Luke Ford

In a photograph taken in Moscow when he was six, Andrei Shleifer (b. February 20, 1961) wears the uniform of a Soviet Army general. The costume fit the boy. When a friend moved to one of the best schools in the city, Shleifer rode his bicycle to the gates and stayed until the principal agreed to admit him too. His parents were engineers. The state had chosen the profession for them, as the state chose most things in the lives of Soviet Jews in those years.

The family left in 1976 with help from the Hebrew Immigrant Aid Society and settled in Rochester, New York. Shleifer was fifteen and spoke little English. He later said he learned most of it from Charlie’s Angels. He was good at mathematics, good enough that Harvard admitted him, and in his sophomore year he walked into the office of a young assistant professor named Lawrence Summers (b. 1954) and told him his paper contained errors.

Summers was the nephew of two Nobel laureates in economics. He had won tenure at Harvard younger than almost anyone before him. He did not throw the sophomore out. He took him on. The friendship that began in that office shaped both careers, and twenty years later it cost Summers the presidency of the university and cost Shleifer something harder to name.

Shleifer finished his A.B. in 1982 and went to MIT for the doctorate, which he completed in 1986 under Franklin Fisher (1934–2019), with Robert Solow (1924–2023) and Stanley Fischer down the hall. He taught at Princeton, then at the University of Chicago business school, and in 1991 he came back to Harvard and stayed. He holds the John L. Loeb chair in economics. By the RePEc citation count he ranks, in most recent years, as the most cited economist alive.

The work came in waves, and each wave attacked a comfortable assumption.

The first assumption was that financial markets price assets right. The efficient market hypothesis held that any gap between price and value gets closed by traders who smell the profit. Shleifer, working mostly with Robert Vishny (b. 1959), asked who those traders are and what constrains them. They run other people’s money. They face redemptions when they are down. They cannot wait forever for the market to come to its senses, and the market can stay senseless longer than they can stay solvent. Their paper “The Limits of Arbitrage” (1997) put a name to the problem and became a founding text of behavioral finance. Mispricing persists, the paper argued, because the smart money is not free to act. The book that followed, Inefficient Markets: An Introduction to Behavioral Finance (2000), carried the case to a wider room.

The second assumption was that managers serve shareholders. Shleifer and Vishny’s survey of corporate governance, published the same year, asked a blunter question. How does an investor in Boston ever get his money back from a manager in Moscow or Milan who controls the assets and writes the books? Their answer was concentrated ownership. A large shareholder has the motive to watch the manager. He also has the motive to rob the small shareholders sitting beside him. The trade is real and has no clean solution, and saying so reframed the field.

The third assumption was the largest. With Rafael La Porta, Florencio López-de-Silanes, and Vishny, Shleifer built what came to be called legal origins theory. They gathered data on dozens of countries and asked why some protect investors and some do not. The pattern they found ran along an old fault line. Nations that inherited English common law tended to give shareholders and creditors stronger rights, courts more independence, and regulators a lighter hand than nations built on French civil law. Those protections, they argued, deepen capital markets and speed growth across generations. The claim turned legal tradition into a number a regression could use, and the regressions multiplied. So did the objections. Legal historians said the categories were too crude, the traditions too tangled, the causation too convenient. Shleifer and his coauthors answered with more data and held their ground.

A single proposition runs under all of it. Prosperity comes not from rational men but from institutions that channel imperfect men toward useful work. Markets beat governments where property is secure, contracts hold, and the powerful are fenced in. He carried the same suspicion to the state itself. With Vishny and others he showed how licensing rules and entry barriers protect the established firm and feed the bribe-taking clerk rather than the consumer. The fullest statement is The Grabbing Hand: Government Pathologies and Their Cures (1998), which treats the politician the way the governance work treats the manager, as a man who serves himself unless something stops him.

He would soon test the proposition in his own conduct, in the one country he knew from the inside.

The Soviet Union came apart in 1991, and Harvard came to Moscow. The Kennedy School sent men. So did the Russian Research Center, the economics department, and the Harvard Institute for International Development. Jeffrey Sachs (b. 1954), fresh from advising Poland, was the loudest of them. Shleifer arrived by a different road. The World Bank sent him, and the World Bank’s chief economist that year was Summers. Shleifer held an advantage no other American could match. He was born there. He spoke the language. He could sit with the young reformers around Yegor Gaidar (1956–2009) and Anatoly Chubais (b. 1955) and catch the meaning under the words.

The city was full of foreigners chasing the same opening. Consultants, bankers, missionaries of the market, and a layer of swindlers underneath them. Money moved in cash. Kidnappings were common. The reformers worked against the clock, certain that a slow privatization would hand the country back to the Communists. Gaidar called his planners the kamikaze team. They issued vouchers to a hundred and forty-eight million citizens and pushed state firms into private hands by the thousands, fast, on the theory that speed itself was the only safe policy. Shleifer advised Chubais and his lieutenant Dmitri Vasiliev, and he wrote the logic down later in Privatizing Russia (1995) and Without a Map (1999). Summers blurbed the first book and said the authors had done remarkable things in Russia.

To run the day to day, Shleifer hired a lawyer named Jonathan Hay, an Idaho native and Rhodes Scholar just out of Harvard Law. Hay had unruly hair, oversize horn-rim glasses, and a high tolerance for chaos. He set up the Harvard operation inside Chubais’s privatization agency, in a cold government building near Red Square. He told a reporter later that they had no heat, no Xerox, no fax, no food. A Russian lawyer summed up Hay’s method in three words. Don’t worry, be happy.

The work carried a hard line through the middle of it. The contract that Harvard signed with the United States government barred everyone on the project, their families, and anyone acting for them from investing personal money in Russia or holding a stake in any Russian business. Even a savings account in a Russian bank was off limits. The line existed because the conflict it guarded against was plain to anyone who paused over it. The institute’s own human resources officer, Louisa French, described under oath the test the staff was supposed to run on every decision. They asked how it would look on the front page of the New York Times. The mantra, she said, was that if you had to ask, you were too close to the line.

In July 1994, Shleifer and his wife began to invest in Russia.

Nancy Zimmerman ran a hedge fund out of Cambridge. She had left Goldman, Sachs to start it, and she out-earned her husband by a wide margin, more than a million dollars to his hundred and ninety thousand the year the investing began. She called him Boss. With the help of Leonard Blavatnik (b. 1957), a Russian émigré on the Forbes 400, the couple put two hundred thousand dollars into a vehicle that held shares of Russian firms being privatized under Shleifer’s own guidance, among them Gazprom and a set of aluminum smelters. When Blavatnik later merged those smelters, Hay’s American lawyers, paid by the United States, worked the merger papers for free.

That same season the Shleifers went into Russian oil with the hedge fund Farallon. On August 11, 1994, Shleifer wired a hundred and sixty-five thousand dollars to a bank account in the Channel Islands to buy thirty thousand shares of an oil company called Purneftegas. By early November more than four million dollars sat in Russian oil stocks, most of it Farallon’s, a tenth of it the Shleifers’. The shares were registered in the name of Zimmerman’s father, a Chicago man with racehorses and a stake in a small bank. A Farallon partner, David Cohen, told the grand jury what they were buying with Shleifer’s name. Russia then was the Wild West, he said, and they were petrified. There was incredible crookery, and they wanted all the protection they could get, and they thought Andrei provided some of it. People might think twice before crossing Andrei Shleifer. His closeness to Chubais was one of the reasons.

To work out which oil stocks to buy, Hay sent a first-year Harvard law student in Moscow to study the market. The student posed as the Russian agent of a foreign investor. He testified later that Hay told him to look at oil and gas because they sat at the front of privatization, and that those would be the most valuable assets in the economy, so of course they would be the most wanted.

In October 1994, the chairman of Harvard’s economics department, Dale Jorgenson (1933–2022), gave a cocktail party at his home. The room held economics stars, among them two men who had won the John Bates Clark Medal, Jorgenson himself and Martin Feldstein (1939–2019), once Ronald Reagan’s chief economic adviser. Shleifer and Zimmerman talked about their Russian investments in front of all of them. Feldstein grew interested and telephoned Shleifer afterward for an introduction to Blavatnik. He looked at Russia and decided against it. Shleifer stood in a room full of his peers and spoke freely about the thing his contract forbade, and no one in the room thought to stop him.

By 1996 the project had folded a love affair into its finances. Hay had fallen for Elizabeth Hebert, an American who wanted to launch the first licensed mutual fund company in Russia. She arrived at meetings on time in a trim suit with a leather portfolio of notes. Hay arrived late with his hair flying and no pen. He let her use his government car. He pressed the Russian regulators, who were his own advisees, to register her company ahead of larger and more seasoned rivals like Credit Suisse and Pioneer. When the registration came through first for Hebert, the Moscow financial community understood at once what it meant. Zimmerman moved to invest in the venture, an investment the conflict rules barred her from making.

The pressure on the Russians was real. Yeltsin had staked his reelection on mutual funds, and his prime minister told Vasiliev to his face that he was a failure. Hebert’s back-office partner, a Russian-born American named Julia Zagachin, told colleagues that if they did not get the thing running she would end up in jail. When an honest competitor refused to make room for her, a Russian official told the man, with Hay translating, that Zagachin was a grain of sand, an irritant, that they would get rid of her later, and that for now he had to take her into his company.

In late August 1996, Shleifer and Zimmerman went to Cape Cod, to the stretch of beach at Truro where they summered with Summers. By then Summers was deputy secretary of the Treasury and the architect of American aid to Russia. He knew the couple were investing there. He did not know they were hiding the oil shares behind Zimmerman’s father or routing bond profits through an Illinois bank to dodge Russian tax. He knew enough to worry. He told Shleifer to be careful, that there was a lot of corruption in Russia. He told Zimmerman there might be a scandal, that her husband could be pulled into it, that she should make sure she was clear with everyone. People might want to make Andrei a problem some day, he said. The world’s a shitty place. He told Shleifer to check what his Harvard contract said, and told Zimmerman to think hard about what she was doing.

Zimmerman had already named the problem herself, to a young aide, in a sentence that survives in the record. What was she supposed to do, she had asked, build a Chinese wall between herself and her husband through their bedroom. When she brought Summers’s warning home, Shleifer’s answer was a lawyer. They could use Michael Butler, he said, if they were worried about specific things.

The first person inside the project to sound an alarm was Holly Nielsen, a lawyer running the legal-reform secretariat. The favoritism toward Hebert’s fund shocked her. She wanted to reach Shleifer and barely knew him, so she took a colleague to breakfast at the Aerostar Hotel and poured out the story while he scribbled on a napkin. She asked him to keep it quiet, to use a code in any message, that the appointment with the pediatrician was confirmed. The colleague flew home, called Shleifer, and said that if what Nielsen described was true, Hay should be fired at once.

Shleifer met Nielsen in Cambridge that December. They lunched at the Faculty Club, and the next morning she came to his office in the Littauer Center and laid it out. Hay and Hebert were being stupid and arrogant, she said. If they had quietly taken the third or fourth registration, no one would have noticed. They had to have the first, and the first caused a sensation. Shleifer’s reply is in her deposition. He said he could not control who Jonathan slept with. As she left, he told her he was promoting Hay to run the secretariat. The man Nielsen had come to warn him about would now be her boss.

Others tried. A Pioneer executive named Timothy Frost took Hay to a diner off the Garden Ring and praised the good he had done, then told him there was a real problem, an odor of conflict of interest, and that he should lean over backwards to guard against it. Frost testified that Hay answered with a threat, that he could see to it that Pioneer’s business in Russia stalled. A New York Stock Exchange lawyer warned Vasiliev that the Harvard men would bring him public embarrassment. Vasiliev listened and protected Hebert anyway. He told an aide why. The first Russian mutual funds could carry no scandal, and the only way to be sure of that was to put them in the hands of someone close, someone they could trust.

The investigation came from the bottom of the agency, not the top. In early 1997 a Moscow staffer of the aid agency told the mission director that Hay’s girlfriend had been handed an unfair advantage. The director called the inspector general in Washington, who reports to Congress and not to the agency, and the inspector general sent two agents to Moscow. They worked quietly for six weeks, then the director telephoned Sachs at Harvard. Don’t say anything, she told him. We have a statement.

Sachs was furious. He had warned Shleifer about Russian corruption and had not imagined the corruption would be Harvard’s. When he reached Shleifer, Shleifer tried to call the investigation a vendetta by jealous rival universities. Sachs told the grand jury later that such investments by an HIID adviser were a conflict of interest and would damage the institute. Shleifer fired off a nine-page letter to the Harvard provost calling the inquiry zealous, outrageous, and vicious, and urging the university to cancel the whole Russia program. It was a great time, he wrote, for Harvard to send the aid agency straight to hell.

The agency reached the same destination on its own. On May 20, 1997, after Chubais himself demanded it, the United States killed the project. The termination letter used language a federal agency rarely uses. Shleifer and Hay, it said, had abused the trust of the United States government by using personal relationships for private gain, and had sent the Russians exactly the wrong message while American equipment and staff paid for it. Harvard fired both men from the institute two days later. Shleifer kept his tenured chair in the economics department.

Peter Aldrich, a Boston investor who had put money into Hebert’s fund as a favor to the Shleifers, wanted the truth from Hay. He called Hay to his office and sat him in a chair facing his own. He told Hay he had to know the truth, that he was a fiduciary with other people’s money. Then he asked whether Hay had invested in Russian securities. Hay said no. Aldrich asked if that was his truthful answer. Hay said he had invested for his father, that it was not much. Aldrich pressed. How much. Fifty thousand. Anything else they could hang him on. Nothing else. Aldrich did not believe him. He had reason not to.

Shleifer took the same posture to dinner at the Charles Hotel. He told Aldrich he had been hung out to dry, that he was only a consultant, that the program was Sachs’s and Sachs had run it. The claim that he was a consultant rather than the man in charge became his legal defense, and it would not survive contact with the record.

The government built its case for three years, through a year of gathering and two before a grand jury. The prosecutors wanted a criminal indictment. In the end the United States filed civil charges only. On September 26, 2000, it sued Harvard, Shleifer, Hay, Zimmerman, and Hebert on eleven counts, estimating the government had been cheated of at least forty million dollars and seeking triple that under the False Claims Act. The judge, Douglas Woodlock (b. 1947), dismissed the charges against the two wives for want of pleaded facts.

On June 28, 2004, Woodlock ruled against the two men. The cooperative agreements were real contracts, he wrote, and they carried a duty to stay free of conflicts, and Hay and Shleifer had breached it. He took apart the consultant defense in a sentence. Shleifer ran the entire Russian project, the judge wrote, and to call the head of the project a consultant exempt from the conflict rules would produce an absurd result. He found self-dealing by Shleifer, found that Hay had tried to launder four hundred thousand dollars through his father and his girlfriend, and found that the two men had conspired to defraud the United States.

The money came due in stages. That summer Zimmerman’s firm paid the government a million and a half, the firm having diverted American resources for its own profit. In August 2005, nine years after the walk on the beach at Truro, the parties settled. Harvard paid twenty-six and a half million dollars, the largest such payment in its history. Shleifer paid two million. Hay owed between one and two million, scaled to his future earnings. Shleifer and Zimmerman took out a two-million-dollar mortgage on their Newton house to cover his share. No one admitted liability. Shleifer issued a statement. A man can fight the unlimited resources of the government only so long, he said, and after eight years he had decided to end it, without any admission on his part, because his lawyers told him the fees would run past what he would pay the government.

As the litigation ground forward, Shleifer’s standing among economists rose. The American Economic Association gave him the John Bates Clark Medal in 1999, the prize it awards to the best American economist under forty, a prize whose winners often go on to the Nobel. The citation praised an economist in the old Chicago manner, building simple models and then looking hard at the evidence. The award arrived in the middle of the affair that has trailed him since, and the two facts sat side by side without touching, one in the journals, the other in the courthouse.

His friend rose too. In March 2001 Summers became president of Harvard, and Shleifer and Zimmerman had campaigned for him, holding parties at their house. Summers said under oath that he recused himself from the university’s handling of his friend’s case. He stayed in it anyway. Early in his presidency he told the dean of the faculty, Jeremy Knowles, that he wanted Shleifer kept at Harvard, and Knowles soon promoted Shleifer to a named chair. Two months after the court found Shleifer liable for conspiring to defraud the government, he hosted Summers at a break-the-fast dinner on Yom Kippur. Harvard’s standard procedure for faculty misconduct, the Committee on Professional Conduct, never moved against him. The dean treated him as innocent until the courts spoke, and after the courts spoke the committee’s chairman said the facts were already settled and the matter belonged to the dean, and the dean did nothing.

The silence broke in January 2006, when David McClintick (1940–2021), a Harvard alumnus and former Wall Street Journal reporter, published an eighteen-thousand-word account of the affair in Institutional Investor. He had read the depositions and the court record and gone to Russia twice. He laid out the conduct and the protection in a single narrative for the first time, and someone mailed copies to the senior faculty. At a faculty meeting that February, a mechanical engineer named Frederick Abernathy rose and said he had been on the faculty more than forty-five years and was no longer easily shocked, and that the Shleifer affair had shocked him. He asked the president for his opinion of it. Summers said he had taken no role in the university’s handling of the case and had not familiarized himself with the facts, and so could not express an opinion. The room murmured. A zoologist called the outcome of the tawdry Shleifer affair unthinkable under the last two presidents and characteristic of the present one. One of Shleifer’s own colleagues defended him to the press in the same week and said that by any measure the man was on a trajectory to the Nobel.

Summers resigned the presidency weeks later. The Russia affair was not the only charge against him, but it was the one his colleagues trusted least to his own account. The institute Shleifer had run did not survive either. Harvard dissolved it and folded its pieces into the schools. Asked years afterward whether he had been punished, Shleifer answered from an airplane that he was glad to have the matter behind him.

He returned to his work and never left it. He kept the chair, the citations, and the editorship of the Quarterly Journal of Economics, which under his hand became a main venue for the empirical economics he favored. In 1994, with Josef Lakonishok and Vishny, he had founded a money-management firm, LSV Asset Management, on the same insight that drove his academic work, that markets misprice in patterns a patient investor can name and use. The firm grew to manage tens of billions.

His later work turned toward the mind. With Nicola Gennaioli he built a theory of diagnostic expectations, which holds that people do not weigh the future by cold probability but seize on the vivid case, the scenario that feels representative, and overweight it. Optimism and panic ride on the same habit, and so do credit booms and crashes. The argument runs through A Crisis of Beliefs: Investor Psychology and Financial Fragility (2018). Into the mid-2020s, with Pedro Bordalo, Gennaioli, and others, he has pushed toward a general account of how men sort problems into categories, pull the wrong memories, and price credit and inflation by feel rather than by sum.

Four decades of work return to one idea. Men are not rational, and the societies that prosper are the ones whose laws and markets and courts make imperfect men behave as if they were. He proved the point about managers, about politicians, about whole legal traditions. The hardest test of it ran through Moscow, through his own hands, where the rules existed to fence in the exact temptation he met. His own institute had named the test years before he failed it. They asked how a thing would look on the front page of the New York Times, and they said that if you had to ask, you were already too close to the line.

Notes

What carries the scenes. The boy in the Soviet general’s uniform, the bicycle rides to school in Moscow, his engineer parents being assigned their jobs by the Soviet state, the family’s 1976 HIAS-assisted emigration to Rochester, his learning English by watching *Charlie’s Angels*, and the sophomore walking into Lawrence Summers’s office to correct a paper all come from David McClintick’s account: How Harvard Lost Russia (also available at University of Vermont). These are the most colorful episodes in the biography and rely primarily on a single reporter. If you want additional confirmation before publication, this is the area that deserves the closest scrutiny.

The investment details also come from McClintick and the court record on which he relied. These include the August 11, 1994 wire transfer of $165,000 to a Channel Islands account, the purchase of Purneftegas shares, the investment’s growth to more than $4 million by early November, the 90-10 split with Farallon, the registration of the account in Jonathan Hay’s father-in-law’s name, the Farallon partner’s grand jury testimony describing Russia as the “Wild West” and identifying Anatoly Chubais as political protection, and the use of Len Blavatnik’s aluminum investment vehicles. The same two links above document these details. Harry Lewis’s summary provides a concise explanation of the settlement figures: Some Russian Money Flows Back to Harvard.

The Lawrence Summers warning is rendered as a paraphrase rather than a quotation, and I did not invent any dialogue. The documented version, including the remarks that “There might be a scandal, and you could become embroiled… People might want to make Andrei a problem some day. The world’s a shitty place,” appears in McClintick’s article. I deliberately avoided reconstructing dialogue for Shleifer, Nancy Zimmerman, Chubais, or the Russian reformers because there is no reliable record of what they said in those conversations.

The settlement and its aftermath are documented by multiple sources. Harvard ultimately paid $26.5 million, Shleifer paid $2 million, and Zimmerman’s investment firm had earlier paid $1.5 million, for a total of at least $31 million. A federal judge ruled in 2005 that Shleifer and Jonathan Hay had conspired to defraud the United States. Shleifer mortgaged his house to help finance the settlement. There was no admission of liability and no criminal prosecution. Sources include Harvard Magazine, Inside Higher Ed, The Harvard Crimson, and Harry Lewis’s blog. The anonymously mailed copies of McClintick’s article, the February 2006 faculty meeting and the audible reaction in the room, and Summers’s resignation are described by Harry Lewis and *The Harvard Crimson*. Frederick Abernathy’s description of the affair as a “disgraceful blotch” and Summers’s BlackBerry response from an airplane come from *Inside Higher Ed*.

The scholarship and honors are drawn from multiple standard sources. These include the John Bates Clark Medal in 1999, RePEc’s ranking of Shleifer as the world’s most-cited economist, including his position at the top in 2024, the “old Chicago tradition” description of his scholarship, his seven books, his editorship of the *Quarterly Journal of Economics*, and the founding of LSV Asset Management in 1994 with Josef Lakonishok and Robert Vishny. Sources include Wikipedia, the American Economic Association, and Shleifer’s Harvard biography. The discussions of “The Limits of Arbitrage,” the legal origins literature, *The Grabbing Hand*, diagnostic expectations, *A Crisis of Beliefs*, and his mid-2020s work on cognition follow your uploaded draft together with the Wikipedia entry.

The Great Delusion

If John J. Mearsheimer’s anthropology is right, the career, economic theories, and policy record of Harvard economist Andrei Shleifer serve as a devastating empirical proof of realism, disguised as a tragedy of failed liberal planning.

Shleifer is one of the most cited economists in the world, famous for his pioneering work in behavioral finance, the legal origins theory of economic growth, and transition economics. During the early 1990s, he led the Harvard Institute for International Development (HIID) project in Moscow, serving as a primary advisor to the Russian government. Alongside Jeffrey Sachs and Anatoly Chubais, Shleifer was a chief architect of Russian privatization, designing the voucher program meant to rapidly transform a collapsing command economy into a free market.

Mearsheimer’s framework in The Great Delusion cuts directly through Shleifer’s institutional blueprints, showing that his project was doomed from its inception because it misunderstood human nature.

First, Shleifer’s privatization program treated human beings as atomistic, rational utility-maximizers. The theory assumed that if you handed state assets to individuals via vouchers, a rule-bound, efficient market architecture would spontaneously emerge through self-interest and legal incentives.

Mearsheimer’s anthropology counters that humans are fundamentally social and tribal beings whose moral frameworks are shaped by intense early socialization. They do not operate as isolated economic units in a historical vacuum. When Shleifer dismantled the Soviet state machinery, he did not unlock a nation of latent Western-style entrepreneurs. Instead, he destroyed the primary collective structure that provided social cohesion and basic predictability.

In the sudden security vacuum, human nature defaulted to its core logic: individuals retreated into defensive micro-societies, kinship networks, and criminal syndicates to survive and capture resources. What the West termed the rise of the “oligarchs” and Russian mafia was simply tribal realism filling an empty space. The legal rules Shleifer tried to superimpose were completely subverted by the primal demand for group survival and competitive leverage.

Second, Shleifer’s broader academic project—the Legal Origins Theory—posits that a country’s economic development is deeply influenced by whether its legal system stems from British common law or French civil law. He argues that common law structures provide better protection for individual property rights, leading to superior financial markets.

Under Mearsheimer’s lens, this theory mistakes a secondary cultural artifact for a primary engine. Legal frameworks do not generate social order; a cohesive, powerful cultural group generates legal frameworks to secure its own position and interests. The British common law system did not succeed because of an abstract, superior logical design. It succeeded because it was backed by the state machinery of a highly cohesive, expansionist nation-state. When a liberal state tries to export these legal codes to a region with different historical value infusions, the imported laws are inevitably hollowed out or rewritten by local group loyalties.

Finally, Shleifer’s own downfall in the Moscow project—which resulted in a major federal lawsuit by the U.S. government over conflict-of-interest allegations regarding personal investments in Russia—illustrates Mearsheimer’s point that reason is subordinate to sentiment and affiliation.

A standard liberal analysis views the HIID scandal as an isolated ethical lapse by an individual actor. Under Mearsheimer’s lens, it shows the fragility of the technocratic illusion. Even a brilliant, elite academic operating at the highest levels of global planning cannot detach himself from immediate, personal, and factional networks of interest.

If Mearsheimer is right, Shleifer’s work proves that you cannot engineer a society using abstract economic textbooks. The institutional designs of liberal economists are fragile structures that are easily crushed or co-opted by the enduring, tribal nature of man.

‘A Big Misunderstanding’

If David Pinsof is right, the foundational research of Andrei Shleifer in behavioral finance, law and economics, and transition economics represents a highly optimized system for converting chaotic, raw power struggles into neat, academic models of institutional and psychological deviation. As one of the most cited economists in the world, Shleifer has built an immense reputation by charting how markets fail, how governments extract wealth, and how investor psychology produces financial instability.
A Pinsofian analysis strips away the high-status academic framework of this research to expose the strategic logic of the actors involved—including Shleifer himself.
Consider his influential work on political economy and transition economics, particularly his 1998 book with Robert Vishny, The Grabbing Hand: Government Pathologies and Their Cures. Shleifer argues that state corruption, bureaucratic red tape, and bad regulations are pathologies—malfunctions of government that enrichment-seeking politicians use to choke economic growth. He presents these pathologies as structural errors that can be cured through privatization and better legal design.
But if Pinsof speaks the truth, the “grabbing hand” of the state is not a pathology or an administrative misunderstanding of economic efficiency. The state is the ultimate coercive apparatus. Subsidies, regulatory barriers, and corrupt payoffs are highly rational, self-serving instruments used by competing political factions to reward their allies, protect their coalitions, and deprive their rivals of resources. The politicians and bureaucrats running these systems understand their immediate incentives perfectly. They are not confused by economic theory; they are playing a zero-sum game to win.
This logic highlights the irony of Shleifer’s real-world advisory role in the 1990s, when he directed the Harvard Institute for International Development’s project to assist in the privatization of post-Soviet Russia. The project aimed to implement rational market reforms to correct decades of communist economic misdirection.
Instead, the transition became a fierce, high-stakes competition over the massive resources of a collapsing empire. Local actors did not misuse privatization because they misunderstood Western economic models. They used the newly created property rules as weapons to capture immense wealth, create oligarchical structures, and secure control over the coercive levers of the state. They responded to immediate incentives as rational primates would.
Shleifer’s more recent work with Nicola Gennaioli on investor psychology, such as A Crisis of Beliefs: Investor Psychology and Financial Fragility and his subsequent papers on “diagnostic expectations,” follows a similar pattern. This research models how investors rely on selective memory, overreact to recent news, and form optimistic stereotypes that fuel market bubbles and predictable financial crises. To the academic elite, this provides a highly sophisticated platform to diagnose the irrationality of market participants.
From Pinsof’s perspective, framing the behavior of investors or market cycles as a collection of cognitive errors and memory distortions serves as a powerful high-status mission statement. It positions the elite financial economist as the necessary choice architect or regulator who stands above the psychological fray, possessing the superior rationality required to monitor expectations and design systemic guardrails.
Shleifer did not discover a series of fixable institutional pathologies or psychological errors in the global economy. He executed an exceptionally effective academic strategy, using rigorous mathematics and legal-origins data to climb to the absolute peak of the university hierarchy, secure the John Bates Clark Medal, and maintain a dominant, high-prestige position within elite institutions. His work provides university circles with a brilliant map of the structural flaws in markets and states, demonstrating that defining the behavior of your subjects as a misunderstanding is the ultimate tool for institutional authority.

How Harvard Lost Russia

David McClintick writes Jan. 13, 2006:

The best and brightest of America’s premier university came to Moscow in the 1990s to teach Russians how to be capitalists. This is the inside story of how their efforts led to scandal and disgrace.

Since being named president of Harvard University in 2001, former U.S. Treasury secretary Lawrence Summers has sparked a series of controversies that have grabbed headlines. Summers incurred the wrath of African-Americans when he belittled the work of controversial religion professor Cornel West (who left for Princeton University); last year he infuriated faculty and students alike when he seemed to disparage the innate scientific abilities of women at a Massachusetts economic conference, igniting a national uproar that nearly cost him his job; last fall brought the departure of Jack Meyer, the head of Harvard Management Co., which oversees the school’s endowment but had inflamed some in the community because of the multimillion-dollar salaries it pays some of its managers.

Then, in quiet contrast, there is the case of economics professor Andrei Shleifer, who in the mid-1990s led a Harvard advisory program in Russia that collapsed in disgrace. In August, after years of litigation, Harvard, Shleifer and others agreed to pay at least $31 million to settle a lawsuit brought by the U.S. government. Harvard had been charged with breach of contract, Shleifer and an associate, Jonathan Hay, with conspiracy to defraud the U.S. government.

Shleifer remains a faculty member in good standing. Colleagues say that is because he is a close longtime friend and collaborator of Summers.

In the following pages investigative journalist David McClintick, a Harvard alumnus, chronicles Shleifer’s role in the university’s Russia Project and how his friendship with Summers has protected him from the consequences of that debacle inside America’s premier academic institution.

The man who had guided Poland’s economic reform, Jeffrey Sachs, an economics professor at Harvard University, was a boyish-looking 35-year-old with explosive energy and little patience. An economic wunderkind, Sachs had passed the general examinations for his Ph.D. and was invited to join the rarefied Harvard Society of Fellows while he was still a Harvard undergraduate. He won tenure in the department of economics at age 29.

Sachs had begun advising the Polish Solidarity Movement before it took control of the government in August 1989. He invited another Harvard-trained economist, David Lipton, to work with him. Lipton, who had been Sachs’ student, had spent most of the 1980s at the International Monetary Fund. On January 1, 1990, following Sachs’ and Lipton’s advice, the Polish government introduced what came to be known as “shock therapy” — the rapid conversion of all property and assets from public to private ownership. After initial shortages and inflation, goods and services soon were flowing through the economy in unprecedented varieties and quantities; prices stabilized.

Though envious of Poland’s success, Russian reformers knew their task would be much more difficult. “When socialism collapsed in Poland, an entire generation of people still remembered what markets, market institutions and private ownership were,” Gaidar wrote in State and Evolution: Russia’s Search for a Free Market, published in 2003. “In Russia there was no such experience to be had. In 1991 the vast majority of Russian citizens had never seen a normal retail shop.”

Still, the Polish experiment was getting worldwide publicity, and it wasn’t long before Moscow reached out to Sachs, who began formally advising the Russians in late 1991, simultaneously with the official dissolution of the Soviet Union. In November, Gaidar invited Sachs and Lipton to work with the new economic team.

Moscow by then was crowded with foreigners eager to help Russia and get in on the ground floor of a great social and economic change. Entrepreneurs, consultants, lawyers, bankers and academics with foundation grants, as well as fast-buck artists and swindlers from all over the world, swarmed across Russia looking for a piece of the action. The atmosphere was charged with possibility and fraught with danger. Financial transactions were mostly conducted in cash; cities were awash in rubles. Kidnappings were common, as was gunfire and even bombings. Organized crime darkened the already grim picture.

Russia’s leaders felt a near-apocalyptic sense of urgency. They understood that to prevent chaos they had to quickly lay the foundation for a Russian-style capitalism or face a return to authoritarianism couched as a restoration of law and order. Even as Yeltsin’s reformers got to work, they faced strong opposition from reactionary former Communists who protested the speed and cost of change.

Sachs wasn’t the only Harvard professor in Moscow in the summer and fall of 1991. No fewer than four university affiliates — the John F. Kennedy School of Government, the Russian Research Center, HIID and the economics department — were represented. Graham Allison, the founding dean of the Kennedy School, was pushing an updated version of the 500 Days plan with its co-author, liberal economist Grigory Yavlinsky. Marshall Goldman, the director of Harvard’s venerable Russian Research Center and a frequent visitor to the Soviet Union for decades, was providing counsel to various parties. Sachs, thanks to his experience in Poland, emerged as the leading figure among these notables. In Moscow he encountered yet another Harvard colleague, Andrei Shleifer. Shleifer had been sent to Moscow by the World Bank, where Summers, on leave from Harvard, was serving as chief economist. Shleifer possessed a distinct advantage over other Westerners: He was a native of Russia and fluent in the language, having been born there in 1961. His parents were engineers, a profession the state chose for them. Shleifer revealed at an early age that he was ambitious; in a photograph taken when he was six, he is dressed as a Soviet Army general. When a friend transferred to one of the best schools in Moscow, Shleifer bicycled there and didn’t leave until he had persuaded the principal to admit him as well.

The Shleifers left Russia in 1976 with the help of the Hebrew Immigrant Aid Society and moved to Rochester, New York. Andrei later claimed he learned most of his English by watching the popular television show Charlie’s Angels. He excelled in mathematics and was admitted to Harvard College. In his sophomore year he went to see Summers and pointed out errors in a paper the young assistant professor had written. Summers, the nephew of two Nobel laureates in economics, soon took Shleifer under his wing. Like Sachs, Summers was one of the youngest economists ever granted tenure by Harvard — they had made it the same year. Summers guided Shleifer onto a similar path, and the friends maintained their close relationship after Summers went to the World Bank in 1991.

There was no love lost between Sachs and Summers, who had been rivals as newly tenured prodigies. Each had to be the smartest man in the room; their presence at faculty meetings ensured lively debate tinged with animosity. Shleifer had a similar personality, and when the confident upstart encountered Sachs in Moscow, he didn’t get along any better with Sachs than his mentor did.

Jeffrey Sachs (b. 1954) comes to La Paz in 1985 as a Harvard professor not yet thirty-one years old, and the thin air at twelve thousand feet leaves a visitor breathless before he has done anything at all. Bolivia is short of breath in every other sense too. Prices climb so fast that a worker paid in the morning hurries to spend the money by afternoon. Over the worst of the crisis, the annual rate runs into the tens of thousands of percent. Shopkeepers reprice goods by the hour. The central bank has no reliable count of its own reserves. A man arrives from Cambridge with a set of equations and a claim that sounds absurd to anyone living inside the disaster: the hyperinflation can be stopped, and stopped fast.

The claim turns out to be close to true. On August 29, 1985, the government of President Víctor Paz Estenssoro (1907-2001) issues Supreme Decree 21060. The decree frees prices, cuts the budget, lets the currency float, and freezes the public payroll. Gonzalo Sánchez de Lozada, the planning minister who later becomes president, works the politics. Sachs supplies the design and the nerve. Within weeks the price level holds. The miners march on the capital and lose. The shock works, and the man who helped write it walks out of Bolivia with a reputation that will follow him for forty years.

To understand how a labor lawyer’s son from suburban Detroit ends up rewriting another country’s economy before he can grow a full beard, go back to Oak Park, Michigan.

His father, Theodore Sachs, argues labor cases for teachers, firefighters, and other public workers, and he wins one before the Supreme Court of the United States. He tells his son to take an interest in the issues of the day, and the son does. Jeffrey Sachs runs for student council president at Oak Park High and wins. He marches against the war in Vietnam. He goes to a rally for Cesar Chavez. On a family trip to the Soviet Union when he is a sophomore, he meets an East German student who lectures him on the glories of socialism, and Sachs discovers that he cannot answer. He does not know what capitalism is, or socialism, or why one country has unemployment and another claims it has none. He arrives at Harvard University in 1972 with his head full of that question.

He answers it the way the brightest students of his generation answer everything, with mathematics. He finishes his bachelor’s degree in 1976, summa cum laude, then his master’s, then a doctorate in 1980 under Martin Feldstein (1939-2019). The Harvard Society of Fellows takes him in as a junior fellow. He joins the faculty the same year he finishes his Ph.D. At twenty-eight, in 1983, Harvard makes him a full professor with tenure, an age at which most economists are still finishing their first round of journal rejections. He writes fast and he writes a great deal. The problems he solves on paper are clean. Then Bolivia teaches him that a model can stop a hyperinflation in the real world, and the cleanness of the page meets the dust of La Paz, and he likes the meeting.

The reputation built in Bolivia carries him to the great opening of his life. In 1989 the communist order in Eastern Europe cracks. Poland goes first.

In April of that year Sachs travels to Warsaw and finds a country that does not yet have positions, only fear. He meets Witold Trzeciakowski, a soft-spoken senior economist on the cerebral side of Solidarity, a frightened gentleman. Solidarity talks about hunger and the risk of civil war. Then Solidarity wins almost every seat it contests on June 4, and the men who spent their lives as dissidents wake up holding a bankrupt government.

The scene that captures the moment is small. Sachs sits with Bronisław Geremek (1932-2008), the historian who runs Solidarity’s parliamentary caucus, and asks him what the movement plans to do. Geremek says they mean to set up a council in the Senate to watch the government’s hands. Sachs tells him that is not enough.

“You can’t take a landslide and make a commission out of it,” he says.

Geremek answers that Solidarity cannot take power. It is impossible.

Sachs disagrees, and then he plays the card that makes him useful. The country is buried in foreign debt, and everyone assumes the debt makes Poland bankrupt and helpless. Sachs tells them to forget the debt. Many countries in history have had their debts cancelled, he says, and the West will cancel Poland’s, because of what Poland is and what this moment is. Late one night he climbs to the apartment of Jacek Kuroń (1934-2004), a physical, overwhelming presence of a man, a chain-smoking hero of the opposition, and lays out the whole plan. Kuroń keeps saying one word back to him. More. More.

The plan that follows takes the name of the finance minister, Leszek Balcerowicz (b. 1947), who serves under Prime Minister Tadeusz Mazowiecki (1927-2013). The Balcerowicz Plan does in Poland what Decree 21060 did in Bolivia, faster and on a larger scale. Prices free up on January 1, 1990. The budget tightens. State monopolies break apart. The currency becomes convertible. The world later calls the method shock therapy. A Polish specialist notes at the time that having a Harvard economist beside Solidarity gives the plan a seal of approval, and that Polish economists had wanted a radical approach for years but nobody had dared to put it so plainly. The radicalism costs people their jobs and shutters old factories, and the pain is real and front-loaded. Poland comes through it as one of the strongest economies of the former bloc. The seal of approval holds.

Then comes Russia, and Russia breaks the pattern.

Sachs advises Mikhail Gorbachev‘s (1931-2022) economic team in 1990 and 1991, then Boris Yeltsin‘s (1931-2007) reformers after the Soviet collapse, working alongside Yegor Gaidar (1956-2009) and later the young finance minister Boris Fyodorov (1958-2008), and he advises Leonid Kuchma‘s (b. 1938) team in Ukraine in 1993 and 1994 besides. He argues, as he argued for Poland, that rapid stabilization needs a wall of Western money behind it, something on the order of the Marshall Plan that rebuilt Western Europe after 1945. He asks for tens of billions of dollars and for the cancellation of Russian debt. He calls it a political lifeline, the thing that gives the visionary builders of a new democracy room to stand.

The money does not come. The reformers get the shock and not the support. Inflation, corruption, and the oligarchic carve-up of state assets follow. Sachs grows certain that Washington and the European capitals have decided to let Russia fall. Around Christmas of 1992 he tells Gaidar he means to step aside. Fyodorov calls him at the holiday and asks him to stay one more year. They meet at the World Bank, and Sachs agrees, and the year goes no better. He resigns in December 1993 and announces it in the first days of 1994, together with the economist Anders Åslund (b. 1952), prompted by the arrival of anti-reformers in Yeltsin’s cabinet.

“Western assistance was promised but never came,” he tells the Harvard Crimson. “The reformers never got the backing they needed.”

He has held the same line for thirty years since. Russia’s failure, he says, came from inadequate Western support and Russian political choices, not from the logic of fast stabilization. His critics say the logic was the problem, that you cannot drop markets onto a country with no courts, no property registries, and no functioning tax system and expect anything other than what Russia got. The argument has never been settled, and Sachs has never conceded it.

Somewhere in the Russian years his interest turns. The crises he had treated were monetary fires you put out with discipline. The poverty he begins to study in the 1990s is colder and older. He concludes that the poorest countries on earth stay poor not because their markets fail but because they have never had the minimum capital to start. Disease, distance from the sea, exhausted soil, no roads, no schools, no clinics. He calls it a poverty trap, and he argues that private markets alone cannot lift a country out of one, and that the rich world has both a duty and an interest in paying for the lift.

The argument becomes a bestseller. The End of Poverty appears in 2005, with a foreword by the singer Bono, and it argues that extreme poverty can be brought near zero in a generation through targeted money for health, schools, farms, roads, and clean government. The book makes Sachs a global figure and brings the subject to dinner tables that had never thought about it.

It also draws the knife fight that defines the second half of his career. The economist William Easterly (b. 1957) reviews the book for the Washington Post and calls the plan a sort of Great Leap Forward. The phrase is a grenade, and it is meant to be. Easterly, and later Dambisa Moyo (b. 1969), argue that big foreign aid breeds dependency and corruption, that markets and accountable institutions and ordinary entrepreneurs do the real work, and that grand plans designed in New York for villages in Africa fail because the planners cannot see what they do not know. Sachs answers that cheap, proven things save lives, that a bed net costs a few dollars and stops malaria, that the choice is not theory but children.

He decides to prove it on the ground. In 2006 he launches the Millennium Villages Project, a hundred-and-twenty-million-dollar experiment financed largely by George Soros (b. 1930) and like-minded donors. The idea is to flood a cluster of villages across ten sub-Saharan countries with everything at once, seeds and fertilizer and clinics and nets and schools, and let the success spread until the whole continent follows. The journalist Nina Munk gets six years of close access, traveling with Sachs and living in two of the villages, and the book she writes, The Idealist (2013), becomes the fairest hard look anyone has taken at him.

She watches the gap open between the plan and the ground. In Ruhiira, in southwest Uganda, Sachs’s team pushes farmers to grow maize, a crop new to the region, in place of the matoke they had always raised. The harvest comes in heavy. Then there are no buyers for it, no roads to move it, and no good way to store it, and the rats get much of the surplus. In Dertu, in the dry borderland between Kenya and Somalia, the project drills a borehole, and people and animals gather around the water, and a semi-nomadic settlement thickens into a permanent one that the project cannot feed once the money runs low. Munk does not write a takedown. She writes something harder, a portrait of a brilliant and tireless man whose certainty races ahead of the world he means to fix, and who calls the failures unexpected artifacts when a colder eye might have predicted them. Bill Gates calls the book heartbreaking. So does the Wall Street Journal. The verdict on the villages, from most development economists, is that the gains they showed had as much to do with Africa’s broad rise in those years as with the model.

While the villages struggle, Sachs builds the larger machine of his influence. He advises Kofi Annan (1938-2018) at the United Nations and later Ban Ki-moon (b. 1944) and António Guterres (b. 1949). He directs the UN Millennium Project and helps shape the Millennium Development Goals, the first time the world sets numbered targets for cutting poverty and disease by a deadline. When those goals expire in 2015 he becomes a chief architect of the broader Sustainable Development Goals, which fold in climate, energy, cities, and biodiversity. He runs the UN Sustainable Development Solutions Network. He works with the physician Paul Farmer (1959-2022) and others to push cheap medicine against malaria, AIDS, and tuberculosis, and on that front the numbers move, and millions of people who might have died do not.

His climate writing grows from the same root. Sachs argues that markets and a carbon price cannot do the job alone, that the world needs comprehensive public investment steered through international institutions. In The Ages of Globalization (2020) he sets out a long view of human history shaped by geography, technology, and exchange, and he argues that humanity has crossed into a planetary age where climate change, pandemics, nuclear weapons, and artificial intelligence cannot be managed by nations acting one at a time. Stronger global institutions, in his telling, become not a preference but a necessity.

Then two episodes in this decade move him from the center of respectable opinion toward its edge, and he goes willingly.

Richard Horton, the editor of the Lancet, names Sachs in 2020 to chair the journal’s COVID-19 commission. Sachs first appoints Peter Daszak of the EcoHealth Alliance to lead the task force on the pandemic’s origins. Then leaked emails show that Daszak had quietly organized an early letter in the Lancet condemning lab-origin theories as conspiracy, and that EcoHealth had funded coronavirus research in Wuhan. Sachs removes him, dissolves the task force, and turns. In 2022 he and the Columbia pharmacologist Neil Harrison publish a paper in the Proceedings of the National Academy of Sciences calling for an independent look at evidence held by American institutions, virus databases and lab notebooks and email records that no outside scientist had reviewed. At a conference in Spain that summer Sachs goes further than the paper.

“I’m pretty convinced it came out of U.S. lab biotechnology, not out of nature,” he says. “We don’t know for sure, I should be absolutely clear. But there’s enough evidence that it should be looked into. And it’s not being investigated, not in the United States, not anywhere.”

Much of the scientific establishment rejects the claim and points to studies that favor a natural spillover at the Wuhan market. Sachs holds that the question stays open and that powerful people prefer it closed.

The second episode is Ukraine, and it makes him a household name on one half of the internet and a pariah on the other. Sachs argues that the eastward expansion of NATO, begun in the 1990s against what he says were promises made to Gorbachev, set the long fuse for the war, and that Western leaders carry heavy blame for the break with Russia. On February 19, 2025, he stands in the European Parliament and delivers a speech he calls “The Geopolitics of Peace.”

“I begged the Ukrainians: stay neutral,” he tells the chamber. “Don’t listen to the Americans.”

He tells the members that to be an enemy of the United States is dangerous and to be a friend is fatal. He calls neutrality the dirtiest word in the American political vocabulary. He says European leaders confuse NATO with Europe and should talk to Moscow without Washington in the room. In the same speech he makes claims that go far past the war, that the Iraq invasion was carried out for Israel, that the 2014 Maidan uprising was an American regime-change operation, that the United States blew up the Nord Stream pipelines. Supporters hear a man with forty years of front-row experience telling truths the press will not print. Critics hear a brilliant economist straying into geopolitics he has not studied, repeating talking points that flatter the Kremlin, and trading the careful qualifications of a scholar for the certainties of an advocate. He does not soften under the criticism. He has never softened under any of it.

The body of work behind the controversy stays large. Sachs has written The End of Poverty (2005), Common Wealth (2008), The Price of Civilization (2011), The Age of Sustainable Development (2015), A New Foreign Policy (2018), The Ages of Globalization (2020), and others, and he hosts a series of book conversations on history and economics. The honors stack up beside the books. In 2022 he wins the Tang Prize in Sustainable Development. He holds the French Legion of Honour and shared the Blue Planet Prize in 2015. Universities have given him dozens of honorary doctorates, and Time has twice named him among the most influential people on earth.

One pattern runs through the whole life, from the high cold air of La Paz to the floor of the European Parliament. Sachs believes that a clear mind with the right plan can fix things that other people call hopeless, and that the main thing standing in the way is the failure of the powerful to act. The belief made him right about Bolivian inflation and Polish prices when older men called him reckless. The same belief made him promise more for Russia and for the Millennium Villages than the world delivered, and pin the shortfall on everyone but the design. His admirers see the great humanitarian economist of his generation, a man who carried the poorest people on earth into the rich world’s conscience and would not put them down. His critics see the hazard of a man who trusts his own plan more than the ground it lands on. Both have watched the same forty years. Both are describing the same trait. He has spent his career certain that the answer is known, and that the only question left is whether the people in charge have the will to pay for it.

Notes

The Bolivia opening is anchored in facts: Decree 21060, August 29, 1985; President Paz Estenssoro; Gonzalo Sánchez de Lozada as planning minister; inflation running into tens of thousands of percent; and the miners’ march. The atmospheric details, including altitude, prices changing by the hour, and the bankrupt central bank with no reliable count of its reserves, are either self-evident or sourced. The reserve-count detail comes from Sachs and Morales themselves. Sources: NBER chapter, NBER paper, and Wikipedia on shock therapy.

The Poland scenes carry the most verbatim dialogue, and all of it is sourced. The Bronisław Geremek exchange, the line “you can’t take a landslide and make a commission out of it,” and the debt-cancellation pitch come from Foreign Policy in Focus. The Jacek Kuroń apartment scene and his repeated “more, more” come from a Polish transcription of Sachs’s own 2014 Łódź lecture, available at ResearchGate. The Witold Trzeciakowski “frightened gentleman” detail is Sachs’s own description in the same FPIF interview. The “seal of approval” line from the Maryland specialist comes from a Vanderbilt thesis.

The Russia resignation, the Boris Fyodorov Christmas call and World Bank meeting, and the Marshall Plan argument come from Sachs’s own account at ScheerPost. The Harvard Crimson quote is at The Harvard Crimson. The resignation alongside Anders Åslund comes from Sachs’s own “What I Did in Russia.” His advising of Gorbachev’s and Kuchma’s teams is from his 2025 EU Parliament speech transcript.

The Millennium Villages material, including Ruhiira maize-for-matoke, the rats, the Dertu borehole, the phrase “unexpected artifacts,” the Soros figure, and the Gates and Wall Street Journal verdicts, comes from coverage of Nina Munk’s The Idealist: the Penguin Random House page, the Harvard student review, and the Amazon page carrying the Forbes blurb on the rats. William Easterly’s “Great Leap Forward” jab is noted at Wikipedia.

The COVID quote and the Peter Daszak removal are from Sachs’s own site and The Intercept: JeffSachs.org and The Intercept. The Ukraine quotes are from the EU Parliament transcript at Consortium News and Sachs’s own posting at JeffSachs.org.

Early life, the Soviet-trip pen-pal story, his father’s Supreme Court work, and Sachs’s tenure at 28 are sourced from Encyclopedia.com and Wikipedia.

The Great Delusion

If John J. Mearsheimer’s anthropology is right, the intellectual trajectory and global campaigns of economist Jeffrey Sachs present a stark transition from technocratic illusion to an unwitting confirmation of tribal realism.
Sachs’s career is divided into two major phases, both of which rest on foundational liberal assumptions that Mearsheimer dismantles in The Great Delusion.
In his early career, Sachs was the chief architect of economic “shock therapy,” advising post-Soviet economies like Poland and Russia on rapid transitions to free-market capitalism. This model treated human beings as atomistic, rational economic actors who would automatically thrive if restrictive state interventions were removed.
Mearsheimer’s framework shows why the Russian experiment collapsed into oligarchic chaos. Humans are profoundly social beings whose identities and moral structures are formed during a long childhood by intense socialization within specific groups. They do not operate as abstract, utility-maximizing units in a vacuum. When Sachs dismantled the existing Soviet state apparatus, he did not liberate autonomous individuals; he destroyed the primary protective structures holding society together. In the resulting security vacuum, human nature did what it always does: people retreated into primal micro-societies—ethnic networks, regional factions, and defensive coalitions—to survive. The institutional rules Sachs tried to import were completely overridden by the ancient logic of group loyalty and survival.
In his later career as a UN advisor, director of the Earth Institute, and advocate for the Sustainable Development Goals, Sachs shifted to global multilateralism. He champions world-spanning cooperation, global governance, and the eradication of poverty through unified human effort, frequently arguing that international conflicts are reckless miscalculations driven by militarism and a failure of diplomatic reason. Under Mearsheimer’s lens, this globalist project is the ultimate liberal delusion. Sachs operates on the assumption that a universal “family of nations” can use critical reason to transcend geopolitical divides and coordinate for the common good. Mearsheimer counters that reason is the least important way preferences are determined. Because different societies are socialized into fundamentally incompatible worldviews, there is no shared moral substrate that can unify humanity under a single administrative code.
Furthermore, Mearsheimer’s anthropology explains why Sachs’s beloved international institutions are inherently fragile. Organizations like the United Nations do not possess independent authority; they are arenas where separate, self-interested states manage their security interests. Sachs blames failed diplomacy and aggressive leadership for global instability, but Mearsheimer argues that conflict is the logical operation of separate tribes seeking survival in an anarchic world where no higher authority can guarantee their safety.
Sachs has become a fierce critic of American hegemony, calling for a multipolar world order and condemning Western interventionist policies. A standard analysis frames this shift as an evolution in Sachs’s independent reasoning. Mearsheimer’s logic reveals a different irony: Sachs’s critique of the American empire aligns with realism, but his proposed solution—a harmonious, cooperative multipolar system run through the UN—remains trapped in the same utopian framework. Sachs correctly diagnoses the failure of the liberal crusade, but he fails to see that the multipolar world he advocates for will be driven by the very tribal security competition he spent his life trying to plan away.

‘A Big Misunderstanding’

If David Pinsof is right, the long career of economist Jeffrey Sachs represents a supreme manifestation of the intellectual fantasy: the belief that the world’s most agonizing crises are simply structural misunderstandings that can be resolved by an elite academic with a better blueprint.

During the 1990s, Sachs gained global fame as the architect of “shock therapy”—rapid transitions to free-market capitalism implemented in Bolivia, Poland, and post-Soviet Russia. Later, in his 2005 book The End of Poverty, he shifted his focus to global development, arguing that extreme poverty could be eradicated by 2025 through a precisely calculated injection of foreign aid, infrastructure investments, and clinical interventions. To the global elite, Sachs was the ultimate technician, proving that human suffering was an engineering problem waiting for a rational solution.

A Pinsofian analysis strips away this high-status mission statement and exposes why his grand projects yielded such complicated results.

The catastrophic economic collapse and rise of oligarchies in 1990s Russia did not happen because local actors misunderstood how capitalism works. The transition was a high-stakes, zero-sum competition over the massive resources of a collapsing empire. Local elites, former party officials, and opportunists used privatization not to optimize GDP, but as a rational, self-serving weapon to secure immense wealth and capture the coercive apparatus of the state. They understood their immediate incentives perfectly.

Similarly, the failure of his ambitious Millennium Villages Project to systematically lift rural Africa out of poverty was not a failure of economic data. Pinsof notes that animals—including humans—evolve to care about themselves, their families, and their immediate coalitional allies, not the abstract welfare of humanity. Local bureaucrats, warlords, and competing factions handled the influx of foreign aid exactly as rational primates would: they used the resources to solidify their own alliances, protect their networks, and outcompete rivals for status and power.

By framing global poverty and economic chaos as problems caused by institutional design and a lack of planning, Sachs created a highly effective platform for himself. His continuous shift toward anti-imperialist rhetoric, critiques of US foreign policy, and climate activism provides international forums and university circles with a sophisticated platform to signal immense moral superiority over corporate and state actors.

Sachs did not discover a fixable misunderstanding in the global economy. He executed a highly successful status strategy, using bold, global frameworks to maintain a dominant, high-prestige position within elite institutions, the United Nations, and the university hierarchy, proving that the ambition to save the world is the ultimate tool for personal prominence.

Jeffrey Sachs and the Field

In 2022 a group of virologists put a sentence into print that reads as a flat fact. Jeffrey Sachs is an economist, not a virologist. The sentence reads as biography. It works as a border. A man has come to the edge of their field carrying papers issued somewhere else, and they refuse him entry, and the refusal takes the oldest form a field has, the naming of who belongs and who is a visitor.

Pierre Bourdieu (1930-2002) built a sociology to read that sentence. A field, in his account, is a structured space of positions, a game with its own stakes and its own scoring. Each field runs on a capital particular to it, and the capital of one field does not spend at par in the next. The scientific field honors a capital earned by work the field can check, published where the field publishes, recognized by the people the field already recognizes. That capital cannot be bought with money and cannot be carried in from a neighboring field at face value. A field also holds the power to consecrate, to say this man is one of us and that man is a tourist. When the virologists write their sentence, they exercise that power. They tell Sachs the currency he carries is not legal tender here.

Read the life this way and it gathers into a single problem. Sachs is a trajectory across fields. He banks one kind of capital early, converts it again and again, and the story turns on the exchange rate, on where the conversion runs favorable and where the window shuts.

He banks the capital young, and it is academic. Harvard, the three degrees by twenty-eight, tenure among the youngest the university grants. In Bourdieu’s terms this is scientific capital in the strict sense, recognition by the peers who hold the right to recognize, and the strict sense matters because it sets the value of everything Sachs spends afterward. The trajectory also lays down a habitus, a set of dispositions formed by a path that rewarded him fast. The disposition is a belief, never stated because never doubted, that clear knowledge travels. What holds in the seminar holds in the country. The capital banked at Harvard spends anywhere a problem waits.

Bolivia is the first conversion and the rate is good. He carries economic capital into the field of national policy and the field takes it. He has argued in print that a hyperinflation ends at a stroke, and in 1985 a Bolivian government issues the decree that proves the argument in the open air. Inflation collapses in weeks. The crisis field consecrates him. The young professor becomes the man who breaks inflations, and the title travels with him as a credential a market will price.

Poland is the conversion at its height, and it crosses a harder border, from economics into a revolution. The scene of consecration runs through a kitchen. Sachs sits an hour with Adam Michnik, who does not argue the economics and asks one question, whether the thing can be done. Then Michnik says the last piece is in place. The political field, speaking through one of its consecrated men, stamps the economist’s capital as sound. A few days later the article that breaks the deadlock appears, and the revolution takes the government. Michnik’s sentence is the mirror image of the virologists’ sentence. One field says, you belong, your currency spends here. Years later another field says the reverse.

Russia is where the window shuts the first time, and the shutting rhymes with everything that follows. Through late 1991 Sachs sits with Yeltsin’s reformers and presses a plan the size of the crisis, thirty billion dollars in Western aid, relief from the Soviet debts, money on the scale of the Marshall Plan. The plan needs a field he does not command. The field is not Russian economics. It is the United States foreign-policy field, the rooms where such aid would have to be authorized. There his capital does not convert. After a television broadcast Lawrence Eagleburger offers him a ride from the studio into Washington, and in the car the older man, who holds real power in that field, explains the exchange rate. The aid is not going to happen. A Harvard economist’s authority, large inside its own field, buys nothing at this counter. Sachs is not failing at economics in Russia. He is rich in one currency and standing in a field that will not take it.

A second Russian episode shows the same logic from the reverse side. Harvard ran a federally funded reform project in Moscow, and people inside it traded in the markets they advised and were sued for it. Sachs was not part of the self-dealing. The scandal that sank the project was not his act. Yet symbolic capital is collective before it is personal. A name carries a charge for the whole group that holds it, and the charge can turn negative for all of them when a few betray the trust. The loose phrase about the Harvard men in Russia taxed the name, and the tax fell on Sachs along with the guilty, by the workings of a field that prices a man by his associations as much as his conduct. Misrecognition runs in both directions. It can lift a man above his work, and it can stain him below it.

After Russia the work turns, and the kind of capital he builds turns with it. He stops chasing inflations and takes up poverty itself, and the argument becomes a book, The End of Poverty (2005), with a foreword by a rock star and a reach far past economics. The shift is the one Bourdieu watches for. This is not scientific capital. It is symbolic capital drawn from outside the autonomous field, from the journalistic field and the field of celebrity philanthropy. Every field, in Bourdieu’s map, holds two poles, an autonomous pole where the field judges by its own rules, and a heteronomous pole where outside powers, money, media, government, set the terms. Sachs moves toward the heteronomous pole and grows powerful there. He advises the United Nations, he lands on the magazine lists of the influential, he carries a moral authority the wider public can read at a glance. The reach is real and it moves money and policy.

The autonomous pole of his own discipline does not follow him. William Easterly and Dambisa Moyo answer him on the field’s own ground, on institutions, incentives, and the record of aid. The foreword and the lists move them not at all, because those are not capital their field honors. Here the two poles pull against each other inside a single career. The man grows more famous and more contested at the same time, and the fame and the contestation feed from different fields with different scorecards.

The Millennium Villages bring the split into the open. Sachs builds fifteen sites across Africa, near a hundred and twenty million dollars, each village to take the full package at once and rise out of poverty in five years. A magazine writer, Nina Munk, spends six years watching and lives long stretches in two of them, and her book The Idealist (2013) reports back. At Dertu in northern Kenya a generator part takes four months to arrive and then sits because no one on hand can fit it. The project’s blog calls the water the most reliable in the region, and by 2011 the wells stand dry in a drought. At Ruhiira in Uganda the spending on clinics saves mothers and drives malaria down. Two fields render two verdicts. The journalistic field judges the project by its narrative of promise and shortfall, and the development-economics field, turning hard toward controlled trials in these same years, judges it by the standard of evidence the field now demands. The celebrity capital that launched the villages cannot overrule either court. The well at Dertu does not consult the foreword.

Then the pandemic, and the conversion fails at the highest stake he ever plays. Sachs chairs the COVID-19 commission for The Lancet and picks the head of a research nonprofit to lead the inquiry into the virus’s origin. Over months he comes to think the man has lied to him, asks for a grant proposal, and hears that a lawyer has forbidden the handover. He disbands the task force, turns toward the possibility of a laboratory origin, and in 2022 co-authors a paper in a national academy’s journal arguing that a feature of the virus points to deliberate insertion. He arrives at this argument holding two currencies, the old economic-policy capital and the new global fame, and he tries to spend both for standing in virology. He even holds the chairmanship, a position of command inside the commission. Bourdieu, in Homo Academicus, separates the temporal power a man wields inside an institution from the scientific capital that a field of knowledge recognizes, and the two seldom sit in the same hands. The chair of a commission is not a virologist’s standing. The paper is an attempt to enter the field through its own front door, a journal it respects. The incumbents shut the border. The virologists, the evolutionary biologists, the nonprofit he had brought in, all answer in the field’s own voice, and the answer reduces to the sentence this essay began with. An economist, not a virologist. The field names the import illegitimate and turns it back.

Set the car ride in Arlington beside the virologists’ sentence and they are the same event thirty years apart. A man holds great capital in one field and presents it at the window of another, and the second field declines it. The habitus formed by Bolivia and Poland, the disposition that capital travels, is the disposition that fails in Washington and fails again in virology. The early conversions ran so favorable that they taught a lesson the later fields refuse to honor. This is the field-theoretic shape of the life, and it carries a hard edge. The dispositions that made the man are the dispositions that wall him out, and a habitus outlives the conditions that rewarded it. The instrument that won the first rooms is the instrument that loses the last.

The final turn fits the frame as cleanly as the rest. On the war in Ukraine, on NATO’s expansion, on the conduct of American power, Sachs takes positions that the institutions he once advised will not bless, and he carries them onto the dissident podcast circuit and the foreign broadcasters. When the autonomous fields withdraw recognition, a man can migrate to a field that rewards the withdrawal. The dissident media field consecrates the heretic for the heresy, and it consecrates him the harder because the establishment has cast him out. His old titles, the Harvard chair, the United Nations posts, the Lancet commission, spend better in those rooms now than in the rooms that issued them. The consecrated insider becomes the consecrated outsider, and the second consecration runs on the wreckage of the first.

What the frame sees is a life of capital crossing borders, the favorable conversions early, the windows shutting late, the same disposition driving the man into the same wall twice and then carrying him to the one field where the wall reads as a badge.

What the frame cannot price is the truth of any single claim.

Jeffrey Sachs and the Problem of the Expert

In 1985 the price system of a country of several million people changes by decree, and the design comes from a Harvard professor in his early thirties who stands for no Bolivian voter and answers to none. The decree works. Inflation falls. The man who drew it leaves with a reputation, and the miners turned out of the closed pits stay behind with the result. No ballot authorized him. No Bolivian in the street could have checked his math. The country took the medicine on the word of an expert, the word held, and the question of by what right he gave it never came up while the cure was working.

That question is Stephen Turner’s. He has spent a career asking how expert authority sits with democratic legitimacy. A liberal order rests on a premise, that citizens can in principle weigh the grounds of the decisions that govern them. Esoteric expert knowledge breaks the premise. When the knowledge runs past what a layman can follow, the public cannot evaluate it, and deference to it cannot be the ordinary rational kind, the kind where you check and then agree. You take it on trust, and trust is not assessment. Turner’s interest lies in how that trust gets built, who grants it, and what becomes of a democracy that runs on more and more of it.

He refuses the easy answer at either end. He is no populist who calls all expertise a racket, and no technocrat who tells the public to defer and keep quiet. His claim is that the trouble is more handleable than the alarmists feared, on one condition. Expert claims have to stay open to challenge. Where they remain discussable, a free society can argue them and survive being wrong. Where they harden into a single necessary course that no layman may question, the expert problem bites, because the discretion at the center of the expert’s judgment slips every check.

Turner sorts experts by the audience that makes them experts. One kind speaks for a knowledge so settled that any competent person would accept it, the physicist’s kind, where the expert reports a consensus and the consensus does the authorizing. A second kind has a following rather than a consensus, an audience that accepts the expert because it already shares his commitments. A third serves a client or a cause and trades in the arguments the client wants made. A fourth has its audience built for it by the body that pays it, the state or the agency creating both the expertise and the demand for it. The kinds shade into one another, and a single career can move across them. Sachs moves across all of them, and the movement is the story.

Bolivia and Poland are the seasons when his expertise looks like the settled kind. He has argued in print that a hyperinflation ends at a stroke, on the day the government stops printing money and the public comes to believe the printing has stopped, and in Bolivia a decree puts the argument in the open and the inflation breaks. In Poland he carries the same authority into a revolution. The scene that wins their trust runs through a kitchen, where Adam Michnik asks whether the thing can be done and then tells him the last piece is in place. To the men taking power it reads as technical truth, the economist reporting what any competent economist would report.

Turner’s caution waits inside the triumph. “It worked” is a verdict on a tangled outcome that no one can pin down to a single cause. The decree carried a hundred judgment calls, how fast, how deep, what to cut and in what order, and a judgment call is discretion, and discretion is where the expert’s power lives and where accountability cannot reach. The public sees a result and credits a science. What it cannot see is the room where the calls were made on the strength of one man’s read, and the read is the thing no peer review and no election ever touched.

The decade that follows shows the expertise was never the settled kind. The work turns from inflations to poverty, and the argument becomes a book, The End of Poverty (2005), with a foreword by a rock star and a reach far past economics. When William Easterly and Dambisa Moyo answer him, they do not answer as cranks. They answer as economists, on the evidence, and they arrive at the opposite conclusion. A discipline whose first names disagree at the root is not a discipline reporting a consensus. It is a discipline with schools, and a school is a following. Sachs now holds the authority of the second kind. His standing rests on an audience that shares his prior conviction, that the rich owe the poor and that the right spending can end the poverty, an audience that grew as he spoke to it. The reach is real and it moves money. The cognitive authority of the physicist is not what he carries. He carries the authority of a man with a movement, and a movement can be large and still be a following.

The Millennium Villages test the deepest assumption in the career, that expert judgment travels. Fifteen sites, the full package delivered at once, poverty gone in five years. The promise rests on a belief that the competence that broke Bolivia’s inflation is a portable thing, ready to be carried from one country and problem to the next. Turner is hard on that belief. In The Social Theory of Practices (1994) he doubts there is any shared, transferable substance of expert knowledge waiting to be moved across cases. What an expert holds is habituation from the cases he has worked, his own and particular, not a method that lifts free of where it was learned. Nina Munk’s reporting reads as a long proof of the doubt. The generator part at Dertu that no one on hand can fit, the maize the farmers will not eat, the wells dry by the drought, none of these are stumbles in the application of a sound technique. They are the technique meeting the truth that there was no portable technique, only a confident man and a five-year clock. The five years were never a forecast. They were discretion in the dress of a forecast, a judgment asserted where no validated knowledge stood behind it, and the clock ran out before anyone with standing could call the assertion to account.

Then the pandemic, and the expert problem turns on the man who spent a life inside it. He chairs the COVID-19 commission for The Lancet, names a head for the inquiry into the virus’s origin, comes to think the man has lied to him, asks for the grant proposal, hears that a lawyer has forbidden the handover, and disbands the task force. He concludes the virus might have come from a laboratory and from research his own country funded. He says the agencies have hidden their work and the scientists are not behaving as scientists behave. In 2022 he co-authors a paper arguing that a feature of the virus points to deliberate insertion, and the virologists turn him back with the sentence that he is an economist and not a virologist.

Turner’s frame holds both men in view and hands neither a trophy. The virologists invoke the boundary of their expertise, which is their right and the source of their authority. Sachs answers with a grievance that is, line for line, the grievance Turner attributes to the layman before esoteric power. The public cannot check the agency. The agency will not show its work. The deference asked of us is trust and not assessment, and the people who ask for the trust hold an interest in the answer. A lifelong expert has taken up the populist’s complaint against expertise and aimed it at another expert community, and the hard part is that no neutral court sits above the two of them. The citizen who wants to know where the virus came from is handed a choice between authorities and given no rational ground on which to choose. That is the liberal-democracy problem at its sharpest, and Sachs stands on both sides of it inside a single episode, the expert who demanded deference for forty years and the citizen denied it in the forty-first.

Run the thread back through the life and one fact holds at every stop. The publics whose lives his prescriptions reshaped never validated him. The Bolivians, the Poles, the Russians, the villagers of Dertu, none of them granted the authority, and none of them could have withheld it in any way the system would have heard. The authority came from the bodies that hired him, the governments, the United Nations, the commission, and from the following he gathered as he went. The “Sachs, go home” poster in the Polish campaign is the demos reaching for the one check it owns, the vote, against a power the vote cannot reach. The poster lost. The reforms held. Whether that outcome should comfort a democrat or trouble one is the whole of Turner’s question, and the career gives evidence for both verdicts at once.

Turner’s measure of a man like this falls not on his beliefs but on whether he kept the door open. Where Sachs left his claims out in the contest, the system worked as a free one should. The aid debate is the healthy case, two schools arguing in print, the public free to watch the experts disagree and draw its own rough conclusions, no single authority closing the matter by fiat. Where he sealed the claim, the trouble came. The five-year promise admitted no challenge until the wells ran dry and the challenge came from the facts. The single foreign-policy line and the single origin claim arrive as settled truths from a man who will not grant that a competent person might land elsewhere. The same conviction that he knows produced the best of the work and the worst. It broke an inflation and it built a village that could not stand, and the difference between the two was never the size of the conviction. It was whether anyone with standing was allowed to say no in time.

How Harvard Lost Russia

David McClintick writes Jan. 13, 2006:

The best and brightest of America’s premier university came to Moscow in the 1990s to teach Russians how to be capitalists. This is the inside story of how their efforts led to scandal and disgrace.

Since being named president of Harvard University in 2001, former U.S. Treasury secretary Lawrence Summers has sparked a series of controversies that have grabbed headlines. Summers incurred the wrath of African-Americans when he belittled the work of controversial religion professor Cornel West (who left for Princeton University); last year he infuriated faculty and students alike when he seemed to disparage the innate scientific abilities of women at a Massachusetts economic conference, igniting a national uproar that nearly cost him his job; last fall brought the departure of Jack Meyer, the head of Harvard Management Co., which oversees the school’s endowment but had inflamed some in the community because of the multimillion-dollar salaries it pays some of its managers.

Then, in quiet contrast, there is the case of economics professor Andrei Shleifer, who in the mid-1990s led a Harvard advisory program in Russia that collapsed in disgrace. In August, after years of litigation, Harvard, Shleifer and others agreed to pay at least $31 million to settle a lawsuit brought by the U.S. government. Harvard had been charged with breach of contract, Shleifer and an associate, Jonathan Hay, with conspiracy to defraud the U.S. government.

Shleifer remains a faculty member in good standing. Colleagues say that is because he is a close longtime friend and collaborator of Summers.

In the following pages investigative journalist David McClintick, a Harvard alumnus, chronicles Shleifer’s role in the university’s Russia Project and how his friendship with Summers has protected him from the consequences of that debacle inside America’s premier academic institution.

The man who had guided Poland’s economic reform, Jeffrey Sachs, an economics professor at Harvard University, was a boyish-looking 35-year-old with explosive energy and little patience. An economic wunderkind, Sachs had passed the general examinations for his Ph.D. and was invited to join the rarefied Harvard Society of Fellows while he was still a Harvard undergraduate. He won tenure in the department of economics at age 29.

Sachs had begun advising the Polish Solidarity Movement before it took control of the government in August 1989. He invited another Harvard-trained economist, David Lipton, to work with him. Lipton, who had been Sachs’ student, had spent most of the 1980s at the International Monetary Fund. On January 1, 1990, following Sachs’ and Lipton’s advice, the Polish government introduced what came to be known as “shock therapy” — the rapid conversion of all property and assets from public to private ownership. After initial shortages and inflation, goods and services soon were flowing through the economy in unprecedented varieties and quantities; prices stabilized.

Though envious of Poland’s success, Russian reformers knew their task would be much more difficult. “When socialism collapsed in Poland, an entire generation of people still remembered what markets, market institutions and private ownership were,” Gaidar wrote in State and Evolution: Russia’s Search for a Free Market, published in 2003. “In Russia there was no such experience to be had. In 1991 the vast majority of Russian citizens had never seen a normal retail shop.”

Still, the Polish experiment was getting worldwide publicity, and it wasn’t long before Moscow reached out to Sachs, who began formally advising the Russians in late 1991, simultaneously with the official dissolution of the Soviet Union. In November, Gaidar invited Sachs and Lipton to work with the new economic team.

Moscow by then was crowded with foreigners eager to help Russia and get in on the ground floor of a great social and economic change. Entrepreneurs, consultants, lawyers, bankers and academics with foundation grants, as well as fast-buck artists and swindlers from all over the world, swarmed across Russia looking for a piece of the action. The atmosphere was charged with possibility and fraught with danger. Financial transactions were mostly conducted in cash; cities were awash in rubles. Kidnappings were common, as was gunfire and even bombings. Organized crime darkened the already grim picture.

Russia’s leaders felt a near-apocalyptic sense of urgency. They understood that to prevent chaos they had to quickly lay the foundation for a Russian-style capitalism or face a return to authoritarianism couched as a restoration of law and order. Even as Yeltsin’s reformers got to work, they faced strong opposition from reactionary former Communists who protested the speed and cost of change.

Sachs wasn’t the only Harvard professor in Moscow in the summer and fall of 1991. No fewer than four university affiliates — the John F. Kennedy School of Government, the Russian Research Center, HIID and the economics department — were represented. Graham Allison, the founding dean of the Kennedy School, was pushing an updated version of the 500 Days plan with its co-author, liberal economist Grigory Yavlinsky. Marshall Goldman, the director of Harvard’s venerable Russian Research Center and a frequent visitor to the Soviet Union for decades, was providing counsel to various parties. Sachs, thanks to his experience in Poland, emerged as the leading figure among these notables. In Moscow he encountered yet another Harvard colleague, Andrei Shleifer. Shleifer had been sent to Moscow by the World Bank, where Summers, on leave from Harvard, was serving as chief economist. Shleifer possessed a distinct advantage over other Westerners: He was a native of Russia and fluent in the language, having been born there in 1961. His parents were engineers, a profession the state chose for them. Shleifer revealed at an early age that he was ambitious; in a photograph taken when he was six, he is dressed as a Soviet Army general. When a friend transferred to one of the best schools in Moscow, Shleifer bicycled there and didn’t leave until he had persuaded the principal to admit him as well.

The Shleifers left Russia in 1976 with the help of the Hebrew Immigrant Aid Society and moved to Rochester, New York. Andrei later claimed he learned most of his English by watching the popular television show Charlie’s Angels. He excelled in mathematics and was admitted to Harvard College. In his sophomore year he went to see Summers and pointed out errors in a paper the young assistant professor had written. Summers, the nephew of two Nobel laureates in economics, soon took Shleifer under his wing. Like Sachs, Summers was one of the youngest economists ever granted tenure by Harvard — they had made it the same year. Summers guided Shleifer onto a similar path, and the friends maintained their close relationship after Summers went to the World Bank in 1991.

There was no love lost between Sachs and Summers, who had been rivals as newly tenured prodigies. Each had to be the smartest man in the room; their presence at faculty meetings ensured lively debate tinged with animosity. Shleifer had a similar personality, and when the confident upstart encountered Sachs in Moscow, he didn’t get along any better with Sachs than his mentor did.

Nonetheless, Sachs introduced Shleifer around the Russian government. It was decided that Shleifer would work with Chubais and Vasiliev on privatization while Sachs advised Gaidar on macroeconomic issues…

In October 1992, just a few weeks before losing the presidency to Bill Clinton, president George H.W. Bush signed the Freedom for Russia and the Emerging Eurasian Democracies and Open-Market Support Act. It authorized up to $350 million in aid to Russia, to be provided and managed by AID, which already had an advance team working informally in Russia at the government’s invitation.

In short order, AID, learning that Sachs and Shleifer were in Moscow, contracted with Harvard to direct and manage the reform program. The agency initially gave $2.1 million to Harvard, which would run the operation out of its Harvard Institute for International Development, a 30-year-old entity located on Eliot Street in Cambridge. With financial support from foundations, international aid agencies, development banks and host governments, HIID operated economic reform programs around the world, concentrating on assisting nations that were changing from government-run to market-driven economic systems. In Indonesia, for example, HIID helped revise the tax system and liberalize financial markets. It also had been active in Colombia, Kenya, Pakistan and Zambia.

The Russia Project would be HIID’s largest and most important program by far. The institute had been run since 1980 by Harvard political economy professor Dwight Perkins, who reported directly to Albert Carnesale, Harvard’s provost and second-in-command. With Sachs advising Gaidar, the HIID project would be directed by Shleifer, who would retain his professorship in the economics department. Shleifer was charged with hiring staff, setting budgets and priorities and creating and supervising the project from Cambridge and on frequent trips to Russia.

Shleifer’s first need was to find someone who could supervise the day-to-day operations of the Russia Project. For this critical post he chose Jonathan Hay, 30, an Idaho native, Rhodes Scholar and newly minted graduate of Harvard Law School.

Fluent in Russian, Hay had moved to Moscow hoping to get in on the excitement of social transformation. Brilliant and intense, with unruly hair, oversize horn-rim glasses and an ethereal academic mien, he dazzled everyone he encountered. Hay had negligible practical experience, but soon, with Shleifer’s blessing, he was setting up Harvard’s Moscow operations at Chubais’s GKI in a drafty government building near Red Square. “We had no heat, no Xerox, no fax, no food,” Hay recalled later to the Washington Post’s David Hoffman, author of The Oligarchs: Wealth and Power in the New Russia. “The first time I came there, I saw just Dmitri Vasiliev and 30 people sitting in a huge hall, just this small man in big glasses, and they were all around him, in a heated discussion, talking about small-scale privatization.”

…JEFFREY SACHS, MEANWHILE, WAS SPENDING less time in Russia and more in Cambridge, where he would eventually become director of HIID. His appointment was not good news to Shleifer, who feared that Sachs would encroach on the Russia Project’s turf and who instructed Hay not to speak to Sachs at all. Shleifer needn’t have worried. Sachs knew nothing of Shleifer’s investments. However, he did warn Shleifer about corruption in Russia, telling him to carefully vet the institute’s Russian employees.

Shleifer and his wife could be surprisingly unguarded about their dealings. In October 1994, at a cocktail party at the home of Dale Jorgenson, then-chairman of Harvard’s economics department, Shleifer and Zimmerman chatted casually about their Russian investments. The gathering was brimming with economics stars. In 1971, Jorgenson had won the John Bates Clark Medal, which the American Economic Association awards every other year to the person under 40 making the greatest contribution to economics. Another prominent Bates Clark medalist, Harvard economist Martin Feldstein, who had been chairman of the White House Council of Economic Advisers under Ronald Reagan, was also present. Feldstein was intrigued to hear of the Shleifers’ investments and phoned Andrei later for a referral to Blavatnik. He ultimately decided against investing in Russia.

Indeed, the chaos had made it clear to the Russian government and its advisers that tighter organization and focus were needed at the Harvard project. In November 1994, Yeltsin issued a decree creating a centralized authority responsible for developing the Russian securities market. Though officially named the Russian Federation Commission on Securities and the Capital Market, the agency was commonly called the Russian Securities and Exchange Commission. This was appropriate: The American SEC was not only the model but was lending technical assistance funded by AID. Charged with running the RSEC were Chubais and Vasiliev, who had launched privatization three years earlier and were ready for a new challenge. Keeping close tabs on the agency were Albert Sokin, a tough lawyer from the St. Petersburg reformers, and Ruslan Orekhov, Yeltsin’s chief legal counselor, whose responsibilities included reform of the legal system.

Through HIID, AID funded the Resource Secretariat, a think tank created in late 1994 that coordinated aid flowing to the new Russian securities commission for the creation of stock exchanges, broker-dealer networks, back-office functions and, most fundamentally, codes of law — securities law, corporate law, tax law and bankruptcy law — governing the vast new economic activity set in motion by privatization. The crafting of law was based in an entity called the Legal Reform Project, which later created the Institute for Law-Based Economy. The ILBE was staffed by American-guided Russian lawyers…

Nonetheless, a few of Harvard’s most senior professors are beginning to break the silence. One such is Harry Lewis, who has taught mathematics and computer science at Harvard for 32 years. He taught Bill Gates as an undergraduate in the 1970s and was dean of Harvard College from 1995 until 2003, when he was dismissed in a restructuring of the college administration and returned to teaching full-time.

“The University is losing its moral authority over undergraduates . . . by failing to respond to faculty malfeasances with the same high-mindedness with which it treats undergraduates,” Lewis writes in his forthcoming Excellence Without a Soul: How a Great University Forgot Education.

Lewis contrasts the Shleifer case with the way Harvard approaches student misconduct, demanding “openness and honesty” of the student, investigating the alleged infraction promptly and imposing sanctions, including expulsion where appropriate. Lewis also invokes recent cases of academic misfeasance by two prominent law professors — Charles Ogletree and Lawrence Tribe. Both were accused of “misusing the words of others” in books they had written. When the “errors” were discovered, they apologized. The episodes were investigated by panels of Harvard eminences, including former president Derek Bok, now a university professor, who determined that the infractions were “inadvertent.” In the case of Tribe, Summers and law school dean Ellen Kagan announced last April that his error was a “significant lapse in proper academic practice.” The Summers administration announced no action against Tribe, however, and the Harvard Crimson, the undergraduate daily newspaper started in 1873, took strong exception. “The evident double standard,” it editorialized, “sets a poor example for the student body and for the wider community. A student caught committing a similar crime might face the termination of his academic career.”

Lewis, in his new book, draws a stark contrast between the Tribe and Ogletree cases, on the one hand, and the Shleifer scandal on the other.

“The Shleifer matter is strikingly different,” Lewis writes. Shleifer has never acknowledged doing anything wrong. Summers has said nothing. And so far as is known, there has been no internal investigation or sanction. “An observer trying to make sense of the University’s position on Shleifer, Ogletree and Tribe is driven to an unhappy conclusion. Defiance seems to be a better way to escape institutional opprobrium than confession and apology. . . . And most of all being a close personal friend of the president probably does one no harm.”

Greek and Latin professor Richard Thomas, the chairman of the classics department and a member of three key committees of the faculty of arts and sciences, agrees with Lewis’s last point at least: “If I had been found liable for conspiracy to defraud the U.S. government, with the result that Harvard had to pay a substantial settlement, I can’t imagine there would have been no consequences for me,” Thomas tells II.

Although Lewis does not declare Summers unfit to be president of Harvard, he comes close. The faculty vote of no confidence in Summers last spring indicates they believe he does not “meet the Harvard standard,” Lewis writes. Summers doesn’t offer “leadership they could respect. The Harvard faculty would rather mind its own business than vote down the president; they did not do so for sport.” Summers, the computer scientist says, has “failed to bring honor to the institution.”