Justin Fox writes,
So has an economics PhD basically become a prerequisite for running the Fed? “I think the answer is ‘probably yes’ these days,” former Fed vice chairman Alan Blinder — a Princeton economics professor — emailed when I asked him. “Otherwise, the Fed’s staff will run technical rings around you.”
Not if you have enough confidence in your own judgment. Paul Volcker could not have cared less about the macroeconomic models of the Fed staff. In fact, nowhere in academic economics do they teach how the central bank really operates on a day-to-day basis. For that, you have to read Marcia Stigum’s Money Market.
Pointer from Mark Thoma.
It does seem to be true that Ph.D economists are now in the saddle at the Fed. In fact, there is a non-trivial chance that Janet Yellen will be the last Fed Chair not to have Stan Fischer as part of her intellectual ancestry (she is roughly the same age as Fischer and did her dissertation under James Tobin).
Just another sign of the “bull market in credentials.” I wonder what underlying conditions lead to such a bull market?
The underlying conditions are the absence of any genuine credentials.
I would think that somebody like Paul McCulley or somebody who has regularly made money in bond markets would be qualified to run the Fed. I’d feel a lot more safe with somebody who had won that particular contest, or even with Geithner, than a connected, fail-upward insider like Summers.
What about finance? Do you want a specialist in normalcy or someone more attuned to black swan tails?