in their editorial on the forces pushing and pulling on the members of the Federal Reserve Board over whether they should raise interest rates, as they have said they would, or leave them where they are, I think the Wall Street Journal editors are pointing to the right facts. Not only has the Federal Reserve systematically misestimated U. S. economic growth over the last half dozen years, all of its errors have pointed in the same direction: they thought it would grow faster. Not only did they systematically overestimate the growth of the U. S. economy over the last half dozen years, they frequently estimated it would grow twice as fast as it actually did.
There is clearly no such thing as malpractice in economics. If an engineer estimated the load-bearing capability of a bridge as twice its actual ability, it would be malpractice. Physicians who prescribe half the amount of medication required by the patient in contradiction of the standard of care would be similarly guilty. That’s one of the problems in economics: there is no standard of care. But that’s another subject.
The editors conclude by asking an implied question that should make the members of the Fed squirm in their chairs:
At the very least it’s time for the Fed to examine why its policies have failed to deliver the buoyant economic results it promised.
I think there are any number of other questions we should be asking the Fed. For example, are you recalibrating your models to come closer to reality? What is the nature of that recalibration? Do you believe that income inequality poses a social or political problem in the United States? If so, how can you coherently adopt a policy the intent of which is to foster income inequality?
When you injure another it is not enough to point to your good intentions. At the very least you are morally obligated to remediate the injury to the extent that you are able. How do the members of the Federal Reserve Board intend to remediate the harm they have done to American society over the last half dozen years?