An e-mail exchange with a friend gave rise to this comment. I post it with his blessing and although I had permission to “add and embellish”, the original comment is to the point:
“Related to your comments about Bernanke, he did one (other?) thing to harm the Fed’s operation: Giving Fed Bank presidents the latitude to offer their opinions not only on how an economy functions but on the likely course of future policy actions. This behavior is terribly irresponsible and neither Volcker or Burns would have tolerated it for one minute. During their tenures, the Fed acted in a manner similar to that of the Bank of Canada: The policy committee met behind closed doors to debate the course of policy but, once that course was determined, only one person — the Governor — communicated those decisions and the reasoning behind them. In recent years, however, several Reserve Bank presidents (Bullard and Plosser come to mind) have spoken as if they were the Chairman; this is even more ludicrous when it is remembered that these presidents get to vote on FOMC decisions only once every three years. And, if “forward guidance” means anything, multiple voices articulating strong, but mutually exclusive, points of view can only add uncertainty rather than reduce it. That academic papers often rest on the effects of “forward guidance” at the same time this kind of behavior is observed every day speaks volumes to the detachment of modern economics from the real world.
The most recent example of this nonsense is here. If I didn’t wish to be black-balled from the profession and lose all ability to produce papers for professional journals, I would write about how this behavior undermines the Fed’s ability to function (imagine a low-level member of the Defense Dept. telling the press that the US should/should not begin a war against X; I think the Chairman of the Joint Chiefs of Staff — not to mention the President — would respond strongly to this kind of insolence. In the Fed, however, nothing is done to quash this type of behavior; there is a difference between honest dissent and the presentation of scholarly work to articulate a point of view on one hand and speech that does nothing but usurp the Chairman’s power and compromise the institution’s ability to operate). While Bernanke tried to “lead” by treating the FOMC as if it were the chairman of an academic dept. where all voices carried equal weight, his naiveté was remarkable. One of the first roles of the Chairman is to make it clear that HE is in charge and if people wish to act otherwise, wrath would be directed toward the renegades.”
Will Yellen be any different? Unlikely.