I just wanted to make a short post about a very interesting story published in the Huffington Post about the apparent lack of criticism of the Federal Reserve by economists (particularly within academia) and why this might be. One reason, the authors argue, is because doing so is a liability for economists who wish to have their views and ideas respected. This isn’t because their ideas are necessarily wrong, but because there is an inherent conflict of interests with the Fed vis-à-vis economists. The authors explain,
One critical way the Fed exerts control on academic economists is through its relationships with the field’s gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll — and the rest have been in the past.
How is it that economists (with marginal exceptions) have been so wrong regarding the current economic crisis and have failed to critically analyze the Fed’s consistent failures throughout its history? As it happens, there’s a lot money and respect hinging on them failing to do so. The Fed, their associates, and their grant money dominate the field. Essentially, they are what the authors call the “Gatekeepers.” For example, nearly 45% of editorial board members of top economic journals are associated with the Federal Reserve.
That’s what you call a conflict of interest. But it’s nothing it new. Take, for example, the government’s National Institute on Drug Abuse (NIDA), which holds a monopoly over medical research on marijuana. This impedes research and skews results, particularly when NIDA deliberately withholds marijuana from researchers it believes will contradict its own findings. As another example, as the article mentions, “The pharmaceutical industry has similarly worked to control key medical journals, but that involves several companies. In the field of economics, it’s just the Fed.”
As the famous saying goes, “It’s almost impossible to get a man to understand something, when his paycheck depends upon his not understanding it.“