Too many darned experts!

Writing in the Wall Street Journal, Seth Lipsky argues that we need fewer economists and more constitutional scholars at the Federal Reserve.

Lipsky’s column was inspired by Sen. Richard Shelby’s (R-AL) move to block the nomination of Peter Diamond, an MIT professor and 2010 winner of the Nobel prize in Economics, to the Board of Governors of the Federal Reserve.  According to Lipsky:

“Is another Ph.D. in economics really what is needed at the Federal Reserve? Prof. Diamond’s leading opponent, Sen. Richard Shelby of Alabama, wants someone who has more experience in crafting monetary policy. Yet the Fed has plenty of experts in monetary policy.”

Because, really, an expert in monetary policy is the last sort of person you would want to take part in the making of monetary policy.  Better to hire someone who hasn’t a clue….

(Or maybe Lipsky is just channeling Sen. Roman Hruska’s  (R-NE) defense of the nomination of Harold Carswell to the Supreme Court: “Even if he were mediocre, there are a lot of mediocre judges and people and lawyers. They are entitled to a little representation, aren’t they, and a little chance? We can’t have all Brandeises, Frankfurters and Cardozos.”)

Instead, Lipsky argues that we need someone who will be true to the founding fathers’ desire to set the value of the dollar in terms of gold and silver.

Lipsky’s argument is, of course, ridiculous.  The weight of scholarly economic opinion places a large chunk of the blame for the depth and spread of the Great Depression on the gold standard.  With the world economy having just sailed awfully close to replaying the Great Depression, why would anyone want to go back to the gold standard?

But even if we did return to those thrilling days of yesteryear, what standard is Lipsky recommending?  Gold?  Silver?  Bimetallic?

Throughout the first century of the Republic, the United States maintained a bimetallic standard, under which the dollar was defined as fixed weights of either gold or silver.  That ratio was reasonably stable during the nineteenth century (although not that stable–the US spent some part of the time with only silver coins in circulation and others with only gold coins in circulation).

Such stability is long gone.

Given that the ratio of market gold to silver prices has ranged from over 100 in 1990 to about 40 right now (see graph below), it is unclear exactly what Lipsky is suggesting.

It’s not so much a bad idea, as no idea at all.