Should-Read: It looks as though Marvin Goodfriend is a very bad choice for Fed governor—that he will behave like one of those Bush-era regional bank presidents who was a stopped clock, impervious to the news and to argument: Matt O’Brien: Why can’t conservatives just admit they were wrong about inflation?: “Marvin Goodfriend, one of President Trump’s picks for the Federal Reserve, would have been terrible at the job over the past 10 years…

We don’t know is whether he’ll be any better at it now. The early signs, though, are not encouraging…. When a once-in-three-generations financial crisis sends unemployment into the double digits and inflation well below the central bank’s 2 percent target… everybody can agree that the Fed should be doing everything it can to help the economy. Well, everybody but people like Goodfriend…. For years… Goodfriend has insisted that hypothetical inflation is a bigger concern than actual unemployment and that the best thing the Fed can do to promote job growth in the long run is to keep inflation in check…. It’s an ideology of inaction in the face of mass unemployment. And in this, Goodfriend has never wavered….

To be fair, though, to err is to be an economic forecaster. The real question is whether you learn from your mistakes. Goodfriend, unfortunately, hasn’t. Indeed, when Sen. Sherrod Brown (D-Ohio) asked him during his confirmation hearing this week why he had been so “wrong so many times,” Goodfriend said only that low inflation is important. This isn’t exactly the level of self-reflection we would hope for after empirical reality had spent the last 10 years refuting his ideas….

The first mistake Goodfriend made was… he didn’t realize the 1970s were over…. The second mistake… was… he didn’t think the Fed should try to make things better because he didn’t think it could… a faux world-weary philosophy in which not doing enough to stimulate the economy becomes an excuse to do even less of it. That they haven’t been able to get things back to normal so far means that it might simply be impossible to do. Something big must have transformed the economy, right? Because it can’t be their fault….

We were lucky the Fed didn’t believe this during the last economic crisis. Now we’ll just have to hope there isn’t another one…

January 27, 2018


Brad DeLong
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