The neutrality illusion: biased economics, biased training, and biased monetary policy. Testing the role of ideology on FOMC voting behaviour

Etienne Lepers

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This research is trying to shed light on two myths that are usually widespread: the first one being the idea of the academic economist as a neutral scientist finding uncontestable consensual truths, thanks to uncontestable empirical methods, the second, the idea of the central banker as a Weberian neutral bureaucrat setting aside personal beliefs to act mechanically for the common good. Deconstructing this ‘neutrality illusion’, this work argues that economics is actually a divided and ideologically marked discipline despite its aim at natural-science-type-legitimacy. It argues in a related discussion that such ideological bias also impedes a purely neutral conduct of monetary policy, undermining the very idea of central bank independence. Linking these two arguments, it argues that graduate training in economics is the first place for the formation of biased preferences, because of the substantial ideological sorting that exists across universities. Using a unique database on FOMC members’ votes and ideology, the paper tests this idea empirically and despite unavoidable caveats, finds robust evidence of a systematic impact of the ideological features of their alma mater on FOMC members’ voting behaviour – impact that we found more important than the other traditional determinants of central bankers’ actions.

Keywords: Fed; monetary policy; FOMC; central bank independence; dissent; ideological bias; educational training; freshwater; saltwater; economics science (search for similar items in EconPapers)
JEL-codes: F3 G3 J1 (search for similar items in EconPapers)
Date: 2017-06-07
New Economics Papers: this item is included in nep-hme, nep-hpe and nep-mon
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Published in New Political Economy, 7, June, 2017, pp. 1-23. ISSN: 1356-3467

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http://eprints.lse.ac.uk/83172/ Open access version. (application/pdf)

Related works:
Journal Article: The Neutrality Illusion: Biased Economics, Biased Training, and Biased Monetary Policy. Testing the Role of Ideology on FOMC Voting Behaviour (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:83172

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