Truth SHOULD be a high duty of central banking

Truth SHOULD be a high duty of central banking, ex-Fed Governor Alan Blinder says

Submitted by cpowell on Tue, 2011-11-15 22:14. Section: Daily Dispatches
5:16 ET Tuesday, November 15, 2011


Dear Friend of GATA and Gold:


For years many Internet sites have attributed to the economist Alan Blinder, now a professsor at Princeton University in New Jersey, a provocative comment reportedly made on a Public Broadcasting System program in 1994 during his service as a member of the Board of Governors of the Federal Reserve System:
"The last duty of a central banker is to tell the public the truth."
An Australian friend of GATA, A.F., recently went looking for authority for the quotation and your secretary/treasurer suggested that he start with Blinder directly.
As it turns out, Blinder was very glad to be asked, for he both doubts that he made the statement even as he long has been concerned that it could be construed literally rather than as criticism and thus be used to misrepresent his views, which are emphatically that central banks should be more open and transparent.
As GATA has been among those attributing the quotation to Blinder, we are grateful to him for providing the statement appended here to set things straight.


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

STATEMENT BY ALAN BLINDER
Tuesday, November 15, 2011

I have been trying for a long time to track down this false attribution, and A.F. has been very helpful, for which I am grateful.

As anyone with even a nodding acquaintance with my record knows, for decades I have been urging, needling, and cajoling the Fed to be more open and transparent. Although the Fed has come a long way, I still am urging more openness. The quotation in question is the opposite of what I actually believe and have written many times.

I have not been able to find the source of the exact phrase quoted, if there even is one. If I ever said it, which I am beginning to doubt, it was either in the context of listing a central bank's duties (with the duty of openness listed last) or in the context of contrasting my views with the secretive, closed-mouth tradition in central banking.

But I'm starting to think that the quotation was made up out of whole cloth. Why?

With A.F.'s help, I was able to pinpoint a 1999 Wall Street Journal story that reported on survey research I did. (This research eventually was published in a paper in the American Economic Review in December 2000.) The Wall Street Journal story was accurate; it does not contain the alleged quote. What it (correctly) says is that, in ranking eight reasons why credibility is important, central bankers ranked last "a duty to be open and truthful with the public."

Here's the excerpt from my paper:

"F. A Duty to Be Open and Truthful (Q8). A quite different reason for thinking credibility important is that 'central bankers are public servants who therefore have a duty to be open and truthful with the public.' A confession is appropriate here: This is my personal favorite reason for why a central bank should strive to be credible, which to me means matching its deeds to its words. But survey respondents rank it either last (among the central bankers) or next to last (among the economists). The mean score for the central bankers is 4.00 (which translates to "agree"); but it is only 3.30 among the economists. Perhaps, as one central banker wrote on his survey, central bankers do not like to think of themselves as 'public servants.'"

Notice that I characterized this reason of truthfulness as "my personal favorite" even though it was the least favorite among central bankers who responded to my survey. Notice also that the phrase "the last duty of a central banker is to tell the public the truth" does not appear in the passage.

I hope this is helpful, and you have my permission to reproduce the contents of this e-mail anywhere.

Thank you.

Alan Blinder
Economics Department
Princeton University
Princeton, New Jersey