Randall Kroszner to Join the Ruling Class and Debauch the Currency

by Liberty and Power

Yesterday President Bush nominated Randall Kroszner, professor of economics at the University of Chicago's graduate school of business, to be a member of the board of governors of the Federal Reserve System.

A few readers may remember Randy as a chapter contact for Students for a Libertarian Society at Brown University, where he went to school. If you're a monetary economist, you may know him as an expert in banking and financial regulation, international financial crises, and related topics. In his bio he mentions that, while he was at the President's Council of Economic Advisors (2001-2003), he worked in many areas including"improving the quality of government statistics." He is also an editor of The Journal of Law & Economics and director of the George J. Stigler Center for the Study of the Economy and the State. I have no idea whether Randy still calls himself a libertarian or, if he does, what that would mean. I guess it wouldn't mean dismantling the Fed—or at least not for several years.

The Washington Post tells us that,"As is typical of many of his University of Chicago colleagues, Kroszner, 43, is a strong believer in free markets—'a solid, conservative, Chicago school economist,' said Edwin M. Truman, a former Fed staffer who is now a scholar at the Institute for International Economics. Kroszner's master's and doctoral degrees in economics, however, are from Harvard."

The Post also informs us that,"Kroszner expressed an upbeat view of the U.S. economic outlook last month, telling an audience at Chicago, 'The economy continues to post a solid and consistent performance no matter what Mother Nature nor nattering nabobs of negativism may throw at it.'" Which sounds as if Randy can do his share of cheer-leading for the Bush administration like the best of them.

The first time I met Randy was in the early summer of 1979 when he had just turned seventeen and was visiting New England colleges before his senior year at high school. We met at Dartmouth College, where we were both participants at the week-long Cato summer conference. Roy Childs, Walter Grinder, Leonard Liggio, and Murray Rothbard lectured in their inimitable styles to provide an uncompromisingly libertarian curriculum.

I invite other readers who have memories of Randy to write in and share them with us.

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More Comments:

Mark Brady - 2/7/2006

Tom: First, a rise in the price of oil of the sort that is envisaged is not a function of U.S. macroeconomic policies.

Mark: If I understand your point correctly, I agree, but I didn't say otherwise. That said, the acceleration in the rate of increase of the Consumer Price Index over the past year is not explained by the extraordinary rise in the price of oil or any other input, rather by the expansion of the money supply. The rise in the price of oil changed the relative price of oil vis a vis other inputs but the rise in the general price level has a monetary explanation.

Tom: The invocation of "underlying problems that must inevitably be corrected" implies something "structural," and not an exogenous shock such as a rise in the price of factor inputs. That's a very, very weak dodge.

Mark: The "underlying problems that must inevitably be corrected" are indeed "structural"—the structural problems that arise from monetary expansion, including but not limited to, the expansion of bank credit.

Tom: As a percentage of the total economy, federal spending is not at an all time high.

Mark: Agreed, but so what? As I’m sure you would agree, it's far too high.

Tom: [W]hat is more worrying from that perspective (but evidently not on Mr. Brady's radar screen) is the growth in unfunded liabilities which, with the added prescription benefit, has exploded.

Mark: It is indeed a matter for great concern, and nothing I wrote denied it.

Tom: Third, Mr. Brady reads Karl Popper as holding the view that anything goes.

Mark: I don't, and nothing I wrote would suggest that I hold that view.

Tom: Let me add another point, since Mr. Brady has recently gained employment at a state institution (whereas Dr. Kroszner works at the private University of Chicago):

"I have no idea whether Mark still calls himself a libertarian or, if he does, what that would mean. I guess it wouldn't mean dismantling the state educational systemn in California—or at least not for several years."

Mark: During my life I have taught at a number of private and public schools, colleges, and universities, most if not all of which were/are directly or indirectly financed by the taxpayer. (In one important respect I don’t see very much difference between a state university that receives substantial financial support from private firms and households and a private university that receives substantial financial support from the state either directly or indirectly by government loans and grants to students.) I have always publicly declared my opposition to tax-financed education and my willingness to go along with a complete and immediate cessation of all government support to education. Would Randy Kroszner be prepared to declare his support for abolishing the central bank now—or even in ten years' time?

Mark Brady - 2/7/2006

Steve: No argument about the size of government Mark. 20.8% is above the long-run average of around 19%. There are other danger signs too, but the CPI isn't necessarily one of them, esp. considering the impact of Katrina-induced oil price hikes.

Mark: The oil price hike, which is by no means entirely due to Katrina, affects relative prices and not the acceleration in the rate of increase of the general price level. That has to be explained with reference to monetary expansion.

Steve: I guess in my middle age, I've become more concerned with longer-run trends. Life has never been better for most Americans, and that includes economically. Unemployment is at 4.7% - and one need not credit Bush for that, but it's still good. I don't, unlike some Austrian types, see inflation lurking around every corner, although the Fed could be doing better, as always.

Mark: If we consider that consumer prices have nearly doubled in twenty years, I suggest there's enormous scope for improvement!

Steve: The real prices of most goods continue to fall. Measures of life expectancy and the like are up.

Mark: I'm not aware that the rental price of accommodation continues to fall.

Steve: The US remains a great place for foreign sellers of US imports to park their financial assets.

Mark: If decision makers were all private individuals, I should be much less concerned. However, the imbalance between U.S. savings and investment is in large part the result of a persistent government budget deficit, and the U.S. trade deficit is sustained by foreign governments, particularly East Asian governments, continuing to buy U.S. government assets and not allow their exchange rates to appreciate very much against the U.S. dollar. That's why I'm concerned.

Steven Horwitz - 2/7/2006

No argument about the size of government Mark. 20.8% is above the long-run average of around 19%. There are other danger signs too, but the CPI isn't necessarily one of them, esp. considering the impact of Katrina-induced oil price hikes.

I guess in my middle age, I've become more concerned with longer-run trends. Life has never been better for most Americans, and that includes economically. Unemployment is at 4.7% - and one need not credit Bush for that, but it's still good. I don't, unlike some Austrian types, see inflation lurking around every corner, although the Fed could be doing better, as always.

The real prices of most goods continue to fall. Measures of life expectancy and the like are up. The US remains a great place for foreign sellers of US imports to park their financial assets.

Seems to me that the situation is more positive than negative.

Tom G Palmer - 2/7/2006

Let me add another point, since Mr. Brady has recently gained employment at a state institution (whereas Dr. Kroszner works at the private University of Chicago):

"I have no idea whether Mark still calls himself a libertarian or, if he does, what that would mean. I guess it wouldn't mean dismantling the state educational systemn in California—or at least not for several years."

Would such a catty remark be slimy? Would it be an example of sliming another person? If yes, then how does it differ from Mr. Brady's treatment of Randy Kroszner?

Tom G Palmer - 2/6/2006

It's nice to see that Mr. Brady scurried off to find something to support his claims. Let's see how far they go.

First, a rise in the price of oil of the sort that is envisaged is not a function of U.S. macroeconomic policies, so it's hard to see how rapid GDP growth is obscuring any problems, as Mr. Brady claimed. (Brady: "Rapid GDP growth obscures some very serious underlying problems that must inevitably be corrected at considerable cost to many people.") The invocation of "underlying problems that must inevitably be corrected" implies something "structural," and not an exogenous shock such as a rise in the price of factor inputs. That's a very, very weak dodge.

Second, once again Mr. Brady attempts to question the "credentials" of others in his attempt to smear. Of course, like anyone who favors limited government, I am quite opposed to the horrifying rise in federal outlays (and I work for an institution that tries to do something about it and has blown the whistle on the Bush administration and the Congress repeatedly). It does not follow from that that an economic collapse of the sort that monetary kranks and kooks predict is just around the corner (even when clothed in the language of "very serious underlying problems that must inevitably be corrected at considerable cost to many people"). As a percentage of the total economy, federal spending is not at an all time high; what is more worrying from that perspective (but evidently not on Mr. Brady's radar screen) is the growth in unfunded liabilities which, with the added prescription benefit, has exploded. (And that is not something that is "obscured" by rapid GDP growth, as if the rapid GDP growth were somehow deeply suspect, when in fact it's simply insufficient to provide enough tax revenues to pay for the promises currently being made.)

So Mr. Brady hasn't made good on his claim that "Rapid GDP growth obscures some very serious underlying problems that must inevitably be corrected at considerable cost to many people."

Third, Mr. Brady reads Karl Popper as holding the view that anything goes. If that's what Popper had in mind (and I don't think it is), it would be good reason for not paying him much mind. Mr. Brady made a statement and I asked whether there was any justification for the claim in it. He hasn't offered any and instead hides behind the ruse that Karl Popper allegedly said that you couldn't justify anything. Um, right. Evidently if Mr. Brady said that the world was going to end soon and I asked him for some reason to believe that the claim is true, he'd run and hide behind a garbled misinterpretation of Karl Popper. That's not economics; it's not science; it's not even a form of discourse.

Finally, I am not the only person who read Mr. Brady's catty remarks about Randy Kroszner in the way I did. Here's what Mr. Brady wrote:
"I have no idea whether Randy still calls himself a libertarian or, if he does, what that would mean. I guess it wouldn't mean dismantling the Fed—or at least not for several years."
In what way is that not both slimy and an attempt to slime? Mr. Brady should apologize for his attack. It's simple. And it's remarkably easy to do.

Mark Brady - 2/6/2006

Huh? I doubt if anyone else, other than Tom, would suggest I was "slim[ing]" Randy in my original post. I assert, and I expect most every libertarian-inclined reader would agree with me, that a nominee for the Federal Reserve, the U.S. central bank, is fair game for the sort of commentary I wrote.

Tom seems to have forgotten his Popper. No one can offer a "real justification" for anything. But there are a great many commentators from all manner of perspectives who are very concerned about the current state of the U.S. economy and who articulate thoughtful arguments to support their concerns. Consider, for example, Martin Feldstein, professor of economics at Harvard and president of the National Bureau of Economic Research, who explained only last week that, "A rise in the oil price could happen again at any time. . . . The US was lucky after 2003 to escape the contractionary effect of an oil price rise even without an explicit change in monetary or fiscal policy. It would not be so lucky if a big oil price increase happened again now." (Financial Times, February 3, 2006)

One last thought. How can anyone who identifies as a libertarian not view the economic situation with concern? In the fiscal year 2006, federal government outlays alone are estimated to reach $2.71 trillion dollars, or 20.8 percent of GDP. And in the year to December 2005, the Consumer Price Index for All Urban Consumers (CPI-U) rose 3.4 percent?

Tom G Palmer - 2/6/2006

You write that you didn't "intend" to slime a man of accomplishment and intellect. So it seems that you are inviting us to conclude tht your sliming was inadvertent. Did you just inadvertently claim that Randy Kroszner would support retaining a central bank so he could keep a job on it? If so, that's truly a pathetic response. You should just try to be a man and apologize to Randy for your sleazy attack on him. And then you might try to offer a real justification for your offhand claim that the U.S. economy is in serious straits, one more convincing than conjuring up "all the economic commentators, many of whom argue persuasively that the U.S. is in serious straits" and then dismissing the issue with a "we'll have to wait and see." At least you inadvertently added "as the year unfolds," so that there's some minimal (and that is truly minimal) content to your claim.

You really ought to focus on something you're good at, rather than prognosticating about the economy and evaluating the work of an accomplished economist.

Mark Brady - 2/4/2006

I, at least, intend no "scraping the bottom" or "slim[ing]" anyone. I just report events as I see them.

And, of all the economic commentators, many of whom argue persuasively that the U.S. is in serious straits, we’ll just have to wait and see who is right as the year unfolds.

Tom G Palmer - 2/1/2006

So Mr. Brady has both read Randy Kroszner's mind (he's *really* just cheer-leading for President Bush) and he is smarter and better informed than Randy Kroszner (some of us may have doubts about that) and therefore knows that in fact the economy is not doing well ("I don't think that the economy is largely doing well") and instead we are....headed to some terrible reckoning of the sort that monetary kranks and kooks keep predicting (eventually, of course, there is a turndown and they tell us "See! I've been predicting just that....for twenty years!").

But not only does Mr. Brady read minds and know more about the state of economic relations than Randy Kroszner, he knows also that Randy Kroszner chooses his policy prescriptions on the basis of his personal interest, and would favor keeping the Fed in place just so that he could keep a job. What a genius you are, Mr. Brady! And what a model of refined discourse.

Tom G Palmer - 2/1/2006

Mr. Brady has tried to slime someone who has made something of himself as a serious economist. Mr. Brady may disagree with Randy, but evidently he hasn't taken the time to read Kroszner's essays and provide us any reasons why. What we get instead is a catty suggestion that Randy would want to keep the Fed so that he could keep his appointment on it. What a disgrace. One economist worked hard, thought hard, and has created a successful academic career. And the other's esponse to his nomination to the Fed is a snippy, childish, and petulant bit of foot stomping.

I have memories of Randy, too, as well as memories of Mr. Brady. Guess which are both pleasant and inspiring.

Mark Brady - 1/30/2006

Yes, it is possible to separate claims about the economy from claims about the president. However, I don't think it's unfair to suggest that Randy was cheer-leading for the Bush administration.

Steven Horwitz - 1/30/2006

Sure, but that's hardly the only piece of data out there. I'm not necessarily making the case that the economy is doing fine (although I do find it plausible), I'm just wondering whether it's possible to separate claims about the economy from claims about the president, which your original language at least implied one couldn't.

Mark Brady - 1/30/2006

And that's the reliability of quarterly GDP data, especially provisional data. And even when the authorities have revised the data, and revised it again, it's of limited usefulness in telling us how well the economy is doing.

Mark Brady - 1/29/2006

Yes, it is possible to believe that the economy is largely doing well despite Bush. However, I don't think that the economy is largely doing well. Rapid GDP growth obscures some very serious underlying problems that must inevitably be corrected at considerable cost to many people.

Steven Horwitz - 1/29/2006

Mark - is it possible to believe that the economy is largely doing well and believe that Bush is both not responsible for that result and that he's an absolutely awful president? I sure hope so. Why assume that thinking the economy is doing pretty well automatically turned to Bush cheerleading?