The “Professor Standard”

Herman Cain has a job application in the WSJ:

The Fed still operates on the “professor standard,” enshrined with Bill Clinton’s nominations of pure academics. Their textbooks say strong economic growth, particularly strong wage growth, causes inflation, which Fed policy should temper. Both the Bush and Obama administrations perpetuated the professor standard, and both presided over income stagnation.

I have a different perspective. The professor standard doesn’t work, and the Fed needs new voices to argue for an approach that does.

The best way to achieve full employment, price stability, economic growth strong enough to solve our fiscal problems, and sustained income growth for the striving majority is for the Fed to stabilize the dollar. The professor standard will not challenge itself—that much has been proved. That’s why my voice is needed at the Fed.

Hmmmmmm.  Mr Cain is certainly not a professor or even a doctor as far as I can tell.

I’m not unsympathetic to his analysis. But two points to make:

  • Politicians are generally very risk averse when it comes to technical appointments. This means that they seldom deviate too far from the mainstream,
  •  US politicians have tended to make appointment from a very, very narrow base (Harvard and MIT).

This then is Trump’s great comparative advantage – he isn’t risk averse and is willing to roll the dice on appointments. He is also willing to buck conventions that he doesn’t much value. This is also his great weak spot – some conventions are worth keeping and others are part of the swamp that needs draining.

What he hasn’t done – as far as I’m aware – is have a long hard look at whether the US actually needs a Federal Reserve.

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20 Responses to The “Professor Standard”

  1. bollux

    If he ever figures out they don’t need a Federal Reserve, he’ll end up meeting his maker, to put it politely.

  2. stackja

    Professor Woodrow Wilson deemed USA needed Fed.
    Who are we mere mortals to question such genius?

  3. Bruce of Newcastle

    Fed meetings would be a whole lot more interesting for the participants. Free pizza!

  4. Gavin R Putland

    The purpose of national central banks is to maintain the illusion that national budgets are just like family budgets. The purpose of the European Central Bank is to turn the illusion into a reality.

  5. Rusty of Qld

    You think the Mueller Report is/was a shocking attempt to get rid of an elected President, just wait until you see how the Banksters react to a threat of loosing their control of the US economy. Mr Mueller’s effort will look like a friendly little game of I Spy With My Little Eye.

  6. Pyrmonter

    @ Stackja

    While the Federal Reserve Act was passed shortly after Wilson’s election, it had its origins slightly earlier, in the Vreeland-Aldrich Act – passed by an overwhelmingly Republican Congress and consented to by Teddy Roosevelt. Central Banking was a bi-partisan creation (though it seems to be veering in direction of which the Democratic populist WJ Bryan would have approved)

  7. Judging by some of his tweets I am sure he has considered getting rid of the Fed.
    He knows it wont happen and he has enough more critical fights on his hands at the moment.

  8. Pyrmonter

    An aside. The nomination of Moore has attracted a few snears (such as – http://gregmankiw.blogspot.com/2019/03/memo-to-senate-just-say-no.html) . I’m not sure Cain’s will; in fact, having a former senior businessman there might serve to provide genuinely useful diversity of opinion. However, it’s likely to encourage Dems to appoint unconventional candidates of their own – MMTers etc. Is that a price worth paying?

  9. Pyrmonter

    (Another aside. Does anyone know the story of how a former GOP Gov candidate for California, past relatively junior Bush administration official, corporate banker and native of Ohio ended up as President of the Minneapolis Fed – referring to Neel Kashkari. He seems interesting (and did good media for this Ca campaign), but how did he get that job?)

  10. stackja

    Pyrmonter – WJB silver tongue orator. Lost out to reserved gold.

  11. stackja

    Pyrmonter – NK worked for GS. Connections?

  12. Tim Neilson

    However, it’s likely to encourage Dems to appoint unconventional candidates of their own – MMTers etc. Is that a price worth paying?

    Obama appointed a convicted tax felon (Tim Geithner) as his head of Treasury with ultimate oversight over the IRS, and his “safe schools czar” (Kevin Johnson, I think) was someone who had been sacked as a school employee for failing to inform anyone that an adult male was co-opting the kids into the front row of the two-person scrum.

    Think also Eric Holder. In fact think of pretty much anyone Obama appointed to any position of authority.

    So setting a bad precedent for the Dems seems to me to be inconsequential.

  13. Gavin R Putland

    Tim Neilson #2991359:

    I can’t find any confirmation that Geithner was ever convicted of anything, although I presume that some ordinary punters have been convicted for less serious oversights.

  14. Chris M

    Mr Cain is certainly not a professor or even a doctor

    Puts him in front straight away.

  15. Tel

    I kind of like Herman Cain, can’t tell you exactly why … just seems down to Earth … bit of a Tea Party darling. I know Tom Woods thinks he’s overrated by Woodsy is a purist and if you hang on and grumble we will end up with someone worse.

    What he hasn’t done – as far as I’m aware – is have a long hard look at whether the US actually needs a Federal Reserve.

    Ahhh, about that … ain’t gonna happen. Worth a mention, don’t hold your breath waiting.

  16. Zatara

    Cain was chairman of the Federal Reserve Bank of Kansas City Omaha Branch from 1989 to 1991. He was deputy chairman, from 1992 to 1994, and then chairman until 1996, of the Federal Reserve Bank of Kansas City.

    He’s already been a Fed. Don’t know why everyone is getting worked up about him doing it again.

  17. RobK

    Ahhh, about that … ain’t gonna happen. Worth a mention, don’t hold your breath waiting.
    I thought so too but when you put it like that i wont risk money on it.

  18. Mitchell Porter

    Gavin R Putland
    #2991338, posted on April 18, 2019 at 4:47 pm
    The purpose of national central banks is to maintain the illusion that national budgets are just like family budgets. The purpose of the European Central Bank is to turn the illusion into a reality.

    Can you expand on this remark? There’s a “common sense” criticism of government budgetary practices which is the reverse of this: any sensible person (at least prior to the modern era of mass indebtedness) tries to balance their household budget, but governments and central bankers live in a different world where one is always borrowing, and minting new money out of thin air.

  19. Thomas Ray

    Maybe Trump has figured out we don’t need a Federal Reserve and his appointments to the FED are making a statement. The left is so insistent on Trump being stupid, that once he is gone and the FED is poorly performing, they may try to abolish it however, I cower at the thought of what AOC might concoct to replace it. We all know that government can’t shrink, we can only possibly hope to contain its growth.

  20. Tim Neilson

    Gavin R Putland
    #2991453, posted on April 18, 2019 at 6:33 pm

    Yes, I think you’re right. He seems to have been a tax cheat but I also can’t find evidence that he was convicted for it.

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