Ooooh. I like this already.
The Minneapolis Fed has hired a very unconventional University of Minnesota professor to serve as its new president. Narayana Kocherlakota served as chairman of Minnesota’s economics department for three years. He’s written lots of out-of-the-box papers, including this one in which he argues that money is a primitive form of memory whose main purpose is to help individuals and businesses keep track of their transactions:
So now that he’s at the Fed, he’ll be printing memory?
In this paper, presented at the International Monetary Fund in April, Mr. Kocherlakota argued in a very theoretical paper that instead of cutting interest rates when the housing bubble burst, the Fed should have raised them:
Most recently, Mr. Kocherlakota has joined an argument between “freshwater” economists (i.e. free market types residing at the University of Minnesota, University of Chicago and other Great Lakes locations) vs. “saltwater” economists (i.e. interventionist types on the nation’s coasts, like Princeton and Berkeley). He fires back at Paul Krugman, who’s been eviscerating free market economics of late.
Here’s Kocherlakota’s response.
And here’s Brad DeLong’s response to Kocherlakota’s response:
What can you draw from all of this? 1) Federal Open Market Committee meetings are about to get a lot more interesting. 2) The brainy Ben Bernanke might have somebody in the room who is as smart as him. The new guy graduated from Princeton when he was 19 years old
Personally I am excited to see Gary Stern's replacement in action and as an obsessive Fedbasher offer the following bit of advice: pick a side and quick, Kocherlakota. Also, please don't give me any more ammunition than I already have or else, well... I defer you to your colleague at the SF Fed for more information on that.