Belongia and Roberts on the Fed
Scott Sumner calls it a “must listen.” What I like is the part near the end, where Roberts tries to argue that reform of the Fed is unlikely. Our political system demands a “maestro,” someone that everyone can look to to stabilize prices, eliminate unemployment, regulate banks, prevent asset bubbles, defend the currency, and so on. There are plenty of people with sufficient egos to supply this “maestro” role. So the natural equilibrium is for the Fed chairman to be a frequent candidate for “person of the year,” even though we might be better off with a non-entity who follows simple rules and makes few promises.
I’d say that’s pretty much my generic view of political economy. People demand extravagant promises from government, and politicians supply those promises. If you can make extravagant promises, you get all sorts of power. So if you’re Jonathan Gruber, you promise health care reform that is a free lunch (and that enhanced concentration of political power in the bargain), and you get hundreds of thousands of dollars in government grants.