Monday Smackdown: Hoisted from Archives from Five Years Ago: Economists Clueless About the Economy Weblogging
Justin Wolfers asked if any of the signers to this took their much-deserved reputational hit for signing it, or whether any of them have provided any sort of apologia.
The answer is "No: reporters somehow quote them, but do not ask them why they got it so wrong in late 2010. Reporters do not ask them how they have revised their visions of the Cosmic All as a result of getting it wrong. Reporters remain eager to take their quotes down and publish them as if they were the informed views of experts."
And the other real shame--besides the journalistic one of pretending that this embarrassment never happened and continuing to burnish the reputation and media presence of the signers--is that, to my knowledge at least, not a single one of the signatories has gone back and explained (a) why they were so certain that QE was a disaster, (b) why they were wrong, (c ) how they have changed their working model of the economy according to Bayes's Rule, and (d) how their policy recommendations will be different in the future. Marking their beliefs about the world to market is just not something that any of these people ever do...
November 15, 2010
To: Chairman Ben Bernanke
Dear Mr. Chairman:
We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment.
We subscribe to your statement in The Washington Post on November 4 that "the Federal Reserve cannot solve all the economy's problems on its own." In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.
We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.
The Fed's purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.
Cliff Asness, AQR Capital
Michael J. Boskin, Hoover Institution, Stanford University; Former Chairman, President’s Council of Economic Advisors
Richard X. Bove, Rochdale Securities
Charles W. Calomiris, Columbia University Graduate School of Business
Jim Chanos, Kynikos Associates
John F. Cogan, Hoover Institution, Stanford University; Former Associate Director, U.S. Office of Management and Budget
Niall Ferguson, Harvard University; Author, The Ascent of Money: A Financial History of the World
Nicole Gelinas, Manhattan Institute & e21, Author, After the Fall: Saving Capitalism from Wall Street—and Washington
James Grant, Grant's Interest Rate Observer
Kevin A. Hassett, American Enterprise Institute; Former Senior Economist, Board of Governors of the Federal Reserve
Roger Hertog, Hertog Foundation
Gregory Hess, Claremont McKenna College
Douglas Holtz-Eakin, Former Director, Congressional Budget Office
Seth Klarman, Baupost Group
William Kristol, Editor, The Weekly Standard
David Malpass, GrowPac, Encima Global; Former Deputy Assistant Treasury Secretary
Ronald I. McKinnon, Stanford University
Joshua Rosner, Graham Fisher & Co., Inc.
Dan Senor, Council on Foreign Relations; Co-Author, Start-Up Nation: The Story of Israel's Economic Miracle
Amity Shlaes, Council on Foreign Relations; Author, The Forgotten Man: A New History of the Great Depression
Paul E. Singer, Elliott Management Corporation
John B. Taylor Hoover Institution, Stanford University; Former Undersecretary of Treasury for International Affairs
Peter J. Wallison, American Enterprise Institute; Former Treasury and White House Counsel
Geoffrey Wood, Cass Business School at City University London
At the time I noted: Yet Another Reason Friends Don't Let Friends Vote Republican:
Douglas Holtz-Eakin, on November 24, 2010, trying to claim that the letter was not the partisan political attack that it was:
The letter... does not say... anything...that might be genuinely politicizing the Fed.... [T]he issue became “political” the moment that the QE II defenders asserted that it was a political attack. It is disappointing that when presented with a serious critique by academics, think tank analysts, and market participants the immediate response is “it must be a conservative attack on the Fed.” Note that implicitly this also carries the message: “I’d never consider that conservatives have ideas or that I might learn something from them.” So sad...
Kevin Hassett, on November 23, 2010, undermining Doug's claim that the letter was not what it was before Doug said it:
Guest Commentary: I’ve signed many open letters to policy makers over the years. The response to this one was stunning. I was surprised, and remain so, that the letter was criticized so widely and so passionately.... I’ll be the first to admit that the letter may have forfeited some impact because of the obvious Republican bent of the signers, some of whom, shall we say, don’t exactly spend their typical workday immersed in equations...
Doug says--despite its raving about "currency debasement... inflation... broad opposition from other central banks"--the letter is not a partisan attack but rather "a serious critique by academics, think tank analysts, and market participants." Kevin says that the signers were not people qualified to make a serious technocratic critique but rather Republican worthies--and that that made it impossible to read it as a serious technocratic critique.
I am with Kevin. I read this as Brent Scowcroft and Jack Danforth read Republican opposition to START. Scowcroft:
It is not clear to me what [the source of opposition] is. I have got to think that it is the increasingly partisan nature [of the Republican Party] and the desire [by the Republican Party] for the president not to have a foreign policy victory...
If Dick Lugar, having served five terms in the U.S. Senate and being the most respected person in the Senate and the leading authority on foreign policy, is seriously challenged by anybody in the Republican Party, we have gone so far overboard that we are beyond redemption. I am glad Lugar’s there and I am not...
The Infamous Austerian-Hack Open Letter to Ben Bernanke
- 2015: Monday Smackdown: Hoisted from Archives from Five Years Ago: Economists Clueless About the Economy Weblogging
- 2015: Weekend Reading: Open Letter to Ben Bernanke: Hoisted from the Archives from Five Years Ago
- 2014: Thursday Idiocy on Wednesday: Open Letter to Ben Bernanke: Hoisted from the Archives from 3 1/2 Years Ago...
- 2013: Justin Wolfers Asks Whether Any of the Right-Wing Worthies Who Put Their Names to This Tripe 26 Months Ago Have Suffered Any Reputational Consequences...
- 2013: Floyd Norris Politely Asks the Austerians: "What Were You Thinking?": Wednesday Hoisted from Other People's Archives Weblogging
- 2010: David Beckworth on Charles Calomiris
- 2010: Throwing Milton the Red Over the Side...
- 2010: Yet Another Reason Friends Don't Let Friends Vote Republican
- 2010: Economists (and Non-Economists) Behaving Very Badly Indeed Watch
- "Quantitative Easing", "Open Letter to Ben Bernanke"
- ON FOLD