In my work, I have tried to avoid revealing anything about my personal political beliefs and even worked to obfuscate as necessary. When my father was visible in national politics as a Democrat, it was helpful to have a letterhead appointment at the Hoover Institution.
Although I stay away from the battles of national politics, in my role as an advocate for science as the greatest human institution, I am now drawn into the battles of academic politics. I seem to be the designated nag when Nobel Prize winners disappoint.
Ed Prescott has a new NBER paper (with a co-author I do not know) on monetary policy with negative nominal interest rates. Other economists have written on this topic. None of the work I know in this area is mentioned in Ed’s paper.
In our professional division of labor, I admire economists who have taken the other path and have served in government — for example, Greg Mankiw, Eddie Lazear, and Glen Hubbard in Republican administrations and Christina Romer (no relation), Austan Goolsbee, and Larry Summers in Democratic administrations. This type of public service generates big social benefits yet imposes direct private costs and often leads to disappointment. It is much easier to observe the scrum of politics from a distance. As a profession, we should recognize the work of economists who follow this path.
Back in the late 1990s and early 2000s, my practical focus was on science and technology policy. During one presidential campaign, I recall being contacted by staff working for both Republican and Democratic presidential candidates. I was willing to share ideas privately with anyone who got in touch, and explained to everyone that this is what I do. It seemed to me then that there might be some value in having at least some economists who could advise from this non-partisan perspective, particularly on science and technology policy.
One of my most exciting background efforts originated in Congress. In 2001, I worked on a bill developed by staff from several Congressional offices, with expert guidance by Bill Bonvillian, the Legislative Director for Senator Joseph Joe Lieberman. Bill lined up broad support for an ambitious bill, including a co-sponsor from each party and each chamber of congress. We were set for a press conference to announce the “bipartisan, bicameral” introduction of the bill at a press conference in Washington DC. I remember waking up on the morning of the conference — Sept. 11, 2001 — and listening to the news on the radio. The world pivoted.
This episode reminds me that it was not so long ago when members of the two parties could cooperate on at least some aspects of policy; and that it was not so long ago when policy makers agreed that in the long-run, the type of support (not just the amount) that national government provided for scientific discovery and technological progress might be among its most important policy decisions. The Morrill Act, which established our land grant universities, is my unit of account. Have we done anything lately that is 1/2 a Morrill? Even 1/10th of a Morrill?
Things can change for the better as well as for the worse. Science could help restore an equilibrium in which policy-makers consider such questions once again. It can do so by demonstrating a professionalism in which everyone admits that reasonable people can differ; in which scientists state their disagreements clearly and directly and then listen to the response; in which conceding that the other side has a valid point is a sign of integrity, not of weakness; and in which professional disagreement can co-exist along side of personal friendship.
I know a little bit the area that is the focus of Ed’s paper because Marvin Goodfriend came to NYU in 2013 to talk about the effort he devoted, starting more than 15 years ago, to prepare for a possibility that he could foresee: As inflation came down, the Fed might need to set a negative Fed-Funds rate. See this paper from 2000 on the underlying issue and this one from 2002, which proposed paying interest rates on reserves in advance. The Fed could not even consider paying a negative rate until it had the power to pay a rate other than zero. Marvin’s work helped spur legislation in 2006 that gave the Fed the power to pay interest rates on reserves. The Fed started using this power during 2008 when the financial crisis hit.
Citations are one of the practical ways for the profession to recognize the costs that economists bear as when they contribute to the public stock of useful knowledge. Money and the Fed are not a policy area that brings out the best in people. The costs for Marvin were nontrivial. His papers led to death threats and a security detail. The least the rest of us can do is admit that these papers exist.
Beyond the role for citations as compensation for work that has already been done, there is even more basic forward-looking efficiency justification for citing the work of others. If Prescott and his co-author had taken 100 minutes to do a search of the internet and read a few of the papers that this search surfaces, they could have explained how what their paper contributes relative to the existing literature, and given readers pointers to follow if they wanted to learn more.
Suppose that 100 readers of the Prescott paper pursue questions about negative nominal interest rates and that links to the literature could have saved each of them 10 minutes. Then 100 minutes invested could have saved 1000 minutes. How many other chances does any of us have to make an investment with a 10x payoff?
So Ed, please. Demonstrate what it means to be a professional.