An important subtheme of Noah Green’s survey of Fed critics is the triumph of Austrian over Chicago economics within the modern political right.
Thirty years ago, right of center economists did not accept recessions as necessary and indeed healthful responses to speculative bubbles. They still winced at the memory of Hoover era officials who welcomed the Great Depression as a means to “purge the rottenness” from the market system.
Thirty years ago, right-of-center economists did not celebrate high interest rates as a safeguard of the currency. Thirty years ago, they measured inflation by the dollar’s ability to buy goods and services – not its value relative to gold or some other commodity.
Even today, probably most business economists – most Republican economists! – reject those ideas. I notice that the e21 letter criticizing the Fed was not signed by two distinguished right-of-center academic economists, Greg Mankiw and Robert Barro. I notice that it was not signed by President George W. Bush’s two leading economic advisers, Glenn Hubbard and Larry Lindsey.
All in all, in fact, it’s fascinating to tally all the people who were likely asked to sign but who opted against – and who have not yet been heard from in this debate.
But that’s how political triumphs often happen: not always by winning the argument, but by deterring those who reject the argument from speaking out.