How do you get a body of professionals to go along with your program?
Pay them.
It’s an old idea: He who pays the piper calls the tune.
The pipers are economists. The paymaster is not you, but the Federal Reserve. There’s a suprising amount of agreement amongst even disagreeing economists that the Federal Reserve is, on the whole, “a good thing,” a necessary thing, even an institution whose existence and rationale must not be questioned.
Shocking, but less so when you apply what is called “Public Choice” analysis to economists themselves. Assume that economists are self-interested. Assume that they like to get paid. Opinions turn out to be somewhat elastic, even given some very hard facts. The results?
Don’t bite the hand that feeds you.
Nicely, a few economists bring this up, every now and then. Garett Jones on EconTalk did, reviving a letter monetary economist Milton Friedman wrote to researcher David M. Levy in the early 1990s. Friedman summarized the situation concisely, saying that the Fed
hires directly roughly half of all economists specializing in the field of money, and indirectly provides funds for a large fraction of the remainder. I have no doubt that is a major reason why the Federal Reserve, despite such a poor record of performance, has such a high public standing.
This also helps explain why there was a major shift away from laissez faire amongst economists. In the 20th century, the “worldly philosophers” developed a new labor market; they found that they could make a great deal of money working for government. And they don’t get paid for telling the government not to do what it wants to do, or to fire most economists.
This is Common Sense. I’m Paul Jacob.
2 replies on “Paying for Agreement”
True, however even the perfect agreement of every economist, from the PhD’s of the Fed to the amateurs on bar stool thrones, will not prevent the eventual dominance of the marketplace.
The Fed is a policy tool intended to manipulate and cause aberrations, but it cannot control the long run when the market will react to, and correct, for them.
Regardless of every lesson of history demonstrating the market will prevail, the false hope of a non-market control-ability of the economy still beats strongly in the breasts of most politicians, and all progressives. The harm caused by them and their policies through the eventual unintended damage caused is another clear, but never learned, lesson of history.
Whilethe economists like the Fed and the current crop of politicians like it, the statesmen that founded the country viewed it as an evil thing that was an enemy of freedom.