Will the Next Fed Chair Come From Business Instead of Academia?

I really, really hope this is a case of “Why Oh Why Can’t We Have a Better Press Corps,” but I fear this may be all too accurate:

W.House may want business experience for Fed chair, By Tim Ahmann, Reuters:  The White House may want to look at the business community in its quest for someone to succeed Alan Greenspan … but analysts say it should take care not to shake market confidence.  Cesar Conda, a former domestic policy adviser to Vice President Dick Cheney, said the Bush administration sees business experience as an important attribute and wants someone with "a real world sense" to take over when Greenspan steps down early next year.  "Part of the thinking is that, at times, a Fed chairman might have to look beyond the economic theory and beyond some of the statistics in order to guide monetary policy," he said.

The White House wants someone who, at times, will not use either data or theory as a guide?  What will they use, guesses?  Surprise policy is likely to have real effects, but not useful ones.  But at least this statement is next:

Business experience may be an asset, but some White House officials say the paramount consideration as the search gets under way is still knowledge of monetary policy.  That should offer solace to economists who have bitter memories of the short and unsuccessful tenure of the last Fed chief to hail from the boardroom, former Textron Chief Executive G. William Miller, in the late-1970s. … [T]he heavily academic trio most often cited as his potential heirs: Bush adviser and ex-Fed Governor Ben Bernanke, former Bush adviser Glenn Hubbard and Harvard University economist Martin Feldstein.  Economist Richard Yamarone of Argus Research said none of the three meets the "real world" test.  "The most important thing you have to do is, you have to be flexible with your policy prescriptions and I think that that can't be done in an effective manner by an academic," he said. "You want someone who has a daily observation of the economy when they come into this office, and I don't know that any of those three have this detail-oriented observation of the economy that Greenspan has," Yamarone said … Discussion of a business-world successor leads many Fed observers to harken back uncomfortably to the runaway inflation of the late 1970s and Miller's brief Fed reign, which was widely seen as feckless at a time resolve was needed. … the White House would need to gingerly lay some groundwork if it was thinking of turning to a dark horse. … Former Fed Vice Chairman Alan Blinder said his biggest fear was that the White House might turn to "Mr. X." "… no matter who it is. That's unsettling enough," he said. "If the … reaction on Wall Street, [is] 'Who's that?,' then I think you're looking for trouble.  "The name Feldstein, the name Hubbard, the name Bernanke will not elicit that reaction. The market will take comfort in that they're in some sense known quantities," Blinder said. … "They're all very able people," said Anna Schwartz, who co-authored a number of books with noted monetarist Milton Friedman, ..." Still, in her view, they all end up somewhat lacking.  "That's what's so depressing; that there are so few names being raised," she said.

I don't know of anyone from business who could possibly have a better sense of economic data than Bernanke and others.  These statements show a serious misunderstanding of the monetary policy process and that is worrisome.  I very much agree with Alan Blinder and, though I would be pleased with Bernanke, I also agree with Anna Schwartz to the extent that she means broadening the choice to include more names with solid theoretical and empirical foundations in the monetary policy area.  But choosing Businessperson X in some misguided attempt to favor business or some other constituency would be a huge mistake.  We don't need a Bolton or a Snow as Fed Chair.