More on Monetary Policy and Morality

Tyler Cowen gave me the old what for the other day for calling him a gargoyle:

I say focus ruthlessly on substance and do your best to explore and present the limits and drawbacks of your own ideas and recommendations. Years down the road — or sooner — one will end up wiser and better informed. The reasoning in this article is an excuse to dismiss moderating or inconvenient ideas, or ideas which de-moralize a topic somewhat.

I’ll cop to sort of asking for that one, it was a bit of an overheated post. And I agree that moralistic thinking can often cloud one’s thoughts. (Also, nothing personal against Tyler, who is the rare libertarianish conservative amenable to reason.) Nevertheless I still think morality has some part to play here.

The reason is that this is not a graduate seminar. The point of all this is not to assemble the correct beliefs about economics, or explore all the undoubtedly complex subtleties thereof. The point is to make the economy work! Years down the road we are all dead.

A depression is in any case not a particularly tricky problem. As Steve Randy Waldman put it:

We don’t lack for technical means to counter people’s self-defeating impulse to hoard cash and safe financial assets. On the contrary, we have a whole cornucopia of options! The squabbling that has preoccupied me lately, between market monetarists and post-Keynesians and mainstream saltwater economists, is an argument over which of many not-necessarily-mutually-exclusive options would most perfectly address address this not-really-challenging problem.

The man in charge of the Fed, Ben Bernanke, is doing right now exactly what he famously criticized the Bank of Japan for doing: being cautious, timid, and immediately hitting the brakes at the first whiff of inflation. That work made his career! As I’ve said before, it’s like we put Richard Feynman in charge of NASA and he started ranting about creationism and homeopathy. This suggests to me we’re dealing with questions of power and politics, the things economists usually pretend don’t exist. And when faced with a political obstacle, good moral arguments are among the most powerful available.

Think of the civil rights movement. They did not defeat Jim Crow over the furious, howling objections of Southern conservatives by saying, “the costs of giving black people the vote are not very high.” They went south and faced the dogs and firehoses and beatings and shotguns and thereby shamed the nation into action. (And it was a close-run thing, even then, I might add.)

I haven’t heard any argument that convincingly rebuts the points in Bernanke’s brilliant paper, though I’m happy to listen. But if, as Tyler agrees, a bit of monetary stimulus has a chance of getting us out of this funk at reasonable cost, then we have a moral obligation to try it. Millions of lives are being shattered because Ben Bernanke won’t sign some directives and speak some sentences. It’s time to make him and the rest of the financial elite face that fact.

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Ryan Cooper

Ryan Cooper, a contributing editor of the Washington Monthly, is currently the Washington correspondent for The Week.