I am gratified to see that at The Bridge Scott Sumner has taken a stab at defining what it means to be qualified for the Federal Reserve Board of Governors, something that has puzzled me for some time. Here’s his list of qualifications:
1. Does the candidate agree with one’s own views on monetary policy?
2. Does the candidate have educational or work experience and credentials indicating an adequate background in monetary economics?
3. Does the candidate exhibit knowledge of monetary economics in their public comments and writings on the subject?
4. In retrospect, do previous policy recommendations by the candidate seem to have been correct?
5. Would the candidate avoid partisan bias when making decisions?
of which he thinks that the first two are the least important.
While Dr. Sumner’s explanation does clarify things a bit, I’m not as convinced as he is about some of them. For example, I seem to recall that it was Dr. Sumner himself who complained from time to time that the Fed and the Congress were working at cross-purposes. Should there be more coordination between the Fed and the Congress or less and, if more, how would that work out with the sort of semi-independent Fed that we have now? I’m uncomfortable with a a fourth branch of government which the Federal Reserve seems to have become.
I’m also less predisposed to pooh-pooh experience than Dr. Sumner seems to be. In theory the Federal Reserve is supposed to be responsible for regulating banks. In practice it has been completely derelict in that area and that has been true for as long as I can recall. I’d prefer a less independent Fed that did the job it was supposed to do over an independent Fed that let the banks run riot as certainly seems to have been the case. If we can’t expect the Fed to regulate banks, let’s officially strip them of that power and give it to one or another of the executive branch agencies which already have authority in that area.
#1 is clearly the least important. I might not agree with someone like, just an example, Greg Mankiw’s economic beliefs, but I dont think he would just blindly support a Republican POTUS at all costs. I think #2 is better than Summers also, but when you bring in someone from the banking sector you do risk capture. The current candidates fail on 3,4 and 5.
Steve
The Fed and Congress have always been at cross purposes. Monetary vs fiscal policy.
Dr. Taylor at OTB seems to be predisposed to PhD economists. That sounds fine on its surface, until you inspect the track record of the Fed since its inception, and all those PhDs. A primary debate about the Fed pits the monetary rule camp vs the activist timer camp. It shouldn’t be surprising that PhDs believe they can time correctly, resulting in the miserable track record.
The current debate about Cain and Moore seems to be mostly ideological. Just look at the language used. I’m not a Cain fan, but could either of them do worse than the late Greenspan, Bernanke and Yellin regimes, all intelligent with impeccable credentials?
That’s complementary not at cross purposes. The number of times that the Congress has pursued an expansionary policy while the Fed a contractionary policy or vice versa is numerous. That’s cross purposes.
The first qualification should be to understand how the monetary system works, and that requires understanding how the financial system works. The second would be to understand how they are connected and the results of that connection.
The first disqualification should be an economics degree.
That was sloppy language on my part. The Fed and Congress have different policumlevers.