Transparency in the News

This all started about a week ago, when Treehugger and the New York Times began reporting that

As of Jan. 1, Pennsylvania is banning labels on milk and dairy products that say it comes from cows that haven’t been treated with artificial bovine growth hormone, which is sometimes known as rBGH or rBST. State officials say the labels are confusing and impossible to verify.

The government maintains that artificial bovine growth hormones are safe, even though they’re illegal in many other countries, critics question their safety, and many American consumers won’t buy milk treated with it.

So instead of exercising the precautionary principle Monsanto has instead spent more than a decade lobbying to get the labels removed. And now Pennsylvania agriculture secretary has agreed, arguing that the labels confuse consumers. “It seems to imply there is a safe, nonsafe dimension.”

Winner: Monsanto.
Loser: the people of Pennsylvania

A few days later, the Federal Reserve changed its reporting policies, publishing economic forecasts four times of year instead of only twice, in order to “take some of the mystery out of its decision-making, disclosing far more information about its economic forecasts — and, implicitly, about its objectives for growth and inflation.”

Now, I’m not an economist (but I’ve dozed through economics lectures), but how can this not be a good thing? Fed Chairman Ben Bernanke gave a speech to the Cato Institute outlining the history of the decision, which is pretty interesting.
An excerpt:

Montagu Norman, the Governor of the Bank of England from 1921 to 1944, reputedly took as his personal motto, “Never explain, never excuse.” Norman’s aphorism exemplified how he and many of his contemporaries viewed the making of monetary policy–as an arcane and esoteric art, best practiced out of public view. Many central bankers of Norman’s time (and, indeed, well into the postwar period) believed that a certain mystique attached to their activities and that allowing the public a glimpse of the inner workings would only usurp the prerogatives of insiders and reduce, if not grievously damage, the effectiveness of policy.

Norman’s perspective on central banking now seems decidedly quaint.

But before you expect to see enlightened beings at the Fed, it’s worth listening to Alan Blinder (an irono-nym, that), a former vice-chairman there.

“If you are a big believer in transparency, which I am, it’s incremental,” Mr. Blinder said. “If I had my druthers, the Fed would be giving out a forecast eight times a year.”

Then again, this may be a tempest in a money temple, especially if Steven Levitt is correct that economists are lousy forecasters.

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