Patrick Horan and Andrea O’Sullivan for the Mercatus Center: There are two major problems with the way that the Fed makes monetary decisions.
The first is the ambiguity of the Fed’s “dual mandate,” which places the central bank in the immensely difficult position of chasing low unemployment and low inflation at the same time. To deal with this conundrum, the Fed has settled on a two percent inflation target as the most consistent way to achieve this goal. But it sometimes deviates from this ideal because inflation and unemployment are not always in sync.
The second is the discretion that the Fed uses to pursue this target. Fed economists consider a number of economic variables when contemplating a rate change. But they lack direct market input in the form of a price signal.
Reforming how the Fed makes decisions would reduce the likelihood of critical monetary errors.
One way to do this is to make Fed policy more market-driven. Instead of relying on FOMC members’ discretion, the Fed should channel wisdom dispersed throughout the economy.
Mercatus Senior Fellow Scott Sumner has one proposal: establish a nominal gross domestic product (GDP) futures market.
Rather than targeting inflation, the Fed would target nominal GDP growth, which is the sum of inflation and real GDP growth. Since unemployment is a large factor in determining real GDP growth, by stabilizing nominal GDP growth, the Fed targets a single variable, which encompasses both inflation and unemployment. Thus, while inflation and unemployment may fluctuate to some degree under a nominal GDP target, in general, both should be kept fairly stable.
It’s still worth being skeptical about correspondence courses
David Whitman for New America: In an eerie replay of the early 1970s, when correspondence courses suddenly mushroomed with access to guaranteed student loans and GI Bill educational benefits, the abrupt expansion of Title IV aid-eligible online programs recreated many of the same abuses that had plagued correspondence courses 30 years earlier. Across many institutions — particularly for-profit ones — enrollment skyrocketed, predatory recruiting practices spread, student supports and career placement services suffered, and fraudulent and deceptive marketing proliferated. Without requirements for good, much less minimal, standards for student outcomes, many institutions — especially proprietary colleges — saw the opening of distance education as little more than a cash-grab, a chance to sacrifice educational quality for profits.
Today, advocates of online programs claim that the potential of modern-day online learning to revolutionize higher education vastly outstrips that of the correspondence schools of the past. They are right — interactive online learning and high-speed internet open up learning opportunities that the founders of the Famous Writers School never envisioned. In light of that potential, many, including Education Secretary Betsy DeVos, have suggested lifting restrictions on higher education to allow innovation to bloom.
Yet recognizing the need to reduce regulatory barriers to innovation does not mean that legislative and regulatory guardrails on postsecondary online learning should be eliminated or drastically scaled back. To date, the biggest and most rigorous longitudinal studies of online learning have found that these courses generally have a poor return on investment, failing to significantly boost subsequent earnings for students and depressing student grades and retention rates. … [O]nly the most naïve or most ideological advocates of online programs fail to recognize that exclusively online colleges have yet to fulfill their potential.
The prohibition mindset is alive and well
Michelle Minton for the Competitive Enterprise Institute: On December 5, 1933 the federal government’s nationwide prohibition against alcohol ended. Eighty-five years later, the beer market seems to have finally recovered. Today, there are more than 6,000 breweries — more than at any time before or since Prohibition — making a seemingly endless variety of beer for us enthusiasts to enjoy. But, while we may be living in the “golden age” of beer, the specter of Prohibition remains. Its effects continue to influence how beer is made, how it can be sold, and how much it costs. More worrisome, the mindset that led to Prohibition has never fully changed — it’s simply become more sophisticated. And, unless those who make and enjoy alcoholic beverages take a unified stance on principle, we could soon be living under Prohibition 2.0.
What few people realize about Prohibition is that it was not the product of some larger cultural movement that recognized the harms of alcohol on society. It was a lobbying campaign by a small group of moralists that succeeded by playing on growing xenophobic and racist sentiments. The beer industry was dominated by German immigrants, while distilling was largely run by Jewish families (considered foreign no matter where they were born). Together, these immoral foreign influences — according to the temperance movement — corrupted black men who, under slavery had been “protected” from alcohol and, as a result, “developed no high degree of ability to resist its evil effects.” Some, like Rep. John Newton Tillman, D-Ark., even argued that banning alcohol would bring an end to the southern lynching of black men and boys because it would cause them to commit fewer crimes.
Modern prohibitionists are not so crude as to believe that advocating for total bans of alcohol will ever be successful, nor are their arguments as crass as they once were. Instead, they now advocate for an ever-increasing number of small, sensible limitations to protect “vulnerable” individuals in our society from the evils of alcohol. These may include bans on certain products deemed too dangerously high in alcohol or, more commonly, making sure that alcohol prices are high and availability low.
Compiled by Joseph Lawler from reports published by the various think tanks.
