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.
READER COMMENTS
RL
Jan 12 2010 at 2:38pm
Arnold: Just get a grant, make a million$ writing papers calling for government intervention, then write a book explaining that the government hands out tax-payer dollars willy-nilly to economists even when they write clearly incorrect papers, and get a large advance. It’s a two-fer.
chris
Jan 13 2010 at 12:41pm
How does the demand for, “extravagant promises from government, and politicians supply those promises” fall in line with the theory that people are rational, are not continually fooled, etc?
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