Political Affiliations of Federal Reserve Economists

By Emre Kuvvet. He is Professor of Finance at Nova Southeastern University. Excerpts: 

"This paper is related to the literature looking at the political activism of the Federal Reserve System. White (2005) shows that the Federal Reserve System sponsors the monetary economics research of a large number of economists through its research program. He suggests that the Fed’s sponsorship of these monetary economists can influence what is researched and the conclusions of that work in monetary economics. Fabo, Jancokova, Kempf, and Pastor (2021) confirms the hypothesis of White (2005) by showing that in the case of the macroeconomic effects of quantitative easing (QE), papers of central bank researchers report larger effects of QE on output and inflation than those of academic economists. Fabo et al. (2021) also demonstrate that central bank researchers that report larger QE effects have better career outcomes. In addition, Binder (2021) finds that populism puts pressure on central banks and causes the Federal Reserve to amend its long-term strategy. Binder and Parajon-Skinner (2021) also show that the topics of research papers published across the twelve regional reserve banks have become more politicized over the past 15 years. They find that a large percentage of the regional banks’ research papers focuses on topics such as race, gender, climate change, and inequality. They also find that this trend is more pronounced for some reginal banks such as San Fransico, Dallas, and Boston.

The literature indicates the increasing politization of the Fed. Parajon-Skinner (2021) suggests that political activism can weaken the legitimacy of the Fed and eliminate the independence and authority of the Fed. However, the previous literature shows only indirect evidence of the politization of the Fed. In what follows, I extend the literature by showing direct evidence that the Fed as a politized body by studying the political affiliations of the Fed economists. My results indicate that political and value judgements of the Fed’s economists’ publications and analysis may be linked to their ideological backgrounds. This is concerning, as the political homogeneity of Fed economists can undermine the legitimacy of their policy recommendations and analysis in the eyes of the public. That is, the public may see the Fed as a political institution, undermining the non-partisan and independent nature of the Fed.

Previous studies look at the political ideologies of the broader economic profession. For instance, Langbert, Quain, and Klein (2016) report that Democrats outnumber Republicans 4.5:1 among economics faculty at 40 leading universities. In addition, Langbert (2020) finds a ratio of 4:1 among members of the American Economic Association (AEA), 4.1:1 among academic AEA members, and 2.5:1 among AEA members working outside academia and government. Earlier, Klein and Stern (2006) estimateds the ratio at 4.1:1 among public sector economists and 1.4:1 among private sector economists. McEachern (2006) shows Democrats outnumber Republicans 5.1:1 among AEA members in terms of political contributions. Likewise, I find that economists at the Fed are more likely to lean left than the broader economics profession.

I find that the ratio of Democrats to Republicans among Fed economists is 10.4 to 1. The lack of political diversity is especially pronounced at the Board of Governors of the Federal Reserve System (48.5:1). Economists at regional Reserve banks range from 3:1 (Cleveland) to 12:1 (San Francisco). The lack of diversity is also noteworthy in leadership positions (22.25:1). Economists who are 40 years old or younger at the Fed are more likely to lean left (20.33:1), as are female economists (27.5:1). This suggests the Fed is likely to become even less politically diverse in time."

Basecamp and the Political Bullies

The company wants an apolitical workplace. Cue the outrage.

WSJ editorial. 

"Time was when political activism in business was controversial. But in these hyper-political times, refusing to turn your company into a workplace of the woke can make you a target.

That’s what’s happened to Basecamp, after the Chicago-based software firm said last week that it will no longer allow political discussions on the company platform. Employees are free to have these conversations on private accounts, but “it can’t happen where the work happens anymore,” said CEO Jason Fried.

Talk about “politics, advocacy, or society at large” has become “a major distraction” that is “not healthy” and “hasn’t served us well,” Mr. Fried wrote. Employees “shouldn’t have to wonder if staying out of it means you’re complicit, or wading into it means you’re a target. These are difficult enough waters to navigate in life, but significantly more so at work.” 

Seems sensible enough. The company offered severance of up to six months’ salary to “those who cannot see a future at Basecamp under this new direction,” said co-founder David Heinemeier Hansson. “No hard feelings, no questions asked.”  

So much for goodwill. A day later the Verge website ran a hit piece citing unidentified employees making vague allegations that the company wasn’t committed to diversity, equity and inclusion. Among the purported bombshells, Verge revealed that “customer service representatives began keeping a list of names that they found funny.”

Messrs. Hansson and Fried had already apologized for their employees’ list, which they said was inappropriate. But Mr. Hansson rejected the assertion that such conduct belongs “on a pyramid of escalations that can lead to genocide.” That claim is “just not an appropriate or proportionate comparison to draw,” Mr. Hansson said. That’s for sure.

Rep. Ted Lieu (D., Calif.) joined the pile-on Friday, tweeting that Basecamp’s new policy may prevent employees “from talking about fear of hate incidents.” But employees can indulge their fears or loathing all they want on their own time. A company isn’t obligated to make itself into a political public square."

Megan McCardle On The Supposed Left-Wing Bias In Academics

I had a post on this yesterday and McCardle has some great thoughts on the issue. Go to Unbiasing Academia. She points out that the supposed conservative bias in the military is not as great as the liberal bias in academia. Also, she mentions that no conservatives are demand affirmative action or quotas. Just recognition of the imbalance and potential bias when the vast majority of people in a place or occupation are all on the same page.

Social Scientist Shows Liberal Bias In Academia

See Social Scientist Sees Bias Within from the NY Times, 2-7-11. It discusses how the field of social psychology is dominated by liberals, by a level that is statistically very unlikely. It also mentions how the whole academic world is like this and conservatives and libertarians tend to be afraid to express their opinions. Experpts:

"It was identified by Jonathan Haidt, a social psychologist at the University of Virginia who studies the intuitive foundations of morality and ideology. He polled his audience at the San Antonio Convention Center, starting by asking how many considered themselves politically liberal. A sea of hands appeared, and Dr. Haidt estimated that liberals made up 80 percent of the 1,000 psychologists in the ballroom. When he asked for centrists and libertarians, he spotted fewer than three dozen hands. And then, when he asked for conservatives, he counted a grand total of three.

“This is a statistically impossible lack of diversity,” Dr. Haidt concluded, noting polls showing that 40 percent of Americans are conservative and 20 percent are liberal. In his speech and in an interview, Dr. Haidt argued that social psychologists are a “tribal-moral community” united by “sacred values” that hinder research and damage their credibility — and blind them to the hostile climate they’ve created for non-liberals.

“Anywhere in the world that social psychologists see women or minorities underrepresented by a factor of two or three, our minds jump to discrimination as the explanation,” said Dr. Haidt, who called himself a longtime liberal turned centrist. “But when we find out that conservatives are underrepresented among us by a factor of more than 100, suddenly everyone finds it quite easy to generate alternate explanations.”

Dr. Haidt (pronounced height) told the audience that he had been corresponding with a couple of non-liberal graduate students in social psychology whose experiences reminded him of closeted gay students in the 1980s. He quoted — anonymously — from their e-mails describing how they hid their feelings when colleagues made political small talk and jokes predicated on the assumption that everyone was a liberal.

“I consider myself very middle-of-the-road politically: a social liberal but fiscal conservative. Nonetheless, I avoid the topic of politics around work,” one student wrote. “Given what I’ve read of the literature, I am certain any research I conducted in political psychology would provide contrary findings and, therefore, go unpublished. Although I think I could make a substantial contribution to the knowledge base, and would be excited to do so, I will not.”

The politics of the professoriate has been studied by the economists Christopher Cardiff and Daniel Klein and the sociologists Neil Gross and Solon Simmons. They’ve independently found that Democrats typically outnumber Republicans at elite universities by at least six to one among the general faculty, and by higher ratios in the humanities and social sciences. In a 2007 study of both elite and non-elite universities, Dr. Gross and Dr. Simmons reported that nearly 80 percent of psychology professors are Democrats, outnumbering Republicans by nearly 12 to 1.

“If a group circles around sacred values, they will evolve into a tribal-moral community,” he said. “They’ll embrace science whenever it supports their sacred values, but they’ll ditch it or distort it as soon as it threatens a sacred value.” It’s easy for social scientists to observe this process in other communities, like the fundamentalist Christians who embrace “intelligent design” while rejecting Darwinism. But academics can be selective, too, as Daniel Patrick Moynihan found in 1965 when he warned about the rise of unmarried parenthood and welfare dependency among blacks — violating the taboo against criticizing victims of racism."