Central Banks: A Huge Blind Spot in Political Science

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Central Banks: A Huge Blind Spot in Political Science

September 22, 2015

I taught college-level political science for eight years, and it always amazed me how textbooks and instructional materials in the discipline almost completely ignored the existence of the Federal Reserve or central banks of any kind.

In one text I was required by the department to use — Politics in America by Thomas Dye — the Federal Reserve System is mentioned on exactly 2 pages in a 600-page book. Those two pages occur within a chapter titled “Politics and the Economy.” But within that chapter, the focus is almost entirely on fiscal policy. Monetary policy is constrained to those two pages that mention the Fed.

There's nothing at all about money supply, or monetizing the debt, of course. And naturally, there's nothing about inflation as a form of taxation.

All of these phenomena involve very political policy decisions, and yet they are ignored in a textbook that purports to cover all the essential institutions and decision-making processes of the American political system. 

Now, this isn't to say that political scientists ignore the central bank completely. There are niche scholars who examine the political interactions between the Fed, Congress, and the Presidency. The Politics of the Fed (1986) by John Woolley is one example of a Fed book by a political scientist. Congress, the President, and the Federal Reserve: The Politics of American Monetary Policy-Making by Irwin Morris is another example. There is also Lawrence Broz's The International Origins of the Federal Reserve System. But books on central banking by political scientists (as opposed to economists, investors, and former “insiders”) are not common.  Certainly, there is no lack of non-academic books about the Fed, including many books by investors and public intellectuals. (I don't mean “non-academic” as a criticism.) There are also many good well-researched journalistic books about the Fed, such as Frederick Sheehan's Panderer to Power.

But there is little in the way of scholarly political science work on the text, and that's too bad, because economists and others who tend to deal more with central banking, do not provide the sort of systematic political analysis and empirical case-study work that political scientists specialize in.  Indeed, political scientists, being outside the economics profession, and insulated from the groupthink about central banks that pervade the economics profession, are arguably better positioned to take a more balanced and critical look at the ways that the Fed behaves like an interest group and is itself influenced by interest groups. Similar analysis is of course necessary for other central banks around the world. This would also seem to be a rich territory for the field of comparative politics in which different central banks could be compared and contrasted as political institutions. 

Moreover, the lack of political analysis of central banks allows the banks to more easily perpetuate the myth that they are apolitical institutions.

Budding political scientists who are reading this might consider specializing in the politics of monetary policy as a fruitful means of carving out a an academic niche and pursuing an area of research that appears to be woefully neglected.

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