"Blood and Guts" Volcker

The Economist's Free Exchange raises the interesting question of whether academic credentials - like those of Ben Bernanke - are valuable for central bankers. Paul Volcker (Fed chairman, 1979-87) apparently takes a rather Stephen Colbert-ian view of the issue:

A central bank governor's most essential trait was "guts" and some management abilities, said Mr Volcker.

Guts?! Hmm... by that logic, perhaps Curt Schilling should replace Bernanke when his term expires, or maybe Ponch from "CHiPs"...

Free Exchange notes that

Mr Volcker does not have an economics PhD; he has a Harvard MA in political economy and two years of study at the London School of Economics. Despite this, he is frequently called the best central banker ever.

Volcker is often lauded for his "toughness" in presiding over the disinflation of the early 1980's, when the Fed tightened monetary policy (the Federal Funds rate exceeded 19% in mid-1981) to bring inflation down. Undoubtedly, that episode was difficult for Volcker, who took some harsh criticism, but the truly severe consequences were suffered by the millions of workers who lost their jobs in the ensuing recession; the unemployment rate peaked at 10.8% in 1982.

The ardent praise sometimes lavished on Volcker for his "courage" in the "fight" against inflation reminds me of the scene from "Patton" when a soldier says: "There he goes, 'ol' blood 'n guts.'" His buddy replies: "Yeah, our blood, his guts."

Arguably, there was no painless way to put a stop to the inflation that had taken hold in the 1970's, but I sometimes like to think that a smart PhD economist might have found a way to do so with less damage.