Biden’s Fed Nominations

By: Robert Aro

Should gender or race play a role in hiring decisions at the Federal Reserve?

Consider the alleged problem in which the mainstream media, economists and Congress want your focus, courtesy of Reuters:

Currently, the Fed’s board has only five members, all white and three of whom are men.

In 2022, one would think there’s something inherently wrong about this. The message being that if more women or persons of color were to helm America’s central bank, things would be better for the economy. The rationale behind the diversity push is not explained. The assumption is that a more (physically) diverse Fed is best.

How heavily diversity inclusion played into Biden’s nominations cannot be measured. He nominated three people; two being women, two African-American. If his nominations are confirmed:

Biden’s picks would mean the seven-member Board of Governors would include four women, also a first.

Sharing his elation, Harvard economic professor Larry Katz said “it’s clearly a changing of the guard” and:

This is a “path-breaking new set of nominees who will bring important perspectives and representation to the board.”

Meeting the candidates, there is former Fed Governor Sarah Bloom Raskin:

…who spent four years as a Fed governor before being tapped as a deputy Treasury secretary from 2014 to 2017, is expected to bring tougher oversight to bear on Wall Street…

Unlike Raskin, an already high ranking member of the system, the other two candidates are not. Lisa Cook is an economics professor from Michigan State and Philip Jefferson, a professor at Davidson College in North Carolina.

Cook has written extensively about the economic consequences of racial disparities and gender inequality, and growing up lived through the violence of school desegregation in the U.S. South. Jefferson has written extensively on wages, poverty and income distribution.

Whether by happenstance or grand design, the problem with emphasizing gender or race obscures the need to fill a board based on competencies.

If the Fed was composed of 4 women and 3 men, but they were schooled in the Neoclassical tradition, one could say they are diverse in appearance, but intellectually similar. This is problematic because without diversity of opinions or challenges to ideas, improvement to monetary policy cannot be expected. The belief that the Fed should manage the money supply and interest rates would continue to go unquestioned. The economic booms and busts this causes would continue indefinitely.

Contrast this to a homogenous board. A Fed composed of 7 women or men, or 7 whites or blacks, yet 3 were Austrian and 4 Neoclassical economists, would be an astounding difference. The public would be privy to one of the most splendid economic debates of all-time, even if only witnessed through interviews and meeting minutes. Nonetheless, there at least would exist the possibility that economic change could be realized from within.

Unfortunately, the importance of intellectual diversity garners little to no attention. The idea that even one person who possesses a basic understanding of the free market, liberty or freedom could ever be welcomed into the Board of Governors remains little more than an unattainable dream. Should the Federal Reserve have a 7 member board, hailing from 7 different genders and 7 different races, yet none understand Austrian economics, then the next 100 years of monetary policy will look a lot like the last 100… or economic collapse will occur, whichever comes first.


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