Fed News Friday: Who Influences the Economics Profession

With long-dated treasuries falling and manufacturing in some areas arriving flat on its face, all hope is being invested into the Federal Reserve.  Its recent actions in the marketplace have been carefully monitored, and some have attempted to predict the outcome of its quantitative easing or tightening up of the money supply.  Although some may argue that it’s been the Fed’s actions over the past 95 years that have caused this wreckage, leading up to this period you will find very few economists who outwardly express criticism toward the Fed.  Why?

According to some research by the Huffington Post, you will find that the economics profession is saturated by Fed employees and Fed policy advocates.  This leaves little room for other schools of thought to enter into the “round table” and bring up different perspectives on how to solve the economy’s woes.

Should we blame the economists of the world for not predicting or finding a better solution for the economy?  If I do recall there were some economists who accurately predicted the downfall of 2008, yet are not part of the Fed’s policy researchers/advisors.  What do they look for in the perfect economist?  How can one meet the standards of the almighty Fed?  Is there a certain something that must be on the resume…from what I have read here, there is.

For example, the Journal of Monetary Economics serves as a benchmark of success for up-and-coming economists.  An interesting tidbit about this publication:  Almost all of the board members are on the Fed payroll or have been in the past.  That means the highly regarded analysis and research found here is influenced highly by the Federal Reserve.  Of course, higher education institutions favor academic journals for classroom curriculum and businesses use them for forecasting and advice.

When calculated in 1993, 730 economists were working for or contracted by the Fed, and over a 3 year period to 1994, 209 professors were awarded with $3 million for contracts from the Fed.  It’s no wonder how the economics profession became so overly pro-Fed:  Many economists can’t afford to rally in another direction if they like their position and pay.

To relate this to something similar, the pharmaceutical industry has long since influenced medical journals in order to promote certain cures and medicines.  However, the difference between their clout in academia and the economics world is there are MANY different pharma companies and only one Fed swaying the authors’ writing.

When accepting advice from the economists in the mainstream media sources, be sure to check their background and past involvement with the Fed.  If their paycheck is or ever has been supplemented by Bernanke, research other opinions before forming your own.

To learn more about a possible alternative to the mainly Keynesian economic policy of the Fed and main stream economists, check out this work by Murray Rothbard.

Original post here.

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