Fed Independence: Too Important to Verify

David Boaz has a good post on the economists petitioning against an audit of the Fed on the grounds that its independence from politics is so precious. David concludes:

The Fed can be independent and unaccountable and undemocratic, or it can be subject to the political whims of elected officials; neither is a very attractive prospect.

I don’t see the choice as quite so binary. There are degrees of independence, accountability, and politicization. One reason to want an audit of the Fed is to establish whether or not it has actually been acting with sufficient independence. The question is already in the air. To attempt to impede an inquiry into the question by stressing the high value of independence is obviously to beg the question. Those who prize independence, if they really do, ought to be all the more keen on an inquiry. The importance of Congress asserting the authority to inquire is that, otherwise, the Fed can use the ideal of independence as cover for what may be in fact extremely political decisions.

There is a big difference between mundane countercyclical central banking and the liberal use of emergency powers. The distributive consequences of the Fed response to the financial crisis are enormous, and I don’t think it’s unreasonable to demand  a justification for the fact or the details of the response. Was there really an emergency that called for the Fed’s action? There weren’t WMD in Iraq. Maybe the financial crisis wasn’t going to blow up the entire economy.

The question of which firms got how much of what kind of transfer through the Fed’s excercise of discretion is inherently political, not in the sense of “partisan,” but in the sense that the Fed was picking winners and losers. I want an account of why these decisions were made the way they were.

Is the worry that no inquiry or audit could be designed that would not devolve into delegitimizing populist point-scoring or policy-warping political armtwisting? I suspect a main worry is that the Fed’s use of discretion was not independent of who in the Fed system knew whom on Wall Street, of who had what kind of pull, etc. And revealing this, even in a sober and responsible manner, would expose the Fed’s failure to act with the sort of impartiality and objectivity at the heart of any useful notion of independence. Of course, the art of central banking is the art of telling lies so that they will come true. Telling the truth about the Fed may create expectations of future partiality that will hinder the central banker’s ability to manipulate expectations in a theoretically ideal way. So the theorists band together to defend the Fed’s right to lie, or at least to stay mute when citizens are owed some justification, about its suspected partiality in the use of emergency discretion. To make this kind of defense of the importance of independence is really to defend the economic importance of maintaining the perception of independence. But this is to assume the legitimacy of useful lies, an assumption that cannot be granted merely on the basis of the self-asserted authority of “experts.”

The attitude of many macro and monetary economists about the operation of the Fed reminds me more than a little bit of the attitude of neocons about defense and foreign policy. Something with the flavor of: “You people are too stupid to understand the real existential threats out there–to understand how we, the big boys, are keeping you safe. You should be grateful, but we don’t ask for gratitude. We’re just asking you to shut up and believe what we, The Serious People, tell you to believe. Or else.”

I have to admit that this doesn’t sit well with my liberal sensibility.

Update!

Sorry so quiet! I’ve been busy doing things. You know how it is. Here is the latest Free Will, in which I talk with Jesse Prinz, whose book The Emotional Construction of Morals is awesome. Here is today’s Marketplace commentary, in which I note that T. Boone Pickens is trying to use the public’s anti-foreign bias and bottomless ignorance to help rig the regulatory structure in his favor. I think of it as the Swift Boat Veterans for windmills project. (Some of the commenters seem not to realize that this kind of mixed environmentalist/energy independence play is exactly how we got the now locked-in subsidies for ethanol they so vigorously decry. Also, I am an idiot for thinking that people will buy things, and producers will produce them, when the price is right.)

I’ll be off next week to Michigan for a Liberty Fund conference on Adam Smith. And then I’m moving to Iowa City with Kerry, where she will start work on her MFA in creative nonfiction while I will do exactly the same thing [as I am doing now, i.e., working for Cato], but from a different place. We will be so far from the Orange Line. Expect puppy-blogging.

Lost Canadians

Speaking of citizenships, I just learned that had Canadian law been what it is now when my father immigrated, I would now also be a Canadian citizen, which would be awesome. But, as it was prior to 1977, my father lost his Canadian citizenship when he became a naturalized American citizen, and so I was thereby preemptively stripped of my ancestral Canadian rights. Why Canada? Why?

Dreams from My Grandfather

A while back, on a lark, I googled my maternal grandfather, Leo Draveling. Because sports archivists are weirdly thorough, I found more than I was expecting. Best of all, I found pictures. Folks, here’s the 1930 Michigan Wolverines:

He’s number 37, second row (seated in chairs), second from the left. (Click for a bigger pic.) They went 8-0-1, tying Northwestern for the conference championship.

According to the roster, he was a tackle, and the second heaviest guy on the team at 208 lbs. Apparently he wrestled heavyweight for Michigan in the 2nd NCAA tournament in 1929. He didn’t place. He played in the NFL for one year with the Cincinnati Reds. I had no idea his nickname was “Firpo.”

Never met the man. He died when my mom was a teenager. He was apparently something of a brute and not entirely admirable. Roots mean somewhat less for me than for most people. That about a quarter of my genes are his makes his story part of mine only in a small causal sense. If this minimum of significance becomes meaningful or deep,  then it is because I choose to make up a story about myself in which it plays that role. I don’t. My junior high English teacher (or the sum total of things I have eaten, for that matter) have more to do with what I am.  That said, it is definitely interesting to vainly pick out the points of physical resemblance. I lament the cleft chin that might have been. And I find that, looking at my strapping grandfather, I am happy to believe that I possess a latent store of powerful athleticism. That hopeful and self-flattering interpretation of the chancy genetic facts will be useful, and to me entirely justified, if I am thereby moved to join a gym and reveal my inner All-American before I do come to weigh more than a tackle for the Michigan Wolverines.

The Shame of Ron Paul

It now seems quite clear to me that Ron Paul has for years used racism, among other vicious sentiments, to build financial and political support.

I’ve been pretty negative about Paul from the start, attracted only to his antiwar stance, since I find his old right brand of nationalist, populist anti-statism pretty repellent and at odds with the cause of human liberty. I didn’t know about the newsletters, but I’m not that surprised by them. I knew that he was close to Lew Rockwell, who many people speculate wrote many of Paul’s most shameful newsletters, and I knew Rockwell’s reputation as a racist and homophobe. And the syndrome of positions Paul has staked on immigration, sovereignty, and constitution idolatry is in my experience often correlated with racist sentiments of exactly the kind on display in the newsletters.

To my mind, the people who are trying to salvage something of Paul’s reputation are just making themselves look bad. No matter how much money, time, and devotion you’ve given to someone, sometimes the only right thing to do is spit on the ground and walk away, hurting. If it wasn’t before, it is now clear that this just isn’t a man who deserves decent people’s support.

I had hoped Paul would do more good than harm for libertarianism, inspiring lots of college kids to get interested in the ideas of liberty. But now I’m pretty certain that he’s done a lot of harm, causing many people to associate libertarianism with racist cranks. I think it’s pretty important then to publicize the fact that there are genuinely liberal versions of libertarianism out there. The young people who got interested in libertarian ideas through Paul need to be able to find Cato, Reason, the IHS, and other places where one can learn about classical liberalism, which isn’t about keeping the Mexicans out, deploring the abolition of slavery, or hoarding gold.

If I can find time over the next few weeks, I’m going to write a series of posts explaining why key elements of Ron Paul’s popular appeal, such as an antipathy to the freedom of movement, a fixation on national sovereignty, and constitutional fetishism, are inconsistent with a real concern for human freedom. More generally, I want to say something about why flag-waving “libertarianism in one country” types are ultimately no friends of liberty.

Fun Facts About Me

I’ve been passed this meme like a bad case of the clap. I’m seriously logorrheic, and I have a good sense of the line between information that ought to remain public and ought to remain private, but I get too much of a kick sharing “too much information,” as they say. So I have nothing that will be surprising to all my acquaintances. Here’s the best I can do.

(1) I was a “historic interpreter” at the Joseph Smith Historic site in Nauvoo, IL, and the Kirtland Temple Historic Center in Kirtland, OH, and gave tours to thousands upon thousands of Mormon pilgrims. Was I raised Mormon? Depends on what you mean by “Mormon”! I grew up in the Reorganized Church of Jesus Christ of Latter Day Saints, the anti-polygamist Mormon sect that stayed in the Midwest while Brigham Young and Co. trekked west, and which then “reorganized” when the son of the slain prophet, Joseph Smith III, was old enough to take on the mantle of leadership. The RLDS church turned out to be something like the Episcopalians of Mormonism (my mother was in the first cohort of women in the priesthood in the mid-Eighties), and recently changed its name to The Community of Christ. I never wore funny underwear, never had a Temple recommend, never was baptized as a proxy for a dead person, never believed in Kolob, and paid tithing on ten percent of my increase (what you’ve got left after necessary expenses), not my income. That said, I did grow up believing that the people depicted in Apocalypto were Jews who came over the ocean in hollow wooden boats with a plug in the top, lit by glowing stones, and that Christ would return to the town of my birth, Independence, MO. I filled up a lot of quarter cards with my paper route money to help build the temple.

(2) At Lenihan Junior High in Marshalltown, Iowa I spent a year on the exhibition jump rope team, the Skippers. I used to be able to do push-ups inside the double dutch, was able to do a few “triples” (pass the rope under three times in one jump), and can probably still do more “doubles” than you, despite my relative corpulence and bad knees.

(3) I was a bit of a Max Fischer in High School, where, despite being a decidely mediocre student, was senior Student Senate president (based on my campaign speech promising a non-lame homecoming theme and dolphin-safe tuna in the cafeteria–both abject failures), Thespian Club president (and winner of the hotly contested Jean SebergMary Beth Hurt drama award), and French Club co-president (despite having almost zero fluency in French — Joyeux Noel!), and a leading National Forensics League point winner, and other stuff I forget. Who had time for homework?! I was also awarded the Left Foot Award (an old left sneaker) for being the worst dancer in South Side Transit, the MHS swing choir. The highlight of my theatrical career was playing Joseph in Joseph and the Amazing Technicolor Dream Coat at the Marshalltown Community Theater in the summer of 1991. I remember being pretty awesome. Really, it’s been all downhill since high school for me. Actually, it’s all been downhill since I was twelve. I was amazing at twelve. And very, very short.

(4) I went by “Bill” until college. I pretentiously tried to switch to the full “William,” but my high school friends in my dorm called me “Wilk” and everybody assumed that it was “Will.” So my comically repetitive name is not really my fault.

(5) I received an “F” the first semester of my freshman year in the University of Northern Iowa Varsity Men’s Glee Club, due to missing rehearsals. I had been in a head-on car collision (my fault!), breaking my collarbone, sending my bottom teeth through my face under my lip, and cracking several ribs. Bob Byrnes, the former Glee Club conductor and UNI carilloneur, was the most sternly drill-sergeant-like yet also sentimentally Liberace-esque dude I ever met. He would yell gruffly at how bad we sucked, and then cry when we really nailed the stirring “Climb Every Mountain” climax to the Sound of Music Medley. He did not take missing rehearsals lightly. (And I just see that he died in 2004. RIP, Bob.)

Enough of my ridiculous midwestern wholesomeness. Merry Christmas everybody!

Arkansas for Crimbo

I’m in Fayetteville, AR with Joanna‘s brother’s family for xmas, and I don’t suspect there will be much blogging between holiday sing-alongs. So if I don’t figuratively see you before then, Merry Christmas!

My Suckitude

Yes. I suck. I have a blog, but I don’t blog on my blog, which sucks. All apologies.

I returned yesterday from Tucson where I was attending the annual International Society for the New Institutional Economics conference, and enjoying the hospitality and company of Dave Schmidtz.

Let me say this about Tucson: when they say “dry” heat, they’re not just saying it. I was drinking like a parched camel, yet my lips and mouth felt like I was slowly dying for want of moisture. I guess it takes getting used to for natives of >90% humidity climes. That said, the landscape was just astonishing for this Iowa boy. The saguaro forests (through which Dave took me on a hike) looked unearthly to my midwestern eyes, but beautiful all the same. The Desert Museum is lovely.

I caught up with a number of friends and acquaintances at ISNIE. Had a very nice dinner with Paul Edwards, Doug North, Timur Kuran, Mary Shirley, and Mat McCubbins at a very good, but comically pretentious, restaurant at a nearby resort. Kyle and his girl Carolyn (sp?) took me to South Tucson for Mexican hot dogs at a wonderful dingy joint with no walls and a spiffy mariachi band.

I’m working on some ideas for articles focusing on the intersection of the brain and cognitive sciences with economics. I interviewed a few folks at ISNIE, and plan on interviewing a few more. Almost none of what I get in the interviews will go in any sort of article, so I’m thinking that if I can get permission, I’ll put some choice bits of interviews with smart people doing hott economic science here on the blog to satisfy your frustrated yearning for fresh Fly Bottle content. Whaddya think of that? Would it make you happy?

College Parked

Sorry for the slowdown in blogging. I’m working on a few non-blog pieces of writing, and today set up my spartan but functional office at the University of Maryland. I hereby express my thanks to the good taxpayers of the great state of Maryland for my accomodations.