Saturday, October 04, 2008

Wanted: A Good Bernanke Speech

My sense is that the Washington economics establishment (that is, Paulson and Bernanke and the teams they lead) is losing the intellectual debate. Many, perhaps most, serious thinkers about financial matters are opposed to, or at least skeptical of, the plans the Treasury and Fed are pursuing.

One reason they are losing the debate is that they are not fully engaged in it. There appears to be a sense in Treasury and the Fed that they needed to convince Congress, which could be done behind closed doors, and that there was no need to address the legions of economics professors out there. Maybe they were right as a short-term political tactic. But as a longer-term strategy, the case for this new Washington consensus needs to be made. The general public is largely opposed to recent moves to rescue the financial system. If Washington crowd cannot bring along the intellectual elite as a first step toward convincing a broader audience, they will end up pretty much alone, which does not seem sustainable. As of now, it seems as if they have not even bothered to try.

To get a sense of this problem, I went back to the Fed website and asked this question: How many speeches were given by Federal Reserve officials in September? The answer is three. Only one by Chairman Bernanke. The topic: "Remarks on historically black colleges and universities." Ben did address the current financial crisis in his Congressional testimony, but that testimony did not offer the kind of meaty analysis that could start to sway serious skeptics.

Ben Bernanke has tremendous credibility among economists of all political stripes. He may be a conservative Republican appointed by President Bush, but even left-leaning, Bush-hating Democrats like Paul Krugman respect him. If the case for the new Washington consensus is going to be made in an intellectually serious way, Ben is the person who has to do it. In the past, Ben has given some terrific speeches that were both deep and lucid. It is time to do it again. I hope somewhere in the Federal Reserve System, the best staffers are drafting a speech for him that eschews the platitudes common in Washington speechifying and makes a serious, academic case for the path the Washington establishment has taken us down.

If Ben is looking for a forum to give it, I am sure I can arrange something at his alma mater. Maybe a guest lecture in ec 10.


Update: I reader alerts me to the fact that Ben is scheduled to talk to the National Association of Business Economists on Tuesday. We will have to wait and see if the speech provides the intellectual support for the Treasury/Fed rescue plan.