Qualifications for the Fed

I have a new post up at The Bridge, which discusses the qualifications we should look for in a nominee for the Board of Governors:

There are at least five possible criteria for judging a candidate for the Fed:

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?

There is some reason to worry that Mr. Moore and Mr. Cain fall short in these areas, although in my view the first two criteria should carry relatively little weight. . . .

I’m in no position to judge motives, but the case for appointing Moore and Cain to the Federal Reserve Board runs into obstacles however one views their attitude toward Fed independence. If their change of heart was motivated by political considerations, that would be inconsistent with the Fed’s traditional independence from the rest of the government. When politics influences Fed decisions, it can destabilize the economy.

If we assume that their evolution from hawkish to dovish doesn’t reflect political considerations, that raises another question: do the candidates have good judgment on policy? I am not aware of any coherent economic model, liberal or conservative, which would justify calling for tighter money in the early 2010s and easier money today.

Read the whole thing.

Update: Tyler Cowen had this interesting observation:

My personal preference is for a nominal GDP rule, but the irony is this: At the end of the day, the advocates of the gold standard, and their possible presence on the Federal Reserve Board, are themselves the best argument for … the gold standard.



11 Responses to “Qualifications for the Fed”

  1. Gravatar of Benjamin Cole Benjamin Cole
    9. April 2019 at 15:38

    I wonder how Richard Clarida, formerly of PIMCO was appointed as Vice Chair of the Fed. He appears very knowledgeable and in the right groove in terms of policy.

    On the other hand, an appointment of Martin Feldstein, a titan within the macroeconomics trade and a professor at Harvard, would be a disaster.

    Give unto us Herman Cain.

    BTW, the International Monetary Fund just released a report that another global housing bust could tank the economy.

    Hey, the IMF said it, not me.


    The last global housing bust caught the macroeconomics profession by surprise, yet the profession has not really adapted to the reality of the property sector and its connection to the financial institutions, and the endogenous creation of of money. Actually, even the IMF study is a bit weak as it fails to note that the commercial property markets had an even larger bust in 2008 to 2010 than residential markets.

  2. Gravatar of Benjamin Cole Benjamin Cole
    9. April 2019 at 16:25

    Cain was chairman of the Federal Reserve Bank of Kansas City Omaha Branch from 1989 to 1991. He was deputy chairman, from 1992 to 1994, and then chairman until 1996, of the Federal Reserve Bank of Kansas City. In 1994, Cain publicly opposed the Health Security Act, resulting in him being appointed to the Kemp Commission in 1995. In 1996, he served as a senior economic adviser to Bob Dole’s presidential campaign. Cain became the CEO of the National Restaurant Association, in which he served as president and CEO from 1996 to 1999. Additionally, he has served as a member of the board of directors of several companies.–Wikipedia.

    Cain has relevant experience, at least on paper.

  3. Gravatar of Anon85 Anon85
    9. April 2019 at 17:31

    Hey Scott, did you see the NYT editorial board advocating for NGDP targeting and citing you?


  4. Gravatar of dtoh dtoh
    9. April 2019 at 23:27


    1. First of all, it’s not that hard. If you’re below target you buy more assets. If you’re over target you buy less assets.

    2. Experience suggests the criteria you recommend are not the right ones. Bernanke was a terrible Fed Chair. Yellen landed on a ship headed in the right direction… who knows how she would have done if the wind or currents had shifted.

    3. Powell is an intellectual and professional lightweight who has learned how to say the right words, but doesn’t have a clue. The worst kind of bureaucrat.

    4. Cain or Moore are not that intellectually impressive, but how bad could they be compared to what we’ve had. All it really takes is a couple of people who are willing to pound their fists and yell at/cajole the other morons at the table when the economy heads south. (I’m reminded of One Flew Over the Cuckoos Nest.) Who knows…. Cain and Moore might turn out OK.

  5. Gravatar of derek derek
    10. April 2019 at 05:30

    That Cowen paragraph is about the sickest burn I have ever seen from him. He is usually much, much more oblique. Paraphrasing, Trump and his ilk are so mind-bogglingly incompetent and self-interested that the best argument for one of their bad, rule-based policies is that it reduces their ability to screw things up horribly.

  6. Gravatar of ssumner ssumner
    10. April 2019 at 10:24

    Ben, You said:

    “Cain has relevant experience, at least on paper.”

    He has zero experience on monetary policy. The jobs you cite have nothing to do with monetary policy, no more than a janitor working at the Fed.

    Anon85, Yes.

    dtoh, You said:

    “Cain or Moore are not that intellectually impressive, but how bad could they be compared to what we’ve had.”

    Well, they thought money should be far tighter in the early 2010s. So can I infer from your comment that you thought Bernanke was far too expansionary?

  7. Gravatar of Lorenzo from Oz Lorenzo from Oz
    10. April 2019 at 15:38

    Another reason to give thanks for the Reserve Bank of Australia …

    And Bernie Fraser, arguably the most successful central banker in modern history, as he created a worthy legacy that outlasted his tenure.

  8. Gravatar of Benjamin Cole Benjamin Cole
    10. April 2019 at 16:13

    Regarding Herman Cain and his previous association with the Federal Reserve Board of Kansas City:

    “Directors oversee Bank operations and policies, and confer on economic and banking developments.”

    Usually boards of directors would oversee the job performance of the ceo or president, in most organizations.

    So Herman Cain’s job at the Kansas City Fed was in part to oversee the voting performance of the president of the Kansas City Fed, who had a rotating vote on the FOMC.

    Herman Cain may have been miserable at his job, but he does have experience on paper.

  9. Gravatar of Kevin A Kevin A
    11. April 2019 at 07:20

    Just here to hat tip the awesome Cowen diss.

  10. Gravatar of ChacoKevy ChacoKevy
    11. April 2019 at 12:48

    In a perfect world, we adopt NGDP targeting so we can abandon the dual mandate. But, seeing as how employment is the other half of the mandate, do you think people like Peter Diamond, whose focus is labor instead of monetary policy, would have been/could be good appointments?

  11. Gravatar of ssumner ssumner
    12. April 2019 at 08:18

    Ben, Just give up; you don’t have a clue to what you are talking about. Cain played no role in monetary policy. Zero. Just admit you were wrong like a mature person would.

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