Judy Shelton for Fed?

My friend and sometime co-author Alexander William Salter has written an excellent piece in National Review in which he makes the case for confirming Judy Shelton as a member of the Federal Reserve Board of Governors. It’s “Confirm Judy Shelton to the Fed Board of Governors,” National Review, November 16, 2020.

Alex writes:

There are three strikes against Shelton in the eyes of her detractors. The first is her fond view of the gold standard, a decidedly gauche position among monetary economists. The second is her academic background: Her Ph.D. is in business administration, not economics, and was awarded by a non-elite university besides. The third is her perceived partisanship, which Shelton skeptics contend would reduce the political independence of the Fed.

Alex answers each in turn. You can go to his article and see if you’re convinced. I am.

One highlight from his piece is his defense of the classical gold standard, not that Shelton would have much chance to move us toward it:

And let’s be clear: It does work just fine. Specifically, the “classical” gold standard, which prevailed from 1879 to 1914, in many respects outperformed the system we have now. (It’s important to specify which gold standard we mean. The “gold-exchange” standard that prevailed between World Wars I and II was awful, largely because central banks mucked it up.) In an important paper comparing the pre- and post-Fed periods, George Selgin, William Lastrapes, and Lawrence White found that “the Fed’s full history . . . has been characterized by more rather than fewer symptoms of monetary and macroeconomic instability than the decades leading to the Fed’s establishment.” In a subsequent study, Thomas Hogan found that GDP growth was better in the pre-Fed period, while inflation and inflation volatility (a key measure of purchasing power predictability) were worse.

When I wrote about Shelton in July, I leaned in favor but didn’t know enough to take a position. But even without reading Alex’s piece, I had come in the last few months to the view that Shelton should be confirmed. And my reason doesn’t have to do with monetary policy but with industrial policy. If you judge the Fed solely on the basis of monetary policy, you’re leaving out a lot of what they do. The Fed Reserve is now a practitioner of industrial policy, picking winners and losers.

I wrote at the end of July:

Moreover, the Federal Reserve, which took on new powers during the financial crisis of 2007-2009, is going further down that path. In a March 23 press release the Fed states, “The Federal Reserve is committed to using its full range of tools to support households, businesses, and the U.S. economy overall in this challenging time.” The release then goes on to list various assets that the Fed will buy, including corporate bonds and municipal government bonds. We used to think of the Fed as the agency whose main purpose was to keep inflation low. That’s so 20th century. The Fed is now essentially the agency that gets to decide which investments are important; it is conducting an industrial policy in all but name.

I’m fairly confident that Shelton is sufficiently against central planning to oppose these Fed powers. And certainly I think she would favor them less than almost all, or maybe all, the other Fed governors.


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Sentences to ponder

How many will speak up for science today?: Our results show that the enormous expansions of parental leave and child care subsidies have had virtually no impact on gender convergence. That is from a new NBER working paper by Henrik Kleven, Camille Landais, Johanna Posch, Andreas Steinhauer, and Josef Zweimüller., based on decades of data […]

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Monday assorted links

1. State capacity: Italian Police Use Lamborghini To Transport Donor Kidney 300 Miles In Two Hours. 2. St. Helena golf club. 3. This source argues there was no real foreign election interference. 4. “A fact that was never mentioned ahead of time. If we had reached complete suppression vaccine development would have been impossible. Depends, […]

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Wretched Refuse? vs. Ominous Speculation

An army of immigration skeptics warn that mass immigration paves the road to socialism and tyranny.  When they express these fears, they almost always find a receptive audience.  Even thinkers inclined to favor immigration often get cold feet when they visualize the new arrivals’ broader political effects.

Yet if you search for actual research on what economists call “the political externalities of immigration,” you won’t find much.  George Borjas himself writes: “Unfortunately, remarkably little is known about the political and cultural impact of immigration on the receiving countries, and about how institutions in these receiving countries would adjust to the influx.”  Indeed, to the best of my knowledge there isn’t a single book published on this general topic.

Until now.  Early next year, Cambridge University Press releases Alex Nowrasteh and Ben Powell’s Wretched Refuse? The Political Economy of Immigration and Institutions.  Immigration skeptics will no doubt protest that both authors are well-known for their pro-immigration stances.

Yet the fair question to ask skeptics is: Shouldn’t you have published your book on this topic years ago?    They, after all, are the ones predicting doom.  The fact that Nowrasteh and Powell are beating them to the punch is deeply revealing at the meta level: Even the more scholarly critics of immigration rely heavily on ominous speculation.  In social science, pessimists normally present concrete evidence of social ills, and critics try to rebut them.  For immigration, the critics often have to create the pessimists’ case for them, then rebut it – because the pessimists don’t go beyond vague Cassandra cries.

I’ll discuss Wretched Refuse? in depth when it releases.  For now, I’ll just say that I’ve read the book, and it’s excellent.  Pre-order now!



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Chart of the WeekIMF Lending Lifeline: Addressing Urgent Financing Needs Brought on by the Pandemic

IMF Blog The human toll and global economic disruption from the COVID-19 pandemic triggered unprecedented demand for financing. More than 1/3 of the IMF’s membership have received relief from the Fund. Since the onset of the pandemic, the IMF has responded rapidly and decisively to meet urgent and exceptional demand for financial assistance from its […]

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