Oct 25, 2005
Who Should Chair the Fed?
As most readers are now aware, President Bush today nominated Ben Bernanke, current chairman of the President's Council of Economic Advisers, to succeed Alan Greenspan as chairman of the Federal Reserve. Bernanke previously served on the Fed's Board of Governors and was a professor of economics at Princeton University.
Over at Marginal Revolution, Tyler Cowen provides some useful links that enable his readers to learn more about the views of Ben Bernanke. Cowen also provides his own assessment of Bernanke, whom he rates “an excellent choice and a first-rate economist.” I don’t doubt that Bernanke isn’t a very smart guy who is well versed in the literature. (That said, where is the evidence he has read either Mises on the impossibility of central planning or Hayek on the pretence of knowledge and drawn the appropriate conclusions for central banking?) I’m not clear, however, that his high IQ and extensive knowledge of recent debates in monetary economics makes him a good, let alone an outstanding, choice. And even were he the best among those whom Bush would consider nominating, that would not make him “an excellent choice” per se. Indeed he could be the best of the bunch and still be pretty awful. Let me explain.
From the point of view of a libertarian or classical liberal who advocates the separation of money and state, none of the likely candidates looks very promising. And even if the question is “Who prospectively looks like doing the least damage?”, I’m not clear that Bernanke who favors inflation targeting (the Fed policy in the 1920s) should be the choice of libertarians or at least those who are aware of the malign consequences of a policy of price stability on the capital structure (remember the Great Depression—even though that depression was made much worse by a subsequent policy of monetary contraction and government price supports). See George Selgin’s"Less Than Zero: The Case for a Falling Price Level in a Growing Economy" (London: Institute of Economic Affairs, 1997).
For this libertarian, a truly excellent choice would be someone who argues consistently for the separation of money and state. Among those who advocate free banking with fractional reserves, two names come immediately to mind: Lawrence H. White and George A. Selgin. And among those who defend free banking with a hundred percent gold standard, Joseph Salerno is perhaps your man.
The ideal nominee would be prepared to freeze the operations of the Fed (its abolition requires, of course, the repeal of the Federal Reserve Act of 1913) and thus refuse to exercise government control over the banking system. I realize, of course, this would very quickly lead to calls for his removal by our ever-vigilant Congress (can the chairman of the Fed be impeached?) but before he could be forcibly removed (by court-ordered detention under a mental health act?), it would be my sincere hope that the public debate would have been considerably broadened by consideration of ideas that were once taken seriously by many economists, bankers, and legislators, and, indeed, implemented on both sides of the Atlantic (eighteenth-century Scotland and, to a more limited extent, Jacksonian America, etc., etc.).
Over at Marginal Revolution, Tyler Cowen provides some useful links that enable his readers to learn more about the views of Ben Bernanke. Cowen also provides his own assessment of Bernanke, whom he rates “an excellent choice and a first-rate economist.” I don’t doubt that Bernanke isn’t a very smart guy who is well versed in the literature. (That said, where is the evidence he has read either Mises on the impossibility of central planning or Hayek on the pretence of knowledge and drawn the appropriate conclusions for central banking?) I’m not clear, however, that his high IQ and extensive knowledge of recent debates in monetary economics makes him a good, let alone an outstanding, choice. And even were he the best among those whom Bush would consider nominating, that would not make him “an excellent choice” per se. Indeed he could be the best of the bunch and still be pretty awful. Let me explain.
From the point of view of a libertarian or classical liberal who advocates the separation of money and state, none of the likely candidates looks very promising. And even if the question is “Who prospectively looks like doing the least damage?”, I’m not clear that Bernanke who favors inflation targeting (the Fed policy in the 1920s) should be the choice of libertarians or at least those who are aware of the malign consequences of a policy of price stability on the capital structure (remember the Great Depression—even though that depression was made much worse by a subsequent policy of monetary contraction and government price supports). See George Selgin’s"Less Than Zero: The Case for a Falling Price Level in a Growing Economy" (London: Institute of Economic Affairs, 1997).
For this libertarian, a truly excellent choice would be someone who argues consistently for the separation of money and state. Among those who advocate free banking with fractional reserves, two names come immediately to mind: Lawrence H. White and George A. Selgin. And among those who defend free banking with a hundred percent gold standard, Joseph Salerno is perhaps your man.
The ideal nominee would be prepared to freeze the operations of the Fed (its abolition requires, of course, the repeal of the Federal Reserve Act of 1913) and thus refuse to exercise government control over the banking system. I realize, of course, this would very quickly lead to calls for his removal by our ever-vigilant Congress (can the chairman of the Fed be impeached?) but before he could be forcibly removed (by court-ordered detention under a mental health act?), it would be my sincere hope that the public debate would have been considerably broadened by consideration of ideas that were once taken seriously by many economists, bankers, and legislators, and, indeed, implemented on both sides of the Atlantic (eighteenth-century Scotland and, to a more limited extent, Jacksonian America, etc., etc.).