JDA's Favorite Fedhead Gets a Good Rub in the Richmond Media
Awww, isn't that precious? Watch the hair, that stuff doesn't always come out in the first shampoo.
Richmond Fed colleague John A. Weinberg remembers a key moment in his friend's development, 24 years ago, when he and Lacker taught at Purdue University in Indiana.
They walked out of a seminar at which a graduate student discussed a model of the national economy.
Both young professors thought the student was missing something. It turned out to be simple.
"I had a professor who used to say: 'Where are the people?'" Weinberg explained. "Jeff's very much that way, too. That's why we work together well."
From that chat came a paper with the daunting title of "Optimal Contracts under Costly State Falsification," [Lacker, J.M. & Weinberg, J.A., 1988. "Optimal Contracts Costly State Falsificaion,"Purdue University Economics Working Papers 930,Purdue University, Department of Economics.] published in 1989.
The paper discussed how lenders can structure loans when a borrower has the power to dress up its books.
By exploring the way real lenders and real borrowers behave - by looking at the people - Lacker thought he could find a key link between monetary policy and economic growth. At the time, many economists found standard theory on monetary policy and business cycles produced disappointing results.
"Some were just throwing up their hands," Lacker recalled. "I thought: 'If it's not working, why isn't it?' I thought: 'I should look at how do things work.'"
You can find little baby research economist Jeff Lacker's paper via JSTOR here if you nerd out on that sort of thing. JDA is partial to his 1999 Limited commitment and central bank lending (with Marvin Goodfriend, the Richmond Fed research alum who believes Fed Chairman term limits are unnecessary) but oh well. As far as Fed fuckers go, at least we know this one has his eyes open, even if he does tend to space out on the horizon and miss the rotting trees burning down two feet in front of his face. *sigh*
It's all about the people, eh? Tell them that. I have a few suggestions as to where JL can start but I'm not saying a word.