From an Independent Review article by Emre Kuvvet:
…research and speeches by the Fed economists are increasingly focused on climate change, gender, race, and inequality (Toomey 2021). Regional Federal Reserve banks and the Board of Governors of the Federal Reserve have conducted numerous seminars and conferences and published research papers on politically charged topics.
I wondered about how damning this statement is. Clearly former Senator Toomey is incensed. The Federal Reserve is charged with conducting monetary policy, but is also partly responsible for the regulation of the financial system. It would seem to me that climate change (increased incidence of climatological events, resulting in economic damage and challenges for insurers) would be a no-brainer for concern. Inequality is something that has impacts upon the transmission of monetary policy (think about wealth inequality, or access to financial services like banking). What about gender and race? We know that pay varies by gender and race, and cannot be explained away fully by other covariates like education; shouldn’t we be interested in whether markets are well functioning, in order to see if either monetary policy is working effectively across demographic groups. At the very least, it’s interesting that — for instance — women usually have higher assessments of inflation than men do. I don’t think it’s a dangerous thing to investigate a phenomenon like that.
Another point that Dr. Kuvvet makes is that the Fed is Democratic biased, and even more so than the general economics profession (I’m talking about rank-and-file economists, not those in leadership like Board governors). I certainly wonder about the comparison with the general economics profession — surely it must depend on the boundaries placed on “the economics profession”; I’m also curious about the statistical significance (Kuvvet reports point estimates for ratios of Democrats/Republicans, but one would want to know what the confidence intervals are for the ratio in the general profession, and for the Fed overall, and see whether the confidence intervals overlap). But I would also expect that Fed economists lean more Democratic than Republican, and more so over time. After all, Republicans have moved away from many of the orthodoxies of their past, like balanced budgets, central bank independence, liberalized trade policy, and in the Trump era, belief in data and expertise. In that environment, I would expect a flight from the Republican party, as in e.g., Zingher (2020) (although not, as I stressed, conservative economic thought).
In any case, here’s the data Kuvvet compiles regarding affiliations for the Federal Reserve Board, and seven of the 12 regional Fed banks (SF, Dallas, Philadelphia, Boston, Atlanta, NY, Cleveland; missing are St. Louis, Kansas City, Minneapolis, Richmond, and Chicago).
Source: Kuvvet (2022), Table 2.
I must say, looking at Kuvvet’s Table 2 and the graphic derived, it seems to me that there is some uncertainty regarding partisan affinities. Looking at the Board of Governors in Washington DC, one can see the largest category is “Not registered”. This is true for the total over the Board and seven of the 12 regional Fed banks. If there is political homogeneity I’m hard pressed to see it in these statistics as reported.
I am also hard pressed to see the increasing homogeneity over time, from personal experience. 32 years ago, I interviewed at the Board, and two Federal Reserve Banks. That’s not an incredibly big sample, but at least I have a sample. I was struck by how much homogeneity there was, at least in terms of economic arguments and worldviews (I never asked about politics, obviously, so don’t know about that). It was also very homogenous ethnically and racially. It is difficult for me to see how homogeneity has increased in the intervening 32 years.
Speaking of partisan affinities and worldviews, ever wonder who who thought up staggered contracts, which is a key concept of New Keynesian economics? One of them was John Taylor. Ever wonder who brought up menu costs as a component of New Keynesian economics? Greg Mankiw [until 2019 — correction h/t Charles Engel]. I’m pretty sure both remain Republicans. [MDC 1/23, 7pm] http://gregmankiw.blogspot.com/2019/10/i-am-no-long-republican.html
DoD has a report, Climate Risk Analysis (2021 edition). Should I wonder about the political affiliations of defense officials affecting their views on global climate change, and its importance to safeguarding American national security. See more here, and here.
Earlier report from 2019.
Notice that these conservative analysts appear to believe that professionals are corrupt. They arrive at their professional opinions from received views of their political party. I agree that all people are subject to various biases, and people with PhDs might also fall victim to fallacies of thought. More likely to me, however, is that economic professionals tend to vote for Democratic politicians, if they do, because their knowledge of economics suggests that Democratic policies are more effective, and better for society.
Left Coast Bernard, how in Tampa on the Left Coast of Florida 🙁
One area in which the Federal Reserve has been accused – wrongly – of political activism is in its attention to climate change as a risk to bank assets and capital. Here’s the latest update on the Fed’s climate-based stress testing:
For those who have been taken in by right-wing malarkey about the Fed’s climate-change initiative, note that the focus of these stress tests is on capital impairment and asset value, not on dabbling in climate politics.
Here are a few examples of the impact on insurers and reinsurers from climate – which CoRev will insist is “Weather! Weather! Weather!”:
Reinsurance rates –
Reinsurance rates rising by about 10% in 2023, in part due to rising payouts due to climate events. Rising payouts? Here’s why:
Property loss in billions per year-
Past 3 years $144.9
Past 5 years $118.2
These are, by the way, inflation-adjusted figures.
I won’t bother to link to reports of insurance firms assessing their need to limit coverage for climate-related events. I assume you can find those yourselves, and probably have already, if you’re actually interested.
Banks are not insurance companies, but surely, no one reading here needs me to explain the commonalities or the Fed’s particular interest in banks.
the causation correlation aspect of using climate assumptions in bank stress testing is less than rigorous hypothesis testing would support.
may not be politics but also a less than logical assessment.
Anonymous: Sorry, are you proposing reverse causation, i.e., bank lending causes global climate change? That is a daring assumption.
The assumption that climate change may have an effect on banks *is tested* in stress testing. Not assumed. Stress testing assets is a well established practice among rating agencies.
Speaking of assumptions, why do commenters keep relying on their imaginations when facts are available? Sheesh.
An obvious question is whether Kuvvet’s research method is valid. Is it credible that:
“Among those whose voter registration information is available, there are 208 Democrat and only twenty Republican economists at the Federal Reserve System.”
Not to lean too much on claims of authority, but Kuvvet isn’t a political scientist and has not provided any documentation from academic literature to show that his method does what he claims it does. Everything he claims about the political mix at the Fed is based on a non-specialist’s untested, made-up method.
Here’s another method, from over at 538:
These guys at least do an out-of-sample test to find that their method is accurate 74% of the time. What does the 538 guys’ method reveal about the political leanings of academic economists?
“We determined that there was a 60-40 liberal-conservative split among the economists in our data.”
That’s a far cry from 10-to-1.
Now, if the powers that be within the Fed are rounding up Democrats as research staff, shouldn’t unaffiliated voters be low relative to the general public?
Unaffiliated voters accounted for 42% of registered voters ahead of the November and 39% in Kuvvet’s count of Fed economists. Not much evidence of packing the Fed with Democrats.
In the 2020 election, 62.8% of those of voting age actually voted. In Kuvvet’s count, only 52% of Fed economists are registered. Why are so few Fed economists registered to vote, according to Kuvvet? Especially if the Fed Lords are packing the place with partisans.
So, 538’s guys do a little testing of their model and give us a direct measure of its accuracy. Kuvvet doesn’t bother to test his method, but when I do some simple checking, I find reason to think his method is weak.
Kuvvet claims that political affiliation can slant research outcomes. The 538 guys don’t just claim it, they show it. The 538 finding agrees with my priors, so I’m happy to accept it.
If you look through Kuvvet’s publications, you’ll see that his finding of imbalance agrees with his priors; Kuvvet is an example of the very sort of bias Kuvvet warns against.
You’ll also find Kuvvet’s claim politicized Fed research is based in a particular implicit definition of politicization. If race, gender or income distribution are considered in research, that research is “politicized”. It is just as easy to claim that economics was politicized when most research excluded these topics. Where’s Dierdre McClosky when you need her? Heck, where’s Derrida when you need him?
Kuvvet’s slobbering his own priors onto his assumptions doesn’t invalidate his data, but I have to think his priors got in the way of checking whether his data are credible. Bad research. Bad researcher.
Having worked at the Fed board, I can say that the views are definitively leaned democrats. The reason why the chart above show unregistered dominate us because fed board is dominated by non us citizen recognizes who don’t vote. Among those, which are dominated by europeans, they also or even more so lean democrats.
So i think the takeaway from the chart is to focus on the distribution within the registered voters. That clearly showed how one sided it is.
Clearly showed, if Kuvvet’s data are correct. That’s not the same thing as “correct”.
economist: Well, let’s take seriously your assertion. If we are wondering about the partisan behavior of Fed (rank-and-file) economists, then it would’ve been useful to consider the impact of omitting a bunch of non-citizens. They’re going to be writing reports, memos, studies, writing programs. Now, you assert the Europeans lean left. Let’s say so. What about the Asian and East Asian non-citizens (I hazard to guess they’re not born in the US, then)? What’re their predelictions? I know a lot of non-native born East Asian economists; I would be hard-pressed to say on average they lean Democratic (at least in the past — four years of demonization of people of Chinese descent by Trump and associates might have changed matters).
Let’s not forget that the Chairman of the FOMC was a Republican for almost thirty years.
It could well be that Democrats are well represented among Fed economists. But it’s also worth remembering how the meaning of being a Democrat has changed in the last 70 year, particularly after the party started courting Big Money. Thomas Frank has also written extensively on Democrats’ shift from being a party of the workers to a party of educated elites. Economists fit that characterization.
Frank: “The Democratic Party has very much become a vehicle of the aristocracy, of plutocracy…One of the reasons for that is because liberalism in its modern-day incarnation not only has moved away from and forgotten about its past as a working-class movement, but [provides] a rationale for plutocracy…
By and large, the elite of America today is this kind of white-collar group that’s defined by where they went to school,” the historian continues, “And this group looks out at the rest of the world, and they say, ‘Not only are we richer than you, but we’re better than you. We’re more moral than you, we understand politics better than you, we know the jargon. We understand the issues.’ And this is highly toxic–that this sort of progressive tradition has now come together with and melded with extreme wealth [and] rationalizes their place in the hierarchy.”
This worldview fits comfortably with the economics expressed here.
I was a republican until the Rs started their current behavior. Indeed, most of the econs I knew were as well. The chart would have been more interesting if it had asked for views on substantive policies.
i would guess many of the not registered category above are republicans who choose not to advertise their political affiliation. that does not mean policy views are not republican, as you noted.
The 538 guys didn’t ask, but did attempt to address your issue.
What is not asked, but several of us have in mind, is how the policies of the two main parties stack up against the best policy recommendations economics has to offer. It may be, as you suggest, that Republicans have wandered far from our current state of knowledge. In that case, an unbiased Fed should end up with few Republican economists because we can’t afford to let them near monetary policy.
Whatever their party affiliation, their policies are clearly serving partying for the multimillionaires.
The socio-economic status of Federal Reserve economics-trained employees suggests that more of them will vote Democratic Party than Republican.
Is there any kind of significant statistical difference with other equally well-educated professional groups?
Menzie, I’m surprised you aren’t up to date on every little bit of trivia about economists, especially when they put it in their blogs. Greg Mankiw left the Republican Party in 2019:
Charles Engel: Oops! I stand corrected. Will fix. Thanks!
I mean factually Mr. Engel is correct, but is an economist self-admittedly more apt to vote for Buttigieg (McKinsey ladder climber) and Klobuchar (surreptitious supporter of white police beating the crap out of Blacks) than vote for Warren or Sanders supposed to make us feel better about Mankiw being an unregistered Republican?!?!?!? Like, Really?!?!?!
Shall Democrats working as economists at the Fed register as “Independent” tomorrow and vote for John Kasich and Liz Cheney etc and then we can stop the sissified whining from the Kuvvets and Toomeys of the world?? Where were their outcries of fairness when Stephen Moore and Judy Shelton got nominated by their Republican demigod?? Are Moore and Shelton Kuvvet’s idea of Fed policy saviors?? Hilarious.
Let’s be real here and cut the bullcr*p, a Fed Conference room/ FOMC packed with Stephen Moores and Judy Sheltons is the world the Mankiws. Toomeys, and Kuvvets in fact want, with Fed economists giving daily lectures on the evils of a minimum wage. Look at the family names in the M’s and the S’s in the following DL/link and see if you see any familiar names.
We had many states raise the minimum wage in the last 5 years, at the same time we have Republicans screaming we need more people fired/jobless because “low-unemployment is causing inflation”. So which is it?? Doesn’t seem like the very time correlated raises in multiple states’ minimum wages and a tight labor market seems to substantiate with the decades long Republican red herring on minimum wage laws hurting employment opportunities, does it?? No WSJ editorials on that lately…….
Frankly, I’d be happy to see even a Democrat economist blogger (never mind WSJ) put a post up about a tight labor market happening at the same time a plurality of states had raised their minimum wage. But they are too busy replicating Nancy Pelosi’s reactionary defense game. There’s no corporate underwritten economic dept “chairs” to be had in “taking the offensive” for a LIVING wage etc. I guess. Certainly not from the credit card companies.
Moses Herzog: Point of clarification. While Dr. Kuvvet was writing more broadly about rank-and-file Fed economists as well as those in leadership positions, my post was about rank-and-file economists (those writing the memos, running the macro models). Mr. Moore and Dr. Shelton were (thankfully) never considered for such roles (as far as I know).
That’s fair enough. I’d like to also say something, to clean up from my sometimes poor social/communication skills. My latter remarks weren’t pointed directly at you (my complaint about Democrat economist bloggers not hammering home the point about recent state level moves to increase the minimum wage and a “tight labor market” happening almost in synchronization). My point is aimed at “liberal”/left economists in general.
I guess a person (myself in this case) cannot “expect” economists to discuss certain events in the name of scoring political points, but it does relate to policy choices, and the facts of recent events~~minimum wage increases happening in near tandem with a tighter labor market~~ (in my sometimes not humble opinion) kills off many of the Republican arguments against working class men/women/families being paid a LIVING wage. A dire problem of our nation for at least the last 40-plus years, very arguably longer. A problem which is solvable.