Friday, March 09, 2012

Who Cares about the Dual Mandate?

Scott Sumner waxes splenetic about an (im)pending measure to end the Fed's dual mandate--to scrub the Fed's responsibility for promoting employment, leaving it only with the job of stabilizing money.    But it's a looking-glass war on both sides.  
Let's stipulate for starters that the dual mandate never did make any sense.  Stabilizing money and maintaining employment are jobs independent of, and often at odds with, each other. Mediating between them isn't "science," neither economic nor rocket.  It's an essentially political exercise in trading off competing interests best left to the political class.

On the other hand, when has the Fed ever taken its dual role seriously?   The guys in the suits know that their job is to manage  money. They'll pretend to worry about employment if as and when necessary to placate a Congressional overlord.  But the incumbent overlords aren't all that worried employment anyway (possible exception: the overlords very likely do like the idea of a workforce that is hungry, insecure and thus dependent on its betters).  So, why waste time and energy over a non-issue?   My own guess is that it's symbolic or cosmetic--trying to please some big donors somewhere who think it really matters.

On the other hand, why waste time and energy fighting it?  Again, there may be cosmetic reasons--perhaps also tactical if it gives you a chance to embarrass your adversary.  But the content is pretty empty.

Scott's rhetorical trope also seems hasty or ill-judged: "turning macro policy over to a cabal of unelected bankers."  Um--?   Scott also says that the sponsors have "pissed off unemployed Youngstown steelworkers"--but before we sign onto that one, I suspect we might want to find an unemployed steelworker and ask him.

So, should we let them get away with it, i.e., end the dual mandate?  Surprising myself a bit, I guess I say "maybe not."   I sign on with those who think there is precious little a government can do about the economy anyway.  But there probably is some virtue in keeping the heat on.  If the Fed doesn't have the mandate to care about employment, then I suspect nobody gets the mandate to care about employment. And paltry as that obligation may be, there may be some residual (again symbolic, tactical?) value in making the guys in suits at least pretend they have to care.  So I suppose I am saying Scott is right after all.

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