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July 2019 posts

Politicizing the Fed

By Jonathan B. Wight

One of the misfortunes of the Trump administration is the hollowing out of competent non-partisan public service professionals in government agencies.

This includes economists: Who would want to work in an administration with such obvious disdain for facts and truth? 

In monetary policy, Trump has proposed or floated names of candidates that are highly questionable in their financial market experience or who have demonstrated incompetence in prediction or analysis. 

His latest nominee for the Fed Board is Judy Shelton, who in the 2016 election berated the Fed for keeping interest rates too low.  Now she is berating them for keeping rates too high (despite the fact that unemployment has fallen since 2016 and is at its lowest in decades).  She supported free trade and immigration until Trump chose the opposite policies. There is no seeming rhyme or reason to her policy changes except for political kowtowing.     

Shelton fits the pattern of other Trump appointments—a questionably competent political junkie who intends to destroy the appointed agency from within. 

Trump has appointed a slew of "Acting" Cabinet Secretaries and other department execs who don't need to face public scrutiny in a Senate hearing; these appointments by-pass the constitutional provisions on accountability and transparency, and demonstrate disdain for the checks and balances in our system.  Here's hoping Shelton faces fair and forceful questions about the political intrigue she would bring to the Fed.  


Truth and Beauty       

By Jonathan B. Wight

Is truth recognizable by its beauty, as Richard Feynman and others have thought?  Massimo Pigliucci explores this idea in a recent edition of Aeon. He argues:

“ The problem is that it’s difficult to defend the notion that the truth is recognisable by its beauty and simplicity, and it’s an idea that has contributed to getting fundamental physics into its current mess….  the history of physics (alas, seldom studied by physicists) clearly shows that many simple theories have had to be abandoned in favour of more complex and ‘ugly’ ones.”

The same might be said of economics, where the beauty of a mathematical model may have little to do with the complexity of local institutions and other bottlenecks to getting prices to work or markets to clear without externalities.  Behavioral economics is far messier than standard models of rationality. 

Many ethical theories also tend to be simplistic—it’s about consequences, and only happiness consequences!  No, it’s about rules and duties!  No, it’s about virtue! 

The reality (in my opinion) is a hodgepodge of pluralism, in which one navigates carefully across these and other dimensions.  No simple rule or rules will suffice.  This makes it unlikely that Artificial Intelligence (AI) robots will replace humans in the realm of ethics, at least not for awhile.  (Alternatively, you could argue that since humans have been behaving unethically for thousands of years, how much worse could robots do by just following a few simple rules?  Answer: there will always be unintended consequences to any rule…)