Austan Goolsbee on Central Banking as a Data Dog

Conversations with Tyler is produced by the Mercatus Center at George Mason University bridging the gap between academic ideas and real world problems Learn more at mercatus.org. For a full transcript of every conversation enhanced with helpful links, visit conversationswithtyler.com. Hello, everyone, and welcome back to conversations with Tyler. Today, I'm very happy to be chatting with Austin Goolsby. Austin is one of my favorite economists. He always thinks like an economist is how I would put it. He has had a long standing teaching post at the University of Chicago, served in the Obama administration, and now is president of the Chicago Fed. Austin, welcome. Tyler, thank you for having me, and what a treat for me this is. I I really appreciate it. What is it in academic macroeconomics or just economics that you found surprisingly useful being a Fed president? I was a data guy, as you know, in the in the field of economics. And soon as I got there, there's all this pressure of from the press and from others. Are you a dove? Are you a hawk? And and I used to say, look. I'm not one of the birds. I'm in the data dogs. You know? And and the the first rule of the data dogs is is there's a time for walking and a time for sniffing and knowing the difference between those. And I would say that discipline of academic economics getting into the data is super useful. And then we're used to thinking about causality and identification, and I do think we we could use a little more of that in in a macro context. But say you're trying to figure out the connection between the money supply and the rate of price inflation. What's the first mental model you put on as a hat? You might disregard it when the data tell you otherwise, but where do you start? Kinda sniff around. I'd say there are multiple models. There's some people and embodied in the machinery of the Furbus official Federal Reserve Bank model is probably a kind of a Keynesian inflation comes from overheating. I'd say the old style money supply is what's correlated with inflation. A lot of those relationships between m two and inflation or or that sort of thing feel a little antiquated. They kinda broke down in the data. But why are those wrong? Like, what's the theory in your mind? You're trying to teach me. I'm in your class. I think there's two let let me finish one thought, and then let's come back to what's wrong about it. I still like the most of all the basic supply and demand framework and that before you can conclude anything, you gotta get a taste of is this a supply shock or is this a demand shock? And and in a way, a lot of the machinery of central banking and macro analysis, let's call it, is oriented around demand. And I'm not disputing …