My Last Post on Ben Bernanke

His confirmation, that is. I summarized most of my position in Foreign Policy, which asked me to lay out the anti-confirmation argument. My reasons overlap with Simon’s but are not identical–I think Simon worries about cheap money and asset bubbles more than I do. I was originally not particularly motivated by the anti-Bernanke campaign, because I didn’t think Obama would appoint anyone better, but as Russ pointed out, whether Bernanke should be confirmed and what the alternative is are two separate questions.

Whom would I pick? I certainly don’t know the candidates well enough to make a good choice. But the first thing I would say is that the Federal Reserve chair does not need to be Superman. The Federal Reserve Board of Governors is a board, and while the chair is important, he or she should really be the first among equals. You want someone who will push the Board in a certain direction, but the chair can draw on the experience and skills of the other board members and the staff, who are technically very competent. The idea that the chair must be Superman seems to be a product of the Greenspan era, and we project it back onto Volcker because of his success in fighting inflation in the early 1980s. And it’s a bad idea, just like searching for a savior CEO. In this context, I think it’s limiting to insist that the nominee have experience on the board, or have government experience, or be a prominent academic, or anything in particular.

For a rough parallel, think of John Roberts. When he joined the Supreme Court, he was by definition the least experienced of the bunch–yet President Bush made him chief justice, and no one objected that he was not competent enough for the job (the objections were over his anticipated policies). In short, the nominee must have intellectual heft and people skills, but otherwise President Obama should feel free to pick someone on the basis of his policies. It’s no accident that Ronald Reagan picked an ardent free marketer back in 1987.

My other observation is that the bench on the progressive side is pretty thin, because there has been a de facto consensus around central banking in the past two decades. That is, everyone seems to think that inflation is more important than full employment, and most people at the Fed have shared the pro-innovation/anti-regulation stance of Greenspan and Bernanke, and hence the emphasis on monetary policy as opposed to regulation. (I’m not an experienced Fed watcher, so I’m sure I’m overlooking someone in those generalizations.) But if Obama wanted a progressive choice (which he doesn’t, but just as a hypothetical), there doesn’t seem to be an obvious one.

But anyway, after all that lead-up, what about Paul Krugman? I think he’s said he doesn’t want the job (or was it Treasury Secretary that he didn’t want?), but I’m sure Obama is a hard person to say no to. Or Brad DeLong? He’s clearly smart and knowledgeable, and I like what he says about inflation and deficits. Whether either of them has the people skills to be chair of the Fed I have no idea. But I don’t think we should be confining ourselves to previous board members, especially since this is a fruitless intellectual exercise, because Bernanke will be confirmed sooner or later.

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