Speaking to the Economic Club of Indiana at the beginning of the month, Fed Chairman Chairman Ben S. Bernanke began by saying: I'm a baseball fan, and I was excited to be invited to a recent batting practice of the playoff-bound Washington Nationals. I was introduced to one of the team's star players, but before I could press my questions on some fine points of baseball strategy, he asked, "So, what's the scoop on quantitative easing?"
Bernanke continued: “So, for that player, for club members and guests here today, and for anyone else curious about the Federal Reserve and monetary policy, I will ask and answer these five questions:
What are the Fed's objectives, and how is it trying to meet them?
What's the relationship between the Fed's monetary policy and the fiscal decisions of the Administration and the Congress?
What is the risk that the Fed's accommodative monetary policy will lead to inflation?
How does the Fed's monetary policy affect savers and investors?
How is the Federal Reserve held accountable in our democratic society?
What Are the Fed's Objectives, and How Is It Trying to Meet Them?
A few days later, Bernanke wrote in the Wall Street Journal about the revived Washington Nationals. “Under Manager Davey Johnson’s confident, laid-back leadership, the Washington Nationals, defying all preseason conventional wisdom, have claimed the 202 National League Eastern Division and the best regular-season record in Major League Baseball.”
Bernanke noted that there is a “head” school of management and a “heart” school of management. Bernanke wrote that “Davey, who earned a degree in mathematics from Trinity University, is the epitome of this head-and-heart consensus. He was an early proponent of the use of statistical analysis in baseball decision-making, and it is clear in his tactical management of games that he is very conversant with sabermetric principles. He well understands, for instance, how to use statistics in determining lineups and pitcher-hitter matchups.”
Bernanke went on to argue: “The point is that Davey fully appreciates the importance of making decisions based on factual evidence and rigorous analysis. He strikes the right balance between relying on the tangible (data) and the intangible (Confidence and motivation) and shows the rare ability of being able to make the right trade-off between winning the day’s game and motivating a player who will help the team win in the long run.”
One wonders whether baseball players should have the same confidence in central bankers that America’s top bankers has in its top manager. After all, in baseball, you know the rules. Fiddling with those rules is always highly controversial. But fiddling with the rules of central banking is what central bankers do every day...albeit controversially.
So, maybe, just maybe, we might benefit from a baseball standard. Better yet, a gold standard.