kiel. First there is a search committee, then an appointment committee.

Institute President in a tight corset

It was clear to those responsible from the start that the IfW would not be able to present a Felbermayr successor within six months. Because it is a structural problem. The fact that it has not even been possible to make the interim solution official in time is all the more obvious. “In some authorities, the employees don’t feel the pressure that the institute feels to make a meaningful transition,” says one participant.

The situation at the Institute for Financial Market Research (SAFE) is similarly complex. The Frankfurters were accepted into the Leibniz Association last year, Jan Pieter Krahnen has been the scientific director to date. But the office of president is still vacant after the application period expired in February. There are quite a few people interested in the position. The Bonn macroeconomist Moritz Schularick, for example, is said to have been negotiating with SAFE for some time – so far without an agreement.

In addition to the lengthy process, the search for a suitable candidate is not an easy undertaking. There is more to an institute president than just being a good economist. He must be able to lead, have a good connection with the workforce and be able to present the institute to the outside world. “You have to be versatile and want to deal with administrative tasks,” says Reint Gropp, President of the Halle Institute for Economic Research (IWH). Christoph Schmidt, President of the Leibniz Institute for Economic Research (RWI) in Essen, calls the office “a task that is as challenging as it is fascinating”.

The conviction of the chosen is the next burden. Many do not want to force themselves into the tight corset that an institute presidency entails. So it makes sense to remain at the level of the department head and to be able to focus on your main focus in research.

And more and more talented economists are migrating to the USA, shows the current economists ranking of the Handelsblatt. Nine out of ten leading economists under 40 years of age work at top Anglo-Saxon universities such as Yale, Chicago or London.

One of them, Maximilian Kasy from Harvard, sees the main reason for the emigration that the research landscape is less attractive. In Germany, economics is much more conservative, both intellectually and politically, than in the USA: “That prevents intellectual diversity and is less attractive for young researchers who are interested in new intellectual territory.”

“Truly no fame sheet”

In Kiel, the complex structures are causing increasing concern. Without a strong person at the helm, the IfW, which was founded in 1914, threatens to revert to the old days. When the Austrian Felbermayr took over the management position in 2019, the facility was hardly of any importance. The well-networked Felbermayr changed that. With clear articulation to the public as well as to politics, he knew how to convince, economists of all stripes say.

Nobody believes that the old times will break out again under Kooths and Görg. But despite their good reputation, it is clear that a permanent solution is needed as quickly as possible. Görg, who is responsible for international trade and investment, is hardly visible to the public. Rather, he has made a name for himself through his empirical work.

Business chief Kooths is best known as the chairman of the Hayek Society, named after the economist Friedrich August Hayek, one of the most important representatives of the Austrian School of Economics. Hayekianer Kooths is recognized as a liberal market commentator in the specialist public. “But neither of them has the format of a Felbermayr and the wires in politics,” says one participant.

It is not that there is a lack of adequate replacements. The Düsseldorf labor market and regional expert Jens Südekum, the Frankfurt economist Nicola Fuchs-Schündeln or Bruegel boss Guntram Wolff had been traded for example. Talks with some candidates are said to continue, while others have already made it clear that they are not interested in the restrictions as head of the institute.

And so the occupation of the top position is still completely open, they say. In Kiel they do not expect that to change this year. The complicated search is “really no fame sheet” for those involved, says an insider.

Despite their limited influence on the framework conditions, the Kiel-based company now wants to take one step. According to information from the Handelsblatt, there should be an amendment to the statutes so that the president is no longer solely liable. Instead, IfW managing director Birgit Austen-Bosy is to be put on an equal footing. Austen-Bosy is then responsible for the financial fortunes, the president for the scientific ones – whatever his or her name may be in the near future.

More: What pigs and a Soviet teach us about wise economic policy