Don Boudreaux's open letter to Ben Bernanke reminds me how badly I overestimated my former teacher's practical wisdom:
Dear Mr Bernanke:
I had to down an extra mug of coffee this morning to be certain that I read your op-ed in today's Washington Post
correctly. Sure enough, you claim to be worried about a recent
House-committee vote to, as you say, "repeal a 1978 provision that was
intended to protect monetary policy from short-term political
Ummm.... What guided Fed "policy" over the past couple of years if not short-term political influence?
Working hand-in-glove with the political branches, you now have the
Fed performing activities - such as direct lending to what, in an April 2009 speech, you called "ultimate borrowers and major investors" - that are utterly outside of the Fed's traditional role.
Sorry, Mr. Bernanke, any independence that the Fed might have once
had from "short-term political influence" has already been trampled to
death - chiefly by you.
Several economists I know argue that you have to be in Bernanke's shoes to understand his conduct. Back in September of 2008, for example, Mankiw wrote:
I know Ben Bernanke well. Ben is at least as smart as any of the
economists who signed that letter or are complaining on blogs and
editorial pages about the proposed policy. Moreover, Ben is far better
informed than the critics. The Fed staff includes some of the best
policy economists around. In his capacity as Fed chair, Ben understands
the situation, as well as the pros, cons, and feasibility of the
alternative policy options, better than any professor sitting alone in
his office possibly could.
If I were a member of Congress, I
would sit down with Ben, privately, to get his candid view. If he
thinks this is the right thing to do, I would put my qualms aside and
follow his advice.
I don't write such blank checks to people with power. Lord Acton had it right:
I cannot accept your canon that we are to judge Pope and King unlike
other men, with a favourable presumption that they did no wrong. If
there is any presumption it is the other way, against the holders of
power, increasing as the power increases. Historic responsibility has
to make up for the want of legal responsibility. Power tends to
corrupt, and absolute power corrupts absolutely. Great men are almost
always bad men...
The life lesson I take away: Acton's admonition remains true even if you personally know the "great man." It should be obvious, but it's all too easy to forget.