Now Top Fed Officials Are Citing Hayek (As If They Are Paying Attention to His Work)

Randal Quarles

Federal Reserve Board member and Vice Chair for Supervision, Randal K. Quarles, spoke before the Ninth Annual Conference of the William F. Buckley, Jr., Program at Yale, New Haven, Connecticut, on Friday.

The theme of the conference was "The Road to Serfdom at 75: The Future of Classical Liberalism and the Free Market." Quarles spoke on Friedrich Hayek and the Price System.

It got absurd pretty fast.
Judy Shelton tweeted out:

Notable speech, by Randal Quarles, well worth reading and digesting. Citing Hayek’s body of work, it explains why market mechanisms lead to better economic outcomes than central planning. Friedrich Hayek and the Price System https://federalreserve.gov/newsevents/speech/quarles20191101a.htm… via @FederalReserve

But Quarles closed his speech, on Hayek's point that market prices are more efficient than central planning, by declaring that everything was just fine with the Federal Reserve's central planning of interest rates:

 Now I would like to turn to the current economic scene and this week's FOMC decision. Let me start by saying that the U.S. economy is doing well, and I am optimistic about the outlook. Economic conditions are currently very close to meeting our—that is, the FOMC's—dual-mandate objectives of maximum sustainable employment and price stability...

Aainst this backdrop, at our meeting earlier this week, we decided to lower our target range for the federal funds rate for the third time this year. We took this action to help keep the U.S. economy strong in the face of global developments and to provide some insurance against ongoing risks. By lowering the federal funds rate this year, we are supporting the continued expansion of the economy. Overall, with these policy adjustments, I believe that the economy will remain in a good place, with the labor market remaining strong and inflation staying close to our 2 percent objective.

David Stockman called Shelton out:

@DA_Stockman
Surely you jest. He gassed on for pages about the price mechanism, but didn’t say boo about Hayek’s support of free market money & that Fed is in business of defeating market prices in the financial sector. Quarles’ just another monetary central planner!

Quarles appears to be something of a "theoretical" free market supporter, that is, he is, in theory, a free market advocate but when the establishment calls, it is central planning for him all the way.

It reminds me of what Murray Rothbard wrote about Alan Greenspan:

Greenspan's real qualification is that he can be trusted never to rock the establishment's boat. He has long positioned himself in the very middle of the economic spectrum. He is, like most other long-time Republican economists, a conservative Keynesian, which in these days is almost indistinguishable from the liberal Keynesians in the Democratic camp. In fact, his views are virtually the same as Paul Volcker, also a conservative Keynesian. Which means that he wants moderate deficits and tax increases, and will loudly worry about inflation as he pours on increases in the money supply.

There is one thing, however, that makes Greenspan unique, and that sets him off from his Establishment buddies. And that is that he is a follower of Ayn Rand, and therefore "philosophically" believes in laissez-faire and even the gold standard. But as the New York Times and other important media hastened to assure us, Alan only believes in laissez-faire "on the high philosophical level." In practice, in the policies he advocates, he is a centrist like everyone else because he is a "pragmatist."

As an alleged "laissez-faire pragmatist," at no time in his prominent twenty-year career in politics has he ever advocated anything that even remotely smacks of laissez-faire, or even any approach toward it. For Greenspan, laissez-faire is not a lodestar, a standard, and a guide by which to set one's course; instead, it is simply a curiosity kept in the closet, totally divorced from his concrete policy conclusions.

Thus, Greenspan is only in favor of the gold standard if all conditions are right: if the budget is balanced, trade is free, inflation is licked, everyone has the right philosophy, etc. In the same way, he might say he only favors free trade if all conditions are right: if the budget is balanced, unions are weak, we have a gold standard, the right philosophy, etc. In short, never are one's "high philosophical principles" applied to one's actions. It becomes almost piquant for the Establishment to have this man in its camp.

-RW