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Narayana Kocherlakota

Fed Reform Should Focus on the Economy

Better incentives would mean better results.
Employment is a goal.

Employment is a goal.

Photographer: Daniel Acker/Bloomberg

Many important people, in both academia and Congress, want to reform the U.S. Federal Reserve. Unfortunately, their proposals tend to focus more on optics than on the important question: How can changing the Fed make Americans better off?

Some, for example, find it disturbing that bankers serve on the boards of directors of the Fed’s network of regional reserve banks. But would the U.S. economy have performed better over the past 10 years if the bankers hadn’t been there? I’m pretty sure that the answer is no -- and I’ve never heard anyone convincingly argue the opposite.