The Corner

Economy & Business

A Good Choice Oddly Made

President Trump has made a good and welcome appointment in choosing Jerome Powell to chair the Federal Reserve board. But he has made it in a way that undercuts his nominee, and that helps us see more clearly something significant about his attitude toward his own job. Both the bad and the good are worth a few thoughts. 

As with his choices for Secretary of State, FDA Commissioner, and other key posts, the president paved the way for today’s announcement with a drawn out public spectacle—fretting over candidates in front of audiences, asking others to vote on his options, and trying to build up suspense. These dramatic devices, obviously drawn from the world of reality television, can’t help but undermine the stature of the ultimate choice. And they are all suggestive of an attitude toward the presidency that fails to appreciate the nature and character of public trust. The president views the presidency as a platform for himself, not as an institution he inhabits for a time, and so he performs rather than governing. Take a look at this utterly bizarre video the White House put out last week about the Fed decision and ask yourself what in the world they take themselves to be doing. 

The main problem is not exactly that this kind of process undermines the Fed’s vaunted independence. It could well do that to a degree, though I think the Fed’s move in recent years away from the traditional role of a central bank and toward an increasing emphasis on directly regulating the financial system has done more to undermine its independence. A bigger problem is that it makes a joke of the job, needlessly undercutting whatever trust the public may still have in institutions that will need some store of confidence to call upon should we confront hard times. 

And yet, in this highly unorthodox selection process, as in most past ones this year, the outcome has been pretty conventional—for better or worse. The performance was not directed toward advancing any novel idea, argument, or policy. Indeed this process, which involved a group of finalists with very different views of monetary policy who seemed to be considered without much regard to those views, has suggested an indifference to the substance of the job in question. 

So how could such indifference lead to a good choice? For me, the answer has to do with the need for humility at the Fed just now. Jerome Powell has been a cautious pragmatist and a consensus builder. That’s not always a good thing in a public official, of course. But it means he is a good choice for Fed chair for you if you have no particular views on monetary policy—as most people don’t, and it seems the president doesn’t. It also means he is a good choice for you if, like me, you think contemporary macroeconomics does not have a good grasp on the contemporary economy and offers policymakers remarkably few useful tools and guidelines for making decisions. 

We are living in a moment when economic theory (and the work of the social sciences more generally, frankly) seems unusually disconnected from the realities policymakers confront and exceptionally baffled by the portion of the world it is charged with understanding and explaining. As I say, this is definitely not a problem limited to economics. You see it perhaps most plainly in the realm of foreign policy, which has long been particularly shaped and guided by theoretical frameworks cooked up in the academy but which has been in total disarray for more than a decade and left policymakers adrift without a compass. No one can tell you how to think about America’s interests in the world at this point, or about what we want from our relationship with China, or what we’re after in the Middle East. There aren’t really coherent competing models or opposing schools, either. And that has meant that American foreign policy has been a thoroughly ad hoc affair, for good and bad. 

Something similar is evident in the relationship of other political scientists to our national policymakers. This would be a great time to study Congress, for instance, and there is certainly some valuable and interesting work being done on that front. But much of it bears little resemblance to how members of Congress experience their own work, and as a result it has basically had no effect on that work. Sociology and social policy are similarly unacquainted. This isn’t universally true of any of these fields, of course. It only strikes me as the general situation. 

And it’s not the end of the world. The social sciences don’t exist just to inform public policy, and policy (let alone our broader political life) isn’t just applied theory. But in the case of economics in particular, which is after all a policy arena especially closely connected to an economic discipline, this situation should call for humility and caution. The people charged with making key economic decisions or with advising those who do now don’t really know how to explain the state of our economy or how to predict its course. Looking over the minutes of most recent Fed board meetings is like listening to politicians talk about the 2018 elections—it’s a bunch of expert practitioners basically befuddled by the situation they find themselves in. And the rest of us are of course at least as confused and probably more so.

That would make this a good time for a Fed chair who is inclined to be relatively humble, to seek consensus where possible, and to understand the necessity of building and sustaining public trust. 

It would also be a good time for a president who grasps the importance of these things. But you can’t have everything you want. 

Yuval Levin is the director of social, cultural, and constitutional studies at the American Enterprise Institute and the editor of National Affairs.


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