At Marginal Revolution, economist Alex Tabarrok responds to my flurry of posts on who gets the top two posts at the U.S. Federal Reserve:
Inequality and the Masters of Money
by Alex Tabarrok on January 14, 2014 at 7:22 am
This post isn’t about inequality and money it’s about inequality and the masters of monetary policy. Consider Janet Yellen, her recent confirmation to chair the Fed has made her the most powerful woman in the world... Moreover, Yellen is married to Nobel prize winner George Akerlof. The fact that two such outstanding individuals should be married to one another is an illustration of assortative mating. Yellen-Akerlof are the 1% of the 1% and all that political and cultural achievement concentrated in one family is an example of the growth of inequality. Tellingly, one of the drivers of this inequality was greater equality of opportunity for women.
Now consider, President Obama’s nomination for Fed vice-chairman, Stanley Fischer. Fischer was born in Zambia, holds dual Israeli-American citizenship and was most recently the governor of the Bank of Israel. In all of US history there is almost no precedent [link to me] for a former major official of a foreign country to become a major official of the United States. Given all the economists in the United States one might have thought that a suitable candidate could be found without this peculiar history and yet it’s not hard to understand why President Obama has nominated Fischer–to wit, I wouldn’t be surprised if everyone President Obama asked for advice on this question to told him that Fischer would be one of the best people in the entire world for the job.
Indeed, many of the people Obama spoke to, including Ben Bernanke, would have been Fischer’s students, themselves a large subset of the tiny elite of the world’s top monetary economists. Perhaps the world of monetary economics is an inbred, clique, a supplier-controlled cartel [link to Arnold Kling]. Maybe so, but I see this as part of a larger story. Stanley Fischer, rather than thousands of other nearly equally-qualified people, is being nominated to the U.S. Federal Reserve for the same reasons that large firms, compete madly for a handful of CEO’s (in the process bidding up their wages to stratospheric levels).
Consider that even in the rarefied world of monetary policy Fischer’s appointment isn’t unique. In 2012, the British appointed Mark Carney, a Canadian, to be the Governor of the Bank of England, the first non-Briton to ever hold the role.
When even Great Britain and the United States find that their home-grown talent isn’t good enough that tells you that the demand for talent is immense. My favorite example of this from the business world is Sergio Marchionne. Marchionne is the CEO of Italy’s Fiat and the Chairman and CEO of Chrysler, among several other positions.
Small differences in quality at the top have a greater impact the larger the firm, the market, or the economy. How many truly great decisions did Bill Gates make at Microsoft (compared to another plausible CEO)? ...
It’s also notable that the Federal Reserve is trying to create the highest-quality team. ...
The bottom line is this, a common set of factors is driving inequality: equality of opportunity, assortative mating, O-ring production, increases in the demand for talent driven by the leveraging of talent through technology. The forces are similar and so are the results, the money elite, the monetary elite, the power elite.
So, while it may look to you like a set of friends and lovers has taken over the world through mutual backscratching, that just shows you aren't up to date on O-ring theory. When have O-rings ever failed the U.S.?
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23 comments:
Yes, if we didn't have the very best people in the world running the Fed, imagine the kind of damage that could result. Why, it could be catastrophic!
Oh, wait....
Burger King has really good O Rings.
Monetary policy is Challenging!
Taborrak did a really good job of unintentionally pointing out why these people and the institutions they control are doomed. They are now inbred and sheltered to the point where they are unable to relate to the general public, but they exist in a nominally democratic political entity. Yellen will be the Marie Antionette of monetary policy and the Fed will get the chop too when its all said and done. Another confirmed case of Hultgree-Curie Syndrome.
If you read these stories and don't think to pick up a few ounces of gold, God help you.
http://www.urbandictionary.com/define.php?term=o-ring
O-rings were an odd and tone-deaf example for Alex to use.
All the praise for Fischer raises an obvious question: if he is so talented to warrant the unprecedented Israeli government-to-US government move, why is he second banana to Yellen? The answer appears to be that she really isn't the best qualified person for the job, just the best qualified woman. Does Alex address why affirmative action for wealthy and well-connected women is deemed more important than merit?
One question for you Steve, since you've implicated this clique in our ongoing economic malaise: given the constraints of the Fed (e.g., its dual mandate to promote economic growth and maximize employment, and its inability to address economic problems not associated with monetary policy, such as unchecked immigration, naive trade deals, poor fiscal policy, etc.), what would you have preferred it did differently over the last several years?
It is almost as if someone decided that they shall surround government with a whole world of economists.
"what would you have preferred it did differently over the last several years?"
I'm not a talented witch doctor, so I don't talk about macroeconomics a lot anymore. I spent a lot of time in the 1970s and 1980s thinking about macroeconomics, but ultimately I didn't notice that I had a comparative advantage in that field.
So, today, I focus on simple topics that don't attract much attention, such as conflicts of interest among the Great and the Good. Dr. Fischer's career features a number of interesting conflicts of interest, but we are being told that those are of no interest because he is the world's greatest witch doctor. I'm really not capable of assessing just how valuable his witch doctoring skills are, so perhaps that's why I am skeptical that they make up for his manifest conflicts of interest: I'm just too stupid to realize how the spells Dr. Fischer is going to cast will do us so much good that his conflicts of interest are a negligible price to pay for his world-class witch doctoring.
When even Great Britain and the United States find that their home-grown talent isn’t good enough that tells you that the demand for talent is immense.
If what was going on was simply a demand for talent it would be less objectionable. It would be like multiple baseball teams bidding for the services of the best pitcher in the game at present.
But what exactly is the evidence that the "1% of the 1%" truly merit the high esteem in which they are held? What exactly has Fischer done which sets him apart from hundreds of thousands of other bankers in the US? It seems that his principle qualification lies in being very well connected - as Tabarrok more or less admits.
Steve is on a roll!
I think the Fed is faced with an impossible dilemma -- how to increase employment without creating inflation -- so all of these people are going to come out of this with egg on their faces. (Except, according to Steve, they just wipe it off and go on to the next meal.)
Perhaps Alex Tabarrok, if he was a a fan of the NFL, could've used the similar strategies of risk-averse franchises hiring the same retread coaches rather than taking chances on lesser known, but perhaps more innovative, college talent.
Maybe Jim Grant is the Chip Kelly of economists, but we'll never get to find out.
I guess Federal Reserve Vice Chairman is yet another one of those pesky "jobs Americans just won't (or can't) do."
It seems Tabarrok strings together a few tautologies and considers the case closed. Color me skeptical. I’ll take it at face value that Yellen/Fischer are individually decent people; as my grandparents always used to say, the Christian thing to do is always assume the good in someone you meet, until proven otherwise. But, just a cursory glance at Yellen’s career reveals unremarkableness. Fort Hamilton High School in Brooklyn, undergrad at Brown, PHD thesis at Yale, and teaching/working at the Fed after that. I guess I’m supposed to hit my knees and gaze at the awesome wonderfulness of her awesomely wonderful Ivy League creds, but I’ll pass. She’s never had to really LEAD people (I don’t count teaching; that dynamic is too one-sided; sorry Education Realist!) to accomplish a goal, or successfully run a business. THAT I could understand and admire; a Fed Chairman that actually saw economics at the other end (micro) on a day-to-day basis. For that matter, I’d like to see Fischer’s bona fides in that regard. Either way, the Fed is more of a technocratic organization; Steve is right to ask the hard questions; nobody in mainstream journalism will. I’ll simply just stand by with guarded detachment, which is all I can do anyway from my lowly perch. There’s a Devil to pay for all this dripping arrogance of the elite. Pride was the Original Sin, after all. Perhaps the assortative mating will be undone by the non-assortative expenditure of ammunition; I can’t help but think that the masses will not accept this condition in perpetuity. I’ll retire to my redoubt in Galt’s Gulch; I’ve done my time in service to the Empire.
It seems our wizards of smart have all mapped out the future for us. As far as I can tell the future is:
A. Robots! Machines! Either in a mostly benign way (AI; I, Robot), or all the way on the other end to human extinction (Skynet; the Matrix; or the Borg – OK the Borg are androids, but that 7 of 9 was easy on the eyes…). They will be here Real Soon Now.
B. Feudalism 2.0 (I guess Gattica would be the most positive vision; Elysium not so much). You’ll eat your Soylent Green/Frijoles and like it! Never, but never ask a question deemed impertinent by his Excellency Torquemada!
If Fischer were a dual citizen of another country, would people still step up and defend him?
Which countries would or wouldn't get a pass?
Steve has now made the transformation into Super Saiyan. I can only speculate as to his current power level. It appears to be growing with every post.
Popeye's are the best fast food onion ring.
Color me skeptical. I’ll take it at face value that Yellen/Fischer are individually decent people; as my grandparents always used to say, the Christian thing to do is always assume the good in someone you meet, until proven otherwise.
I take it as a given that individual Jews are going to turn out to be decent people. But also ethnocentric. It's just the realistic thing to do, until proven otherwise.
Popeye's are the best fast food onion ring.
Popeye's have withdrawn from my vicinity. I miss their oh-so-greasy cups of beans and rice. You can only eat one, once in a while, but with those biscuits, and maybe even some greasy fried chicken on the side...
"When even Great Britain and the United States find that their home-grown talent isn’t good enough that tells you that the demand for talent is immense."
Demand for talent or the talent with the right pedigree?
Suppose someone had even higher credentials than Fischer but is harshly critical to Zionism or had made public statements about racial differences. Would such talent even be hired for a lower post?
Fisher is Jewish-Zionist, and Carney worked with Goldman Sachs for 13 yrs.
http://en.wikipedia.org/wiki/Mark_Carney#Goldman_Sachs
It wasn't just about talent but talent with the right assurances of loyalty and allegiance.
Chrysler was purchased by Fiat. Marchionne was already the CEO of Fiat so why would he not take over for Chrysler. It's not like Chrysler was actively looking for a new CEO
Did Fisher ever hold a UK passport? Assuming he was born in Zambia..
Tabbarok's is full of hasbara but it's Sailer who trips over Godwin's Law. *facepalm*
"When even Great Britain and the United States find that their home-grown talent isn’t good enough that tells you that the demand for talent is immense."
It shows there's been a coup and the banking cartels are now the true government of USUK.
"When even Great Britain and the United States find that their home-grown talent isn’t good enough that tells you that the demand for talent is immense."
It shows there's been a coup and the banking cartels are now the true government of USUK.
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