Priceless: How The Federal Reserve Bought The Economics Profession

Very interesting article in the Huffington Post (hat tip:, seeking to demonstrate that, for a variety of reasons,  there is limited independence from government on monetary and banking issues amongst the economics profession in the United States. You can read it here. I will leave it to others to suggest how these arguments might play in Ireland where there is less scope (and appetite) for putting economists on the payroll or for control of opportunities to publish in key journals. On the other hand, at the same time as contributors to this blog are tackling government over key aspects of banking policy,  the universities and the government are battling over autonomy (the latter for financial rather than intellectual reasons).

By Colin Scott

Colin Scott is Principal, UCD College of Social Sciences and Law and Professor of EU Regulation and Governance at UCD. He is a Co-Editor of Legal Studies (Wiley-Blackwell).

9 replies on “Priceless: How The Federal Reserve Bought The Economics Profession”

@Colin Scott,

Steady on. You’re running the risk of descending into the trenches like the rest of us. Cling hold to the ivory towers. They may be the only thingsabove water when the NAMA wave breaks.

It doesn’t need the need the increasingly decripit Greek goddess, Arianna, and her mouth pieces to tell those of us who’ve being labouring in the fields outside the palace walls walls what we’ve known for years. Obama, in re-appointing Bernanke, is proving to be even more duplicitious, and earlier, than Blair. Roy Jenkins, after the Electoral commission fiasco, concluded that that “Blair didn’t want to be the leader of the Labour Party; he just wanted to be Prime Minister”. Similarly for Obama.

Apologies to all the bleeding heart liberals out there, but it’s time time to wake up and smell the coffee.


Not just interesting….fascinating!

Like you say, less scope for a similar scenario in Ireland.

There are more than enough other influential groups to keep sweet.

Did you detect any of the veiled attacks on the 46ers?

Interesting: I wonder how true it is. It smacks a bit of conspiracy theory. Since governments here are generally not interested in what economics has to offer there is no chance of this problem arising here.

I worked at the Federal Reserve Board from 1996 to 2002 and have maintained contact with colleagues since then. As is often the case when you read popular articles about things you have first-hand experience of, I found this article to bear little resemblence to reality.

The Fed staff has very many economists because they spend time analysing, you know, the economy. They take advice from outside economists at conferences and on relatively low-paying consultancy jobs. But do people really think they’d be better off to ignore this advice?

There is of course an interesting story in the failure of the Fed to see what was coming. And, as the story indicates, this was a failure shared by the relevant parts of the economics profession (no point in blaming microeconomists or econometricians, remember). But the idea that academics were bought off from criticism because of their interactions with the Fed is silly.

And for what it’s worth, the Blinder story about the Fed not tolerating criticism is interesting because it is well known that Bernanke runs a more open collegiate FOMC than Greenspan. Didn’t help in stopping the crisis though.

@Karl Whelan

There is of course an interesting story in the failure of the Fed to see what was coming.

It’s interesting to hear your comments re Bernanke running a more open collegiate than Greenspan.

In his testimony to congress in late 2008, in the wake of the Lehman Brothers collapse, Alan Greenspan declared himself “shocked” that markets had not worked as anticipated.

“I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms,”

Q – Did you get my email re the contradiction in the Governments stance on long term valuations as applied for Nama, as opposed to sales of State owned property?

All that aside, its interesting that we have two ex-feds at opposite sides of the NAMA debate (AA and KW), and a slew of ex central bank of ireland economists (mostly anti-NAMA ; BL, D McW, George Lee to name three ) also in the mix. I cant think of any ex CB economist who is pro nama, apart from Donal O’Mahoney of Davys.

Like a lot of other commentary of this type, the Huffington Post article starts off with ‘it was the Fed wot done it’, and then proceeds to selectively present arguments that will support that proposition.

This sort of commentary may be entertaining, it may even have its uses in that various professions will look to the flaws in their reasoning and learn from their mistakes, it may even be satisfying to identify ‘scapegoats’ and castigate them; but it’s ultimately a monumental waste of time. It’s a bit like a group of people, experts in different aspects of tracking and hill-walking, falling into a deep ravine and then each one turning on the others for failing to spot what was coming, when they would be better off combining their efforts and expertise to working out how to get out of it. Or am I being too harsh?

@ Brian

re Donal O’Mahony: i consider him to be far and away the best of the current crop of private sector economists in the Irish market at the moment. I know a lot of others in the industry think so as well.

The increasing prevalence of anonymous contributors to this site suggests that there is some element of fear in Ireland about free speech.

As the economy winds down in a death spiral, this is likely to get worse! But then this is a democracy ….?

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