38 Pages Posted: 24 Jul 2017
Date Written: July 19, 2017
How do political environments influence the behavior of economists who transition from academic and business environments to policymaking positions? And, more specifically, are an economist’s preexisting beliefs and principles congruent with their policy stances and actions once they transition into a policy role? These questions are particularly relevant when it comes to central banking, where academic and business economists are often selected for policy roles wielding substantial economic influence based partly on their stated monetary principles and beliefs. To address these questions, we analyze the writings and speeches of three economists, Arthur Burns, Alan Greenspan, and Benjamin Bernanke, as they transitioned to becoming chairman of the Fed. The tension between their previously stated views and their subsequent policy stances as chairman of the Fed, suggest that operation within political institutions impelled them to alter their views. Our findings offer additional support for incorporating the concerns of political economy into monetary models and structures.
Keywords: Central banking, monetary policy, public choice, political economy
JEL Classification: D73, E58, H00, P16
Suggested Citation: Suggested Citation
Salter, Alexander William and Smith, Daniel J., Political Economists or Political Economists? The Role of Political Environments in the Formation of Fed Policy Under Burns, Greenspan, and Bernanke (July 19, 2017). Available at SSRN: https://ssrn.com/abstract=3005647