When a Nobel Prize Isn’t Enough

naija4real · Jun 6, 2011

Is this how politics work in the real world? Does it really serve the public good, or tribal interests against corporate interest? Many times it is obvious we have little understanding of the world, yet we can't trust some, i.e. those that have spent a lifetime trying to understand it. I guess this is the terrain many walk, the terrain where sense does not make sense.

Here is one of those times when sense isn't enough.

June 5, 2011
When a Nobel Prize Isn’t Enough
By PETER A. DIAMOND

Lexington, Mass.

LAST October, I won the Nobel Prize in economics for my work on unemployment and the labor market. But I am unqualified to serve on the board of the Federal Reserve — at least according to the Republican senators who have blocked my nomination. How can this be?

The easy answer is to point to shortcomings in our confirmation process and to partisan polarization in Washington. The more troubling answer, though, points to a fundamental misunderstanding: a failure to recognize that analysis of unemployment is crucial to conducting monetary policy.

In April 2010, President Obama nominated me to be one of the seven governors of the Fed. He renominated me in September, and again in January, after Senate Republicans blocked a floor vote on my confirmation. When the Senate Banking Committee took up my nomination in July and again in November, three Republican senators voted for me each time. But the third time around, the Republicans on the committee voted in lockstep against my appointment, making it extremely unlikely that the opposition to a full Senate vote can be overcome. It is time for me to withdraw, as I plan to inform the White House.

The leading opponent to my appointment, Richard C. Shelby of Alabama, the ranking Republican on the committee, has questioned the relevance of my expertise. “Does Dr. Diamond have any experience in conducting monetary policy? No,” he said in March. “His academic work has been on pensions and labor market theory.”

But understanding the labor market — and the process by which workers and jobs come together and separate — is critical to devising an effective monetary policy. The financial crisis has led to continuing high unemployment. The Fed has to properly assess the nature of that unemployment to be able to lower it as much as possible while avoiding inflation. If much of the unemployment is related to the business cycle — caused by a lack of adequate demand — the Fed can act to reduce it without touching off inflation. If instead the unemployment is primarily structural — caused by mismatches between the skills that companies need and the skills that workers have — aggressive Fed action to reduce it could be misguided.

In my Nobel acceptance speech in December, I discussed in detail the patterns of hiring in the American economy, and concluded that structural unemployment and issues of mismatch were not important in the slow recovery we have been experiencing, and thus not a reason to stop an accommodative monetary policy — a policy of keeping short-term interest rates exceptionally low and buying Treasury securities to keep long-term rates down. Analysis of the labor market is in fact central to monetary policy.

Senator Shelby also questioned my qualifications, asking: “Does Dr. Diamond have any experience in crisis management? No.” In addition to setting monetary policy in light of a proper understanding of unemployment, the Fed is responsible for avoiding banking crises, not just trying to mop up afterward.

Among the issues being debated now is how much we should increase capital requirements for banks. Selecting the proper size of the increase requires a balance between reducing the risk of a future crisis and ensuring the effective functioning of financial firms in ordinary times. My experience analyzing the properties of capital markets and how economic risks are and should be shared is directly relevant for designing policies to reduce the risk of future banking crises.

Instead of going to the Fed, however, I will go about my congenial professional existence as a professor at M.I.T., where I have taught and researched since 1966, and I will take advantage of some of the many opportunities that come to a Nobel laureate. So don’t worry about me.

But we should all worry about how distorted the confirmation process has become, and how little understanding of monetary policy there is among some of those responsible for its Congressional oversight. We need to preserve the independence of the Fed from efforts to politicize monetary policy and to limit the Fed’s ability to regulate financial firms.

Concern about the (seemingly low) current risk of future inflation should not erase concern about the large costs of continuing high unemployment. Concern about the distant risk of a genuine inability to handle our national debt should not erase concern about the risk to the economy from too much short-run fiscal tightening.

To the public, the Washington debate is often about more versus less — in both spending and regulation. There is too little public awareness of the real consequences of some of these decisions. In reality, we need more spending on some programs and less spending on others, and we need more good regulations and fewer bad ones.

Analytical expertise is needed to accomplish this, to make government more effective and efficient. Skilled analytical thinking should not be drowned out by mistaken, ideologically driven views that more is always better or less is always better. I had hoped to bring some of my own expertise and experience to the Fed. Now I hope someone else can.

Peter A. Diamond is a professor of economics at the Massachusetts Institute of Technology

http://www.nytimes.com/2011/06/06/opinion/06diamond.html?_r=1&ref=opinion&pagewanted=print
Click to expand...

botoan · Jun 6, 2011

Thats because if this man gets elected and starts making adjustments that improves the economy before the 2012 election--Pres. Obama is almost guaranteed to be re-elected and that is more important than jobs, the economy or anything else.

These Senators have high-paying jobs with full life-time health benefits they don't care about the other 99% percent because half of them are 'value' voters.

FRESH · Jun 6, 2011

It is sad he's giving up, it would be nice if he at least was around in ome type of consultancy capacity.

Soulthinker · Jun 6, 2011

I hope so too. It is sad that the Republicans wants to pull the US in the abyss just because the President is Black.

z · Jun 6, 2011

Nobel prize is shit. Look who they gave it to, Obama. What did he achieve in first couple of weeks of office before he got the prize? nothing, except read well written speechs in his great baritone voice. Next....

archangel · Jun 6, 2011

DOA said: ↑

Nobel prize is shit. Look who they gave it to, Obama. What did he achieve in first couple of weeks of office before he got the prize? nothing, except read well written speechs in his great baritone voice. Next....
Click to expand...

The Nobel prize that Obama recieved is different from what the other guy got.

andreboba · Jun 6, 2011

DOA said: ↑

Nobel prize is shit. Look who they gave it to, Obama. What did he achieve in first couple of weeks of office before he got the prize? nothing, except read well written speechs in his great baritone voice. Next....
Click to expand...

Come on, Black.:smt104

Obama's prize was ceremonial, more symbolic really, it wasn't awarded for a lifetime of research, publication and academic rigor in his chosen field.

I've yet to hear or read about a person who received a Nobel Prize in economics being a 'lightweight' or irrelevant.

The partisan divide on Capitol Hill is the biggest threat to the future of the American Experiment.

The GOP has become rabid faced with the two unforgivable sins of having both a Democrat in the Oval Office AND an overqualified Negro.:smt088

Most congressmen are lackeys for corporations and represent their high-powered donors before the interests of the American people.

Every day I think the only way we'll be able to fix the shitstorm in D.C. is for the entire U.S. economic system to collapse.

The U.S. government needs to be more efficient, but it can't be run like a corporation. There are inherent interests to the people more important than profits, cutting spending and lower taxes.

When someone like Professor Diamond is blackballed from the Fed by partisan opponents, it's very easy to imagine Obama losing in 2012 and by 2015, the United States will be in the midst of a fullblown depression.

Sign In

Register

When a Nobel Prize Isn’t Enough

naija4real New Member

botoan Active Member

FRESH New Member

Soulthinker Well-Known Member

z Well-Known Member

archangel Well-Known Member

andreboba Well-Known Member

Share This Page

White Women Black Men.com