Tuesday, July 30, 2013

More on Summers, Yellen and the next Fed chairperson

The NYTimes has a debate on who should be the next Fed chairperson. Predictably Brad DeLong prefers Summers over Yellen, which is almost unique given the backlash that the floating of Summers name caused (see Krugman on that here). Brad's preference is based on the fact that:
"Larry Summers has an edge as the most creative thinker likely to successfully think outside the box should outside-the-box thinking be called for, and least likely to bind himself to an institutional consensus past its sell-by date. If times are placid, the stakes are small. If times are turbulent, outside-the-box thinking has its place. Therefore I have a slight preference for Summers."
While it is arguable if Summers is more creative than Yellen and other possible candidates, I wouldn't disagree that thinking outside the box is an advantage. That's why an heterodox economist would be even better, without false preoccupations about inflation. But in all fairness the best alternative, and one that would be more likely from a political point of view, would be to appoint a politician, rather than an academic economist, someone like Elizabeth Warren, with no knowledge of the natural rate of unemployment and that does not "fear high inflation as they fear a tornado."

1 comment:

  1. That's an heretical view now since Western central banking has become the exclusive purview of neoclassical technicians, the most extreme of which argue for rules over discretion and the adherence to the nominal anchor of price stability (even if monetary policy had little to do in achieving it save for generating high unemployment domestically). I know this is dated but out of curiosity I was reading Janet Yellen's "On Keynesian Economics and the Economics of the Post-Keynesians" (The American Economic Review, Vol. 70, No. 2, Papers and Proceedings of the Ninety-Second Annual Meeting of the American Economic Association (May, 1980), pp. 15-19 Stable URL: http://www.jstor.org/stable/1815432 . In addition to her critique, there were appraisals by Lorrie Tarshis, James Crotty and a discussion between Peter Kenyon and Geoff Harcourt. Was this the last time this strand of heterodox economics was discussed in the AER?


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