Tuesday, March 8, 2011

Think Thank Uses Krugman as an Example of Why a Nobel Prize Is Not a Sufficent Qualification to Be Named to the Fed

Freedom Works is out with a hit piece trying to kill Senate approval of Peter Diamond as a member of the Federal Reserve Board of Governors.

As part of the piece, written by economist Dr. Judy Shelton, she points out that Paul Krugman has won a Nobel Prize and that, therefore, a Nobel Prize is not enough to be considered for a position on the Fed's Board of Governor's. Writes Shelton:
Peter Diamond, a professor at the Massachusetts Institute of Technology since 1966, was awarded the Nobel Prize in economics this past October.
That is no small thing.
But then again, New York Times columnist Paul Krugman was also awarded the Nobel Prize in economics in 2008. Does that mean the Senate Banking Committee should automatically relinquish its right to question the economic judgment of Krugman if his name were ever put forward as a nominee for the Federal Reserve Board?
Certainly, it would be inappropriate for members of the Committee to ignore the fact that Krugman is a strong advocate of government fiscal and monetary stimulus, i.e., deficit spending and printing money, as a cure for economic slackness. Not withstanding the charming manner in which Krugman expresses his views (he calls Rep. Paul Ryan a“charlatan” and his Road Map for America plan a “fraud”), it is important to distinguish a nominee’s current policy positions from academic accolades for prior work. Committee members should be careful to focus on the monetary perspective a nominee is likely to bring to the Federal Reserve Board; this is what will influence future decisions on whether to suppress or elevate interest rates.
I couldn't have said it better myself. Just because someone has received the Nobel Prize in economics doesn't mean they advocate sound policies. Krugman is certainly proof of that.

As for Diamond, he appears to come out of the same mold as Krugman, without the NYT soapbox. Diamond is in favor of more government spending and more Fed money printing.

If you think of the Fed as an inflation creating machine, you have to think of Krugman and Diamond as soul brothers who would like to keep the Fed money printing presses going 24 hours a day. In other words, they are truly last types you want at the Fed.

1 comment:

  1. yep, Hayek was right yet again...