High Praise for Rand Paul’s Challenge of Ben Bernanke to Debate

Sen. Rand Paul (R-KY) (photo credit: Gage Skidmore)
Sen. Rand Paul (R-KY) (photo credit: Gage Skidmore)

The Libertarian Republic has this to say about Senator and presidential candidate Rand Paul’s recent challenge of Ben Bernanke to debate:

Ben Bernanke, who recently called Senator Rand Paul and those like him “know-nothings” because they wish to audit the Federal Reserve and question the central bank’s manipulation of the price of money.

So let’s get this straight: seek more information, transparency, and discourse from one of the most powerful and privileged institutions in the world and you will be called ignorant and unwilling to learn.

It appears the former Federal Reserve Chairman prefers condescension over open debate. Who would have thought the former leader of a monopoly institution would think in such a way.

Dr. Bernanke may (or may not) have been alluding to the infamous and short-lived anti-Catholic “Know Nothing Movement” of the 19th century. Yet there is a distinguished pedigree to knowing nothing: that of Socrates of Athens. As recorded by Plato, in The Apology, Socrates said:

Well, Chaerephon … went to Delphi and boldly asked the oracle to tell him whether … there was anyone wiser than I was, and the Pythian prophetess answered that there was no man wiser. Chaerephon is dead himself, but his brother, who is in court, will confirm the truth of this story.

[…]

When I heard the answer, I said to myself, What can the god mean? and what is the interpretation of this riddle? for I know that I have no wisdom, small or great.

[…]

After a long consideration, I at last thought of a method of trying the question. I reflected that if I could only find a man wiser than myself, then I might go to the god with a refutation in my hand. I should say to him, “Here is a man who is wiser than I am; but you said that I was the wisest.” Accordingly I went to one who had the reputation of wisdom, and observed to him – his name I need not mention; he was a politician whom I selected for examination – and the result was as follows: When I began to talk with him, I could not help thinking that he was not really wise, although he was thought wise by many, and wiser still by himself; and I went and tried to explain to him that he thought himself wise, but was not really wise; and the consequence was that he hated me, and his enmity was shared by several who were present and heard me. So I left him, saying to myself, as I went away: Well, although I do not suppose that either of us knows anything really beautiful and good, I am better off than he is – for he knows nothing, and thinks that he knows. I neither know nor think that I know.

[…]

When I left the politicians, I went to the poets…. That showed me in an instant that not by wisdom do poets write poetry, but by a sort of genius and inspiration; they are like diviners or soothsayers who also say many fine things, but do not understand the meaning of them. And the poets appeared to me to be much in the same case; and I further observed that upon the strength of their poetry they believed themselves to be the wisest of men in other things in which they were not wise. So I departed, conceiving myself to be superior to them for the same reason that I was superior to the politicians.

[…]

I am called wise, for my hearers always imagine that I myself possess the wisdom which I find wanting in others: but the truth is, O men of Athens, that God only is wise; and in this oracle he means to say that the wisdom of men is little or nothing…

Intellectual humility has far more dignity than being a “Know It All,” Dr. Bernanke. And one need not go as far back as ancient Athens to absorb this lesson. The great classical liberal economist, Frederick Hayek in The Pretense of Knowledge, his Nobel Prize acceptance speech:

It seems to me that this failure of the economists to guide policy more successfully is closely connected with their propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences – an attempt which in our field may lead to outright error. It is an approach which has come to be described as the “scientistic” attitude – an attitude which, as I defined it some thirty years ago, “is decidedly unscientific in the true sense of the word, since it involves a mechanical and uncritical application of habits of thought to fields different from those in which they have been formed.” I want today to begin by explaining how some of the gravest errors of recent economic policy are a direct consequence of this scientistic error.

Hayek’s full speech may be the best refutation of Dr. Bernanke’s position in economic literature.  Whether grounded in classical or contemporary thought, Sen. Paul’s challenge to Dr. Bernanke rests on very firm ground indeed.

Sen. Paul’s credentials for making this challenge are impressive. He is the prime Senate sponsor of the Federal Reserve Transparency Act of 2015 — popularly known as “Audit the Fed” — which includes as co-sponsors both Sen. Cruz and Sen. Rubio, two other presidential contenders. He also is an original co-sponsor, with Sen. Cruz, of Sen. John Cornyn’s Centennial Monetary Commission legislation.

This latter legislation, whose companion House bill, prime sponsored by Congressional Joint Economic Committee vice chairman Rep. Kevin Brady, already has passed House Financial Services Committee, would establish a commission “to: (1) examine how U.S. monetary policy since the creation of the Federal Reserve Board in 1913 has affected the performance of the U.S. economy in terms of output, employment, prices, and financial stability over time; (2) evaluate various operational regimes under which the Board and the Federal Open Market Committee may conduct monetary policy in terms achieving the maximum sustainable level of output and employment and price stability over the long term; and (3) recommend a course for U.S. monetary policy going forward.”

This Commission is just what is now needed. If Dr. Bernanke really is confident in the competence of the Fed, he will endorse the Commission to provide a forum in which he can prove his case.  If he balks at such an endorsement, it calls into question his confidence in the strength of his case.

Meanwhile, Sen. Paul would do well to feature, in his campaign, his calling to account the Fed for its role in causing the housing bust and financial crisis of 2008 — events which then Fed Chairman Bernanke did not see coming — and in the deplorably sluggish recovery.

The Fed’s consistent lack of foresight does not support an arrogant or condescending attitude on the part of its former Chairman (or current officials).  Moreover, the Fed’s consistently wrong economic forecasts, as I pointed out in my Forbes.com column If The Fed Is Always Wrong How Can Its Policies Ever Be Right, have rather made it the laughingstock both of Washington and Wall Street.  The Fed has even been ridiculed, recently, by the Washington Post‘s resident political cartoonist Tom Toles.

The Fed surely deserves to be at the center of a debate about the issues — the economy and job creation — about which the voters are most concerned. Sen. Paul is to be very much commended for issuing this challenge. He, and other presidential aspirants, would be well advised to issue it repeatedly and prominently.  Time for a big debate — and then a Commission — on how the Fed can play a positive role in regenerating job creation and economic mobility for workers.

Ralph Benko, internationally published weekly columnist, co-author of The 21st Century Gold Standard, lead co-editor of the Gerald Malsbary translation from Latin to English of Copernicus’s Essay on Money, is American Principles Project’s Senior Advisor, Economics.