Economists Sell their Souls to the Fed

by Ryan Grim — How the Fed Bought the Economics Profession (Oct, 2009) (Edited by April 7, 2014

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession.
This dominance helps explain how, even after the FED failed to foresee the [credit crash] the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed’s thrall, the economists missed it, too.
“The FED has a lock on the economics world,” says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. “There is no room for other views, which I guess is why economists got it so wrong.”
One critical way the FED exerts control on academic economists is through its relationships with the field’s gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the FED payroll – and the rest have been in the past.
Robert Auerbach, a former investigator with the House banking committee, spent years looking into the workings of the FED and published much of what he found in the 2008 book, Deception and Abuse at the FED“. A chapter in that book, excerpted here, provided the impetus for this investigation.
Auerbach found that in 1992, roughly 968 members of the AEA designated “domestic monetary and financial theory and institutions” as their primary field, and 717 designated it as their secondary field.
Combining his numbers with the current ones from the AEA and NABE, it’s fair to conclude that there are something like 1,000 to 1,500 monetary economists working across the country. Add up the 220 economist jobs at the Board of Governors along with regional bank hires and contracted economists, and the FED employs or contracts with easily 500 economists at any given time.
Add in those who have previously worked for the FED – or who hope to one day soon – and you’ve accounted for a very significant majority of the field.


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