Bryan Caplan  

The Fed: A Cost-Benefit Reckoning

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Steve Miller and I have a question on the latest Kauffman econ bloggers' survey.  Namely:
Taking into account its entire history, do you think the Federal Reserve has done more harm than good?
Survey says:
All things considered, this is an amazingly anti-Fed result.  Kauffman participants span a wide range of political views, and status quo bias is a powerful force.  Nevertheless, the median respondent isn't convinced that the Fed has been a net benefit.  And it's been around for almost a century now!  If you've got even a mild moral presumption against government action, this ambivalence is especially telling.

P.S. In other news, my SRtHMK podcast with Russ Roberts is now up.

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COMMENTS (8 to date)
Daniel Kuehn writes:

"Mixed" is an awfully odd response to a question that's worded this way.

What does that even mean? I assume it means "The Fed has had a mixed record". A huge majority of the "no"s would probably say this too if you followed up with them by asking "has the Fed had a mixed record of success and failure?".

I'd be careful how you interpret this.

Amaturus writes:

I don't think this is too surprising considering that even the current Chairman admits the Fed's epic failure during the Great Depression. Mixed is the most intellectually honest answer, even for supporters of the Fed.

Zac Gochenour writes:

I agree with Daniel that "Mixed" is not a great response to this question. It should be something like "more harm," "more good," and "about as much harm as good." Mixed doesn't capture the last response, it's more akin to "has done both harm and good," which isn't mutually exclusive with the other responses. I think any interpretation of this result will be subject to plenty of valid criticism, unfortunately.

wd40 writes:

I have little confidence in these results because of the way the question is posed and the list of possible answers. I would like to also see the answers to the following questions: Taking into account its entire history, do you think the Federal Reserve has done more good than harm? How would you rate the performance of the Federal Reserve over the last x years: Strongly positive, Positive, Neutral, Negative, Strongly negative.

Josh W. writes:

The point of a netting analysis is to eliminate "mixed" as a final answer.

The Kaufman survey's text spins it pro-Fed:

Only 16 percent of respondents believe the U.S. central bank has had a net negative effect overall, one-third the number of those who believe it has had a net positive effect.
blink writes:

I agree with wd40. Very likely, the bad rap for the Fed would disappear with a "more good than harm" version of the question.

crossofcrimson writes:


What does that even mean?

Given the wording:

Taking into account its entire history, do you think the Federal Reserve has done more harm than good?

I would take "mixed" to mean, pretty broadly, "not sure if they've done more harm than good or more good than harm."

A belief that the Fed has a "mixed record" might be one of the many reasons one could have "mixed" feelings about the beneficial status of such an institution - but I think that's beyond the scope of the poll.

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