By Jeffrey Gangemi

Can academics help the nation's leaders rev up the economy? President George W. Bush, a 1975 Harvard Business School alumnus, seems to think so. The President recently nominated Edward P. Lazear, a professor at Stanford Graduate School of Business, to be chairman of the White House Council of Economic Advisers (CEA),replacing Ben Bernanke, who has just taken over as chairman of the Federal Reserve.

And in early January, Bush nominated Randall S. Kroszner, professor of economics at the University of Chicago Graduate School of Business to the board of governors of the Federal Reserve System, a seven-person group that helps determine interest rates and other economic policies. Both nominations must be passed by Congress for Lazear and Kroszner to be confirmed in their new positions.

Experts say B-school professors are often particularly good at applying economic theory to real-world issues, which sets them apart from their counterparts in corporations or politics. Their interaction with students and industry professionals brings them out of the metaphorical "ivory tower." "Business school professors who teach economics are put in a world where their theoretical knowledge has to be applied, and in the process of doing that, they develop speaking skills and end up with extensive contact with businesses," says David Brady, deputy director of the Hoover Institution, a policy think tank on Stanford's campus.

STRONG BACKGROUNDS.  It's not uncommon for politicians to call on B-school professors to help institute economic change. Last year, California Governor Arnold Schwarzenegger appointed Dean Tom Campbell of the University of California at Berkeley Haas School of Business to help him solve the state's recent budget crisis (see BW Online, "Haas' Dean Goes to California's Aid"). Still, Bush's decision to nominate two professors is somewhat ironic. Many B-school professors have been tough on the President's handling of many different issues, including the war in Iraq (see BW Online, 11/3/03, "Bush in Iraq: A B-School Case Study").

They've been especially critical of his economic policies (see BW Online, 10/4/04, "For Bush, A Blast from the Ivory Tower"), in large part due to the growing national debt. "It's not unreasonable to say that academia is disappointed with the Bush administration's fiscal policies," says Richard Green, associate dean of graduate programs and professor of finance at George Washington University School of Business in Washington, D.C. "And that includes both Democrat and Republican, liberal and conservative."

Lazear and Kroszner were unavailable for comment for this story.

Savvy strategy might have been on the President's mind when he opted for Lazear and Kroszner. Now more than ever, as Bush's approval rating hovers at 43%, according to the most recent CNN/USA Today/Gallup poll, political experts say it's important for Bush to nominate strong candidates with impeccable records. Some of Bush's recent nominees, especially Harriet Miers for the Supreme Court and Michael Brown at FEMA, have prompted critics to accuse him of cronyism. Both Lazear and Kroszner are considered to be on the conservative, market-based side of economics, says Harry Holzer, professor of public policy at Georgetown University and former chief economist in the U.S. Labor Dept. But because both have spent much time at the research-focused University of Chicago economics department (Lazear taught there from 1985 to 1992 before moving to Stanford), they are adept at building a strong empirical argument for their theories and aren't ruled by ideology, Holzer adds.

COMMUNICATING IS KEY.  Academics are often appointed to head the CEA because of their strong theoretical background, and especially for their ability to face a situation objectively, says Green. For example, Glenn Hubbard from the Columbia Business School and Laura Tyson from London Business School have served as CEA chairs in recent years.

Known as one of the few labor economists to make significant advances in both theoretical and applied research, Lazear has focused his studies around workplace issues, particularly pensions and retirement, worker compensation, education, and immigration. At Stanford, Lazear developed research and ideas that became the seminal work in the area of "personnel economics," a field that marries labor economics analysis to organizational behavior. And for the past year, Lazear has sat on the president's tax reform panel.

No doubt, Lazear appealed to the president for his technical knowledge, as well as his ability to communicate it to economic greenhorns. As Bush struggles to meld the traditional company-sponsored health care system with personal health savings accounts, which will allow individuals to set aside money tax-free to cover medical expenses, he'll need a labor economist with extensive experience in this area. Lazear talks well to non-economists, which will enable him to sell his perspective to the Bush administration and the public, says Holzer.

TEACHING THE NATION.  It's less common for academics to sit on the Fed Board of Governors, because it's highly important for its members to possess intimate knowledge of the financial services sector. But Kroszner's experience on the CEA (on which he served from 2001 to 2003), his research on regulation, and his consultancy at the Federal Reserve Bank of Chicago all strengthen his fit for the position. "Kroszner is a great guy -- very smart," former CEA chair Hubbard said in an interview. "What he'll bring to the Fed is a deep expertise in banking and international finance."

Hubbard says economics professors in business school are the perfect nominees for government positions. "When you teach and study economics within a business school, you're used to speaking to a business or applied audience, so you're probably a little bit more of a natural," he says. As he welcomes Lazear and Kroszner to their new positions, Bush probably hopes they will be close allies in formulating his economic agenda, as well as teaching its benefits to the American people.