In her Washington Post op-ed Julia R. Cartwright points to a real problem with the Federal Reserve but does not quite reach the greater conclusion she should draw from it. The Federal Reserve’s structure was built in the early 20th century, during the very peak of technocracy when leaders of big corporations preached that the U. S. system of government was old-fashioned and antiquated and should be replaced by, well, themselves. One of the earliest and most influential exponents of this worldview was Walter S. Gifford, then chairman of AT&T, who openly argued that modern society should be governed by professional managers and engineers rather than by the clumsy mechanisms of democratic politics. Ms. Cartwright starts by reflecting on the recent failures of the Fed and the political brouhaha over the Fed during the second Trump Administration and proposes a rules-based system she calls a “monetary constitution”.
She’s right. The deeper implication of her argument is not merely that discretion should be constrained, but that monetary governance itself should be treated as a formally designed socio-technical system rather than an artisanal priesthood. We should have a real-time data collection system coupled to a rules-based expert system with, and this is the part she misses, human beings exerting the ultimate oversight of the system. We have known for decades, since the Taylor Rule was first promulgated, that this was possible and now we have the technology to make it practical.
That isn’t just a problem for the Federal Reserve. An enormous number of companies, government agencies and departments, and institutions would benefit from such expert-systems with mandatory human oversight. The challenges lie in constructing them and convincing people that it’s the right thing to do.
