The Official Blog Of Edward Cline

Lament of a Federal Reserve Wonk

A friend of mine, a retired banker, passed on to me the link to an astounding but not so shocking paper written by a senior economist in the research department of the Federal Reserve Bank in Richmond, Virginia. Before joining the Federal Reserve in 2000, Kartik H. Athreya was an assistant vice president at Citibank in New York City (for only seven months). He received his Ph.D. in economics in 2000 from the University of Iowa, and his B.S. in economics from Iowa State University in 1993.

He taught a course, “Topics in Incomplete Markets,“ at the University of Virginia, in the fall of 2003.

As a senior economist at the Federal Reserve, Athreya has churned out several policy papers with titles like “The Growth of Unsecured Credit: Are We Better Off?,” “Equilibrium Models of Personal Bankruptcy: A Survey,” and “”Implications of Some Alternatives to Capital Income Taxation.”

Other papers of his, published or in-progress, include such scintillating subjects as “Consumption Smoothing, and the Measured Regressivety of Consumption Taxes,” “The Case for Direct Methods to Address CO2 Emissions and Other Negative Environmental Externalities,” and “Credit Exclusion in Quantitative Models of Bankruptcy: Does It Matter?”

No, it doesn’t. I have sampled some of these papers, and found them all to be rather contrived, artificial, and, in two words, certifiable snoozers. They are the typical effort of a bureaucratic non-entity attempting originality but only repeating the somniferous screeds of his countless colleagues and predecessors in Federal Reserve banks everywhere.

It is the kind of macro- and micro-economic writing that makes economics so dismal a science. It is devoting thousands of words, lines of equations laden with curious symbols, bewildering pie and graph charts, and jargon-riddled econo-babble to describe the probable causes, consequences and possible solutions surrounding a minuscule crack in a single engine piston — when the whole vehicle has been totaled in a multi-car pile-up.

Which has been our economy at the hands of the Federal Reserve system for a very long time.

One wonders what passes for “peer review” to vet these studied but wholly busy-work analyses. I imagine it must be the academic equivalents of The Three Stooges, the Marx Brothers, and the Monty Python troupe, kitted with a Ouija board and a case of Kentucky Bourbon, swapping turns to put their imprimaturs on such ethereal delvings and sorties into Platonic forms.

But the paper of Mr. Athreya’s that wins the prize for hubris and outright elitist condescension is the one originally brought to my attention. With egregious but semi-literate flair, it echoes the yearning of the Obama administration to control the Internet, to regulate speech and thought and to compel everyone to zip it and let the “experts“ talk. These people pose as our Platonic guardians and we are just cave-dwellers, fettered to the dank walls of work-a-day ignorance, who must rely on them to know what is going on outside. His paper has nothing to do with economics, real or whatever alchemy he practices. The paper is called “Economics is Hard: Don’t Let Bloggers Tell You Otherwise.”

The title alone should raise the hackles of anyone who now gets his news on the blogosphere and not from the MSM or from the Federal Reserve. Economics is “hard” if it is divorced from reality, reason, and language. It is quite easy and simple if one subscribes to the law of cause and effect. One could embark on a technical discussion of economics, provided one’s premises are valid and communicated to the layman.

Mr. Athreya opens with:

In this essay, I argue that neither non-economist bloggers, nor economists who portray economics —especially macroeconomic policy— as a simple enterprise with clear conclusions, are likely to contibute [sic] any insight to discussion of economics and, as a result, should be ignored by an open-minded lay public.

That is not calculated to win Mr. Athreya friends or to influence people. To whom should the lay public turn for advice on economics? Aside from himself, he mentions some obscure economists much later in his paper. But, he continues:

The following is a letter to open-minded consumers of the economics blogosphere. In the wake of the recent inimical crisis, bloggers seem unable to resist commentating routinely about economic events. It may always have been thus, but in recent times, the manifold dimensions of the inimical crisis and associated recession have given fillip (sic] to something bigger than a cottage industry. Examples include Matt Yglesias, John Stossel, Robert Samuelson, and Robert Reich. In what follows I will argue that it is exceedingly unlikely that these authors have anything interesting to say about economic policy.

Remember that these are not the words of a columnist writing for The New York Times or The Washington Post. You bought the paper and can take or leave a columnist’s opinions. This is the assertion of a functionary of the central bank, paid with the tax dollars of all those “open-minded consumers of the economics blogosphere.” I have news for Mr. Athreya: To judge by the content and caliber of his official papers, he is the least likely to have anything of interest to say about economic policy. After assuring readers that he is not being “mean-spirited,” he goes on.

Before I continue, here’s who I am: The relevant fact is that I work as a rank-and-file PhD economist operating within a central banking system. I have contributed no earth-shaking ideas to Economics and work fundamentally as a worker bee chipping away with known tools at portions of larger problems. It is precisely from this low-level vantage point that I am totally puzzled by the willingness of many who fearlessly and breathlessly opine about economics, especially macro- economic policy.

The worm doth protest too much. He’s just a “worker bee chipping away” at larger problems. I have not lately seen any worker bees chipping away at anything, except in an old Saturday Night Live skit. Buzzing about and alighting on flowers to collect pollen, yes — but never mind his mixed metaphors. The lesson here is that anyone who boasts so strenuously of his humility is a person to be on guard against.

Mr. Athreya (humbly) considers himself to be a professional economist. He knows what it takes to talk about economics, because he must factor in so many elements and subjects to present “a very precisely articulated model that has been vetted repeatedly for internal coherence.”

Critically, it is one whose constituent assumptions and parts are visible to all present, and can be fought over. And what I certainly know is that to even begin to talk about the effects of unemployment, debt, deficits, or taxes, one has to think very hard about many, many things. Examples of this approach done right in the context of some of the topics mentioned above are recent papers by Robert Lucas of the University of Chicago, Jonathan Heathcote of the Minneapolis Fed, or Dirk Kreuger and his co-authors. Comparing, even momentarily, such careful work with its explicit, careful reasoning, its ever-mindful approach to the accounting for feedback effects, and its transparent reproducibility, with the sophomoric musings of autodidact or non-autodidact bloggers or writers is instructive. For those who want to really know what the best that economics has to offer is, you must look here. And this will be hard.

And it is very, very hard to write coherently about economics, never mind all those pesky autodidacts out there who presume to “muse” about the trillion dollar deficits, the costs of socialist legislation, and the abandonment of all pretense of a federal budget. They should stop writing about this stuff and leave it to professionals like Mr. Athreya to educate the public. Or to Bernard Bernanke. Or Tim Geithner. Or Barney Frank. Or Christopher Dodd. Or Henry Waxman. Or Nancy Pelosi, who wanted Obamacare passed first, and then we could all see its “internal coherence.” All sophomores. Nay, freshmen whose ignorance of economics and indifference to it know no bounds.

Mr. Athreya further on in this bewildering paper attempts to draw an analogy between ignorant bloggers writing about the disastrous consequences of Obamacare and other socialist/fascist legislation (such as President Barack Obama taking over the financial markets today), and hypothetically criticizing seismologists for not being able to predict natural disasters.

These are, of course, the Tsunami in East Asia, and the recent earthquake in Haiti. These two events collectively took the lives of approximately half a million people, and disrupted many more….However, neither of these events was met by (i) a widespread condemnation of seismology, the organized scientific endeavor most closely “responsible” for our understanding of these events or (ii) aflurry [sic] of autodidacts rushing to offer their own diagnosis [sic] for what had happened, and advice for how to avoid the next big one. Everyone understands that seismology is probably hard enough that one probably has little useful to say without first getting a PhD in it.

Not a valid analogy, to be sure. Every blogger knows that human actions in the way of trades, contracts, and criminal behavior are observable, and that the movement of tectonic plates is not observable or even predictable. That’s why bloggers did not rush to condemn seismologists, but do rush to speak when Obama destroys another chunk of the private sector. But, Mr. Athreya will have none of that. He insists that bloggers have Ph.D.’s and do course work before inking their pens or touching their keyboards. But then, he’s not addressing bloggers so much as he is those who read them.

So far, I’ve claimed something a bit obnoxious-sounding: that writers who have not taken a year of PhD coursework in a decent economics department (and passed their PhD qualifying exams), cannot meaningfully advance the discussion on economic policy….Many of those I am telling you not to listen to will more than successfully be able to match wits, in any generalized sense, with me. This is irrelevant. The question is: can they provide you, the reader, with an internally consistent analysis of a dynamic system subject to random shocks populated by thoughtful actors whose collective actions must be rendered feasible?

Or rendered coherent? Or comprehensible? Any blogger with half a brain could match wits with His Humbleness because most of them don’t make a career of writing obfuscating treatises that leave laymen cross-eyed and popping headache pills. This essay is written from only one coherent, comprehensible premise: That “amateur” economists should keep still and let the “professionals” do the writing, talking and educating. It’s “hard work,” you know. Mr. Athreya spent years studying economics and got his Ph.D., and now any random bastard can come along and clutter up the landscape with his non-university-gotten ditherings and discourses. It isn’t fair.

Mr. Athreya concludes:

As a result, my hope is that the broader public will ask for a slightly higher bar when it comes to economics, rather than self-selecting into blogs that merely confirm half-baked views that might have been acquired from elsewhere.

Government wonks come a dime a dozen, but I have rarely encountered one with the depth of arrogance and the ingrained sense of entitled elitism as Athreya‘s. This is what such creatures, high in Congress, and low in the faceless cubicles of the Federal Reserve Banks, think of Americans. We are just passive vassals of the state, hungering for enlightenment and waiting for him to show us the way and to answer our questions.

A “higher bar”? Mr. Athreya should discover Ludwig von Mises, Lord Acton, Henry Hazlitt, Frédéric Bastiat, Thomas Sowell, and Walter Williams, for starters. Any one of them will give him a genuine sense of humility, and teach him just how fighting, arguing, and writing for freedom is such hard and unremitting work.


Circe in a Burqa


You Don’t Own Me


  1. Jeffrey Perren

    Well, Ed, – echoing Rousseau and Hegel – somebody's gotta interpret the General Will or represent the Absolute Spirit, don't they?

    Otherwise, how would all these "do something(s)" that need to be done, get done?


  2. Unknown

    It's certainly easy to have such an attitude when you have a coercive monopoly on the money supply. I'd like to see how long his job lasts in an atmosphere of individual freedom.

  3. Anonymous

    How appropriate that Mr. Athreya is 'umbly, 'umbly assisting in perpetrating a fraud on the financial system. Uriah Heep, anyone?

    C. Andrew

  4. Anonymous

    I sent this clown an email, scoring him on his pitiful English and writing skills, and for his cluelessness about the nature and purpose of the Federal Reserve system. No reply — not that I expected any.

  5. Steve D

    “The question is: can they provide you, the reader, with an internally consistent analysis of a dynamic system subject to random shocks populated by thoughtful actors whose collective actions must be rendered feasible?”
    Of course the real question is : can they provide you, the reader, with an internally and externally consistent analysis of a dynamic system subject to random shocks populated by thoughtful actors whose collective actions must be rendered feasible?
    If you don’t check your premises by the process of induction (or I suppose technically reverse induction), then any theory can be constructed by a deductive argument which is internally consistent even if it has no relationship to reality.
    Actually the amateur economists may not be competent to understand all the details of the theory – what they can and should do is to make sure that the theory itself at a high level is tethered to reality.

  6. Slade Calhoun

    Why are these guys such slaves to their professors, even after leaving the mediocrity mill? This guy's an ignoramus who never had an original thought in his life. I'll bet his PhD thesis was a masterpiece of quasi-intellectual ass-kissing. He can't run his own mind, much less any economic "policy." Too bad these creatures breed.

  7. Anonymous

    Slade observed: "Too bad these creatures breed." Yes, they breed, and find cushy jobs in government entities. It's the culture that sets mediocrity as the norm that inculcates the mediocrity in men. No one is born mediocre; it's a chosen state.


  8. Bobby V

    This comment has been removed by the author.

  9. Bobby V

    Mr. A confuses having a Ph.d with understanding millions of transactions engaged in by billions of people every single day, 365 days a year.

    As Ayn Rand said, "…if you want to propagate an outrageously evil idea (based on traditionally accepted doctrines), your conclusion must be brazenly clear, but your proof unintelligible. Your proof must be so tangled a mess that it will paralyze a reader's critical faculty-a mess of evasions, equivocations, obfuscations, circumlocutions, non sequiters, endless sentences leading nowhere, irrelevant side issues, clauses, sub-clauses and sub-sub-clauses, a meticulously lengthy proving of the obvious, and big chunks of the arbitrary thrown in as self-evident, erudite references to sciences, to pseudo-sciences, to the never-to-be-sciences, to the untraceable and unprovable—all of it resting on a zero: the absence of definitions." – An Untitled Letter.

    It is much more accurate to use a good general principle tested a million times such as "laissez nous faire" and count on individuals to make the right decisions for their own lives. It really is as simple as that for uneducated bloggers like myself.

  10. djr

    Athreya will likely get what he's after, at least from those that will obey. There seems to be a strong concerted effort to blast anyone not tooting the admin's horn. As more and more stuff becomes government stuff, the risk of offending will be too high. Been here before.

  11. Rational Education

    Bruce Krasting posted on his blog, demolishing the article as well:

  12. Anonymous

    Working as a scientist I've met a lot of unbelievably incompetent PhD graduates. It can be quite demotivating actually.

    Nice article, even if it's on a blog 🙂

  13. kavak yelleri 127. bölüm fragmanı

    thank you

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