Bryan Caplan  

What Bernanke Needed

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On Matt Yglesias' reading of "Ben Bernanke and the Zero Bound," Laurence Ball is saying that Bernanke needed to be more of a jerk:
Former Treasury Secretary and former National Economic Council director Lawrence Summers has always suffered in the eyes of many for being a bit of a jerk. But an amusing-yet-thorough paper by Lawrence Ball indicates that this disposition might have made Summers an excellent choice for a job he coveted and didn't get--chairman of the Federal Reserve Board.
Ball is admittedly coy in the paper; he focuses on Bernanke's change of mind rather than whether Bernanke was right to change his mind.  Still, if you read between the lines, it's pretty clear that Ball is strongly criticizing Bernanke. 

That said, I don't think Matt correctly interprets Ball's underlying criticism.  Ball's not saying that Bernanke should have been a jerk.  He's saying that Bernanke knew the truth but lacked the courage of his convictions.  There's no reason Bernanke couldn't have politely but firmly stood his intellectual ground.

Yglesias also argues that Ball underestimates the political pressure on Bernanke:
I find this narrowly personality-based explanation a bit unsatisfying. A more economics-oriented explanation might appeal to incentives. Anything you try to do in an unfamiliar situation might fail. But the strategies emphasized by professor Bernanke are all premised by the idea that a central bank can on its own boost an economy even at the zero bound. A central banker who implements those ideas would run the risk of needing to take responsibility for failure in the event that something bad happens.
But why then did Bernanke change his mind way back in 2003, when Bernanke wasn't in charge and the zero bound was a remote risk?  Matt's story is a useful supplement to Ball's; I've told the same story myself.  But the hard fact is that Bernanke caved in to flimsy arguments long before push came to shove.


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COMMENTS (2 to date)
Bill Nichols writes:

Keynes observed that "it is better for the reputation to fail conventionally than to succeed unconventionally".

The solution is to hire someone like Bill Belichick or Billy Beane who aren't afraid to take an unconventional approach and live with the outcomes.

Seth writes:

I agree with Bill Nichols. I would add that the underlying motivation for that is best described as ambitious milquetoast.

I don't find it all that different from your signaling theory of education.

It's better for a hiring manager's reputation to make a bad hire who has a college degree than to make a bad hire without a degree. I've seen that risk averse behavior in several variations.

It's better for a hiring manager's reputation to make a bad hire who has a college degree from a well reputed school than a bad hire from an average school.

It's better for a manager's reputation to hire top notch consultants and fail than to not hire them and fail.

I guess, then it all comes down to what is conventional because that is what you will get with ambitious milquetoast.

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