## Center for Popular Democracy — Exit Grant

Grant investigator: Peter Favaloro

This page was reviewed but not written by the grant investigator. Center for Popular Democracy staff also reviewed this page prior to publication.

Open Philanthropy recommended a grant of $500,000 to the Center for Popular Democracy (CPD) to support the “Fed Up” campaign. This follows our June 2020 support and represents an “exit grant” that will provide CPD with approximately one year of operating support. It falls within our focus area of macroeconomic stabilization policy. ## Center for Popular Democracy — Fed Up Campaign (2020) Grant investigator: Alexander Berger This page was reviewed but not written by the grant investigator. Center for Popular Democracy staff also reviewed this page prior to publication. Open Philanthropy recommended a grant of$465,000 to the Center for Popular Democracy to support the “Fed Up” campaign. The campaign aims to encourage more accommodative monetary policies and greater transparency and public engagement in the governance of the Federal Reserve. Fed Up plans to use this funding to build up grassroots support for policies that prioritize full employment during and following the current economic crisis.

This follows our November 2019 support and falls within our focus area of macroeconomic stabilization policy.

## Center for Popular Democracy — Fed Up Campaign (2019)

Grant investigator: Alexander Berger

Open Philanthropy recommended a grant of $600,000 over two years to the Center for Popular Democracy (CPD) to support the “Fed Up” campaign. The campaign aims to encourage more accommodative monetary policies and greater transparency and public engagement in the governance of the Federal Reserve. As labor market conditions have improved, we’ve become less confident about the appropriate short term stance of monetary policy, but we continue to believe it to be worthwhile to support the campaign through the next recession, when its advocacy might be especially useful and when we could better evaluate its impact. This follows our 2014, 2015, 2016, 2017, and 2018 support to CPD and 2016, 2017, and 2018 support to the Center for Popular Democracy Action Fund, and falls within our focus area of macroeconomic stabilization policy. ## Center for Popular Democracy — Fed Up Campaign (2018) Grant investigator: Alexander Berger This page was reviewed but not written by the grant investigator. CPD staff also reviewed this page prior to publication. The Open Philanthropy Project recommended a grant of$1,200,000 to the Center for Popular Democracy (CPD) to support the “Fed Up” campaign. The campaign aims to encourage more accommodative monetary policies and greater transparency and public engagement in the governance of the Federal Reserve. As labor market conditions have improved, we’ve become less confident about the appropriate short term stance of monetary policy, but we continue to believe it to be worthwhile to support the campaign through the next recession, when its advocacy might be especially useful and when we could better evaluate its impact. We have written in more detail about our rationale for supporting this campaign on our 2014, 2015, 2016, and 2017 grant pages.

This grant falls within our work on macroeconomic stabilization policy.

The Open Philanthropy Project has separately recommended a grant to CPD Action, a 501(c)(4) organization affiliated with CPD.

## Center for Popular Democracy — Fed Up Campaign (2017)

Grant investigator: Alexander Berger

The Open Philanthropy Project recommended a renewal grant of $1,100,000 to the Center for Popular Democracy (CPD) to support the “Fed Up” campaign. The campaign aims to encourage more accommodative monetary policies and greater transparency and public engagement in the governance of the Federal Reserve, and specifically in the selection of regional Federal Reserve Bank presidents and leaders. We have written in more detail about our rationale for supporting this campaign on our 2014, 2015, and 2016 grant pages. CPD expects to use this funding toward campaign expenses such as salaries, travel, sub-grants, and overhead. We decided to renew our support based primarily on CPD’s continued success drawing attention for its agenda from the press, Congress, and the Fed; ongoing opportunities to potentially influence the appointment or priorities of new Federal Reserve governors and regional Fed presidents; and our intention to provide the campaign with enough sustainable funding to last through the next recession, when CPD’s advocacy might be especially useful and when we could better evaluate its performance. Since our last grant, one new area of uncertainty introduced for the campaign is the degree to which the Trump administration and a unified Republican Congress might support policies that reduce the need for expansionary monetary policy. Additionally, as unemployment rates have declined, we have become less confident in the appropriate short-term stance of monetary policy, and could imagine disagreeing with the Fed Up campaign about the appropriate direction for interest rates to move. However, our primary reason for continuing to support the campaign is that we believe it may be able to potentially prevent extraordinary harm during the next recession, when we think it will be more likely to have a meaningful short-term influence (as compared to the current gradual tightening cycle). The Open Philanthropy Project has separately recommended a grant to CPD Action, a 501(c)(4) organization affiliated with CPD. ## Center for Popular Democracy — Fed Up Campaign (2016) CPD staff reviewed this page prior to publication. The Center for Popular Democracy (CPD) is running a campaign (“Fed Up”) that aims to encourage more accommodative monetary policies and greater transparency and public engagement in the governance of the Federal Reserve, and specifically in the selection of regional Federal Reserve Bank presidents and leaders. The Open Philanthropy Project has decided to renew our support for Fed Up with an additional$1 million in funding, plus up to $1 million to match whatever Fed Up raises from other funders this year. This is the third grant we’ve recommended to support CPD’s work on this campaign (see links in the sidebar for more information about our previous grants). Our default expectation for this grant, as in previous years, is that it is relatively unlikely to have an impact on the Fed’s monetary policy, but that if it does, the benefits would likely be very large. We believe the call for greater transparency and public engagement in the selection of regional Federal Reserve bank leadership is more unambiguously positive and also more likely to succeed, though we do not have much sense of the humanitarian impact of such a change. The campaign had a strong 2015 in our view (more details below), which increases our estimate of how likely it is that it will have the effects it is aiming for. As ever, we acknowledge that this is an unusually complex policy area, and we could be mistaken in our views. Update: In October 2016, we supplemented our 501(c)(3) support with a$31,500 grant recommendation to the Center for Popular Democracy Action Fund, a 501(c)(4) affiliated with CPD.

April 2017 update: In total, we ended up recommending $429,000 in matching funding. The “grant amount” above has been updated to reflect this. ## 1. Background CPD is a progressive national advocacy group that works with local community groups across the country to promote its agenda.1 Fed Up is a campaign run by CPD in association with 24 other progressive national advocacy organizations, unions, think tanks, and regional community-based organizations.2 The campaign targets the Federal Reserve, and its stated goals are both substantive (to “create a strong and fair economy”) and procedural (to “create a more transparent and democratic Federal Reserve”).3 More information about CPD and Fed Up is available here and more about our work on macroeconomic policy can be found here. ## 2. Previous grant In 2015, we made a grant of$750,000 to the Center for Popular Democracy to support the Fed Up campaign. Fed Up’s total budget for 2015 was approximately $1.1 million. Overall, the progress made by Fed Up in the past year exceeded our expectations. The campaign attracted substantial media attention and obtained access to some influential policymakers. It is too soon to tell if the campaign will impact monetary policy, but we now believe some basic risks (such as being unable to attract the attention of the Fed at all) have been much reduced. Fed Up Director Ady Barkan’s leadership contributes to our confidence in the campaign. We do not know if the campaign has had a humanitarian impact, and believe it is likely that we will not have much information on this point until the next recession. #### 2.1 Fed Up 2015 activities In 2015, Fed Up4: • Developed partnerships in all 12 cities with Federal Reserve Banks. • Met with the majority of the 17 members of the Federal Open Market Committee (FOMC). • Carried out “day of action” protests at seven of the regional Federal Reserve Banks, associated with the release of its report “Wall Street, Main Street, and Martin Luther King Jr. Boulevard.”5 • Released reports entitled: • Suggested questions that were asked during Federal Reserve Chair Janet Yellens’ congressional Humphrey-Hawkins testimony about African-American unemployment. • Brought approximately 100 people to teach-in and protest at the 2015 Jackson Hole Economic Policy Symposium. This included several prominent economists (such as Nobel laureate Joseph Stiglitz, Josh Bivens, Dean Baker, and Brad Delong). • Protested outside the September FOMC meeting (and was mentioned in a reporter’s question to Chair Janet Yellen during the press conference following the meeting). • Prompted open letters, protests, and meetings on the lack of transparency and accountability in the regional Fed president selection process (for example, Fed Up representatives pointed out that the new Dallas Fed president had been on the board of the search firm that was hired to select him). This led to the Minneapolis Fed posting a job description for the president role for the first time, a promise of more transparency from the San Francisco Fed 8 and a show of interest from the Dallas Fed.9 • Conducted and released a poll on the public’s monetary policy stance.10 • Prompted former Labor Secretary Robert Reich to make a video about monetary policy.11 The video was released in conjunction with a petition that garnered over 100,000 signatures and was delivered at Jackson Hole. • Obtained substantial press coverage for these and other activities (below). #### 2.2 Media coverage Fed Up was covered relatively extensively in the media over the past year. A collection of examples of Fed Up press coverage from 2015 and 2016 can be found in Fed Up 2015-2016 Press Clippings. Below are some examples of coverage (positive and negative) that the campaign received: Overall, we are impressed with the press coverage Fed Up has received. The campaign was featured in much of the news about the Jackson Hole Symposium. Since then, Fed Up has continued to be featured in other stories about the Fed, which we believe is a sign of the campaign’s ability to attract ongoing media attention. #### 2.3 Access to and impact on policymakers Fed Up was able to interact with influential policymakers more than we expected. • In January 2015, (following Fed Up’s November 2014 meeting with Yellen), the Fed announced that it was starting a “Community Advisory Council” that would meet with the Fed twice a year, parallel to its pre-existing Federal Advisory Council, which is made up of bank representatives.19 We do not have direct evidence that Fed Up prompted the formation of this panel, but based on the timing and the language used—and the lack of other actors pushing for the Fed to hear from other voices—we find it very likely that Fed Up was responsible. • Fed Up representatives met with 10 of the 12 regional Fed presidents. Following a particularly productive meeting with the president of the San Francisco Fed, Reuters published a story headlined “Fed’s Williams vows more transparency after meeting with Fed Up.” 20 Press coverage regarding a November 2015 meeting with the new head of the Dallas Fed also suggested a useful exchange.21 While we’ve been positively surprised by the campaign’s access to date, we doubt that it has yet been able to build enduring relationships or cause meaningful shifts in policymakers’ views. #### 2.3.1 Jackson Hole Symposium Our impression is that Fed Up was successful in achieving its goals at the 2015 Jackson Hole Economic Policy Symposium. The campaign received substantial press coverage, as discussed above, and Fed Up representatives were able to interact with some influential policymakers. We believe the campaign’s presence was felt by policymakers and helped demonstrate that the public is interested in actions taken by the Fed. When Yellen was asked about the protesters at the press conference after the September FOMC meeting, her response was ambiguous, as we would expect.22 The White House’s chief economic advisor, Jason Furman, spoke at the Fed Up event for approximately 45 minutes, discussing pro-growth monetary policy and concerns about Federal Reserve governance, and inviting Fed Up representatives to visit with him in Washington, DC. #### 2.3.2 Regional Fed selection process We believe that Fed Up did not greatly influence the outcomes of the Dallas, Philadelphia, and Minneapolis Fed president selection processes that took place in 2015. Our impression is that the campaign had not yet built up sufficient power and influence to substantially affect the process. #### 2.4 Fed Up 2015 Budget Fed Up’s budget for 2015 was approximately$1.1 million, of which our previous grant contributed $750,000. CPD told us that in 2015, Fed Up spent: •$485,000 on subgrants
• ~$290,000 on internal staff • ~150,000 on convenings (including Jackson Hole) • ~$25,000 on communications
• $150,000 on overhead ## 3. Grant renewal The campaign continues to advance the same broad substantive23 and procedural24 goals as it has over the past year, including calling for looser monetary policy and more transparency from the Fed and the Regional Banks. The main changes with respect to these goals this year are that: • Fed Up won’t have the Dallas, Minneapolis, and Philadelphia opportunities to organize around on the procedural side. • The Fed has raised interest rates for the first time since the Great Recession, and may continue to slowly raise rates rather than holding them steady. Fed Up told us that it expects it to be somewhat tactically easier to campaign for the Fed to change what it is doing (i.e. not to continue raising rates) rather than to campaign for the Fed to continue with what it was doing (which was Fed Up’s main message until the recent rate raise), though we don’t have a sense of how this affects the overall likelihood of campaign impact. • 2016 is a presidential election year, which is likely to affect the political media environment. • The campaign now has more community-based partnerships, and stronger relationships with regional and national members of its coalition. #### 3.1 Budget and proposed activities The initial 2016 budget given to us by Fed Up was for$4 million, but we also requested budgets for $2 million and$3 million. Each of these budgets would be a substantial increase from 2015.25

We expect Fed Up would spend a $3 million budget approximately as follows: •$1.5 million regranted to local partners
• $650,000 for national staff •$250,000 to national partners
• $600,000 for other costs, including events, polling, lobbying, and overhead. The campaign’s current funders include several large progressive funders, and CPD also receives some general support from a number of others. After discussion with CPD, we don’t believe the support from these funders is likely to dramatically increase in the near future. #### 3.2 Case for this grant We see the case for this grant as fairly similar to the rationale we laid out for making the previous grant. This time around, we’d summarize the case as follows: • Perspectives on the FOMC about how to weigh tradeoffs between unemployment and inflation in monetary policymaking seem to range between placing equal weight on a percentage point of each and placing vastly more weight on inflation. In contrast, we see the negative humanitarian impact of a point of unemployment as significantly greater than the humanitarian impact of a point of inflation,26 and accordingly worry that the Fed has been persistently too tight in recent years. (Of course, we agree that the Fed cannot arbitrarily or indefinitely lower unemployment, but we think policy would be better in humanitarian terms if the Fed placed higher weight on a point of unemployment than a point of inflation.) • We believe the Fed is adept at slowing and moderating inflationary growth, but has had less success speeding growth following economic weakness. Because it seems to be the less reversible path, we see asymmetric risks from tightening too soon.27 (In our experience, those in favor of tightening sooner typically reply that waiting to tighten now means that larger moves could be required later, potentially triggering a recession. We take the point but think it should be possible to tighten later without causing a recession.) • It seems to us that the Fed is currently held responsible for inflation to a greater extent than it is held responsible for persistent output gaps. This creates excess pressure on the Fed to prioritize minimizing the risk of inflation relative to a more balanced commitment to both sides of its dual mandate. • During the Great Recession and the following recovery, our impression is that a common public narrative was that the Fed was doing as much as it could feasibly do to support the economy by keeping interest rates at zero. However, there are a suite of options the Fed could have taken to do more, some of which it employed to some extent, such as using negative interest rates (as some European nations have experimented with in recent years), quantitative easingthe Evans Rulenominal gross domestic product (NGDP) level targets, and a higher inflation target. It is possible that the Fed ended up at the edge of public knowledge and support by chance, but it seems likely to us that the Fed was bound to some extent by public perceptions of what was permissible, and with a wider window of public acceptance, it may have done more to support the economy. Given the depth of the recession, the slow recovery, and the still-below-target inflation rates, it seems likely to us that more radical policies would have been extremely valuable, and we do not see the Fed as having fully adopted this lesson. Indeed, in former Fed Chair Ben Bernanke’s memoir, he reports that the Fed considered and rejected the possibility of adopting a nominal GDP target, in part because of concerns about being able to credibly commit to such a target when it would be vulnerable to Congressional override.28 • We expect that the next recession is likely to occur before interest rates return to “normal” levels and that accordingly “unconventional” forms of monetary stimulus are likely to be necessary. We think the Fed is more likely to be able to implement such stimulus if there are stronger public advocates for the importance of expansionary monetary policy. As things stand now, we expect that during the next recession, the FOMC would mostly hear from critics claiming it was being too aggressive in responding, and we see reversing that balance as potentially highly beneficial • We believe increasing transparency and accountability in the regional Federal Reserve Banks is likely to be attainable, and more likely than not to lead to better outcomes. While we don’t see large direct utilitarian consequences for this consideration, there seems to be a strong procedural presumption in favor of a more credible, transparent selection process for regional Federal Reserve Bank board members and presidents. #### 3.3 Risks of the grant We consider this an unusually risky grant. Experts disagree about this subject, and it is possible that this grant could backfire by provoking opponents of more accommodative policies to become better-organized. Overall, the risks described last year29 continue to apply, though the risk of straightforward programmatic ineffectiveness seems to have been significantly reduced by the successes of 2015. We find it plausible that in the future, Fed Up may continue to press the Fed to keep interest rates low at a point where we believe the ideal rate is higher than what Fed Up would advocate for. We feel this risk is acceptable. ## 4. Plans for learning and follow-up #### 4.1 Key questions for follow-up • Can Fed Up build enduring relationships with policymakers? • Does Fed Up continue to receive media attention? • Does Fed Up appear to have an effect on the Fed’s decision-making about potential further interest rate increases? • In the event of a recession, is there evidence that Fed Up had an effect on the Fed’s response? #### 4.2 Follow-up expectations We expect to have a conversation with campaign staff roughly every 3 months for the duration of the grant, with public notes if the conversation warrants it. When the next recession occurs, we plan to attempt a more holistic and detailed evaluation of the grant’s performance. We may check the transcripts of 2016 FOMC meetings after they are released in 2022 to see whether any of the FOMC members discuss meetings with workers that inform their perspectives on policy. ## 5. Our process We monitored the campaign throughout 2015 and had conversations with Ady Barkan of CPD about the campaign’s plans and progress. We followed the media surrounding Fed Up and its interactions with policymakers. Karl Smith, who worked with us in 2015 as a consultant, attended the Jackson Hole Symposium and reviewed some of the campaign’s 2015 activities with us. ## 6. Sources DOCUMENT SOURCE Appelbaum 2015a Source Appelbaum 2015b Source Bernstein 2015 Source CPD 2015: Mind the Gap Source (archive) CPD 2015: Poll on Monetary Policy Source (archive) CPD 2015: Wall Street, Main Street, and Martin Luther King Jr. Boulevard Source (archive) CPD 2015: Whose Recovery? Source (archive) CPD Federal Reserve Campaign Paper Source Fed Up 2015-2016 Press Clippings Source Fed Up One Pager Source Fed Up Website Source (archive) Federal Reserve Press Release, April 13, 2015 Source (archive) Federal Reserve Transcript of Chair Yellen’s Press Conference, September 17, 2015 Source (archive) Ip 2014 Source (archive) Jean 2015 Source (archive) Prior 2015 Source (archive) Robert Reich “What’s the Fed?” Video Source (archive) Saphir 2015 Source (archive) Spross 2015 Source (archive) Warmbrodt 2015 Source (archive) Washington Post 2015 Source Yglesias 2015 Source (archive) ## Center for Popular Democracy — Federal Reserve Campaign (2014) Center for Popular Democracy (CPD) staff reviewed this page prior to publication. Note: This page was created using content published by Good Ventures and GiveWell, the organizations that created the Open Philanthropy Project, before this website was launched. Uses of “we” and “our” on this page may therefore refer to Good Ventures or GiveWell, but they still represent the work of the Open Philanthropy Project. The Center for Popular Democracy (CPD), a progressive organizing group, is planning to launch a campaign to educate the public about monetary policy and encourage the Federal Reserve to give more attention to the full employment portion of its mandate.1 CPD approached us for support for the campaign after hearing about our interest in potentially funding advocacy in this space. A version of CPD’s proposal that we received permission to share publicly is here. This version is significantly redacted and somewhat altered relative to the private version initially shared with us; in particular, it has a somewhat less overtly progressive tone. The budget for the campaign is variable, depending on CPD’s ability to attract funding, but is on the order of$1 million for the 12-month campaign.2

CPD’s stated “primary goals” for the campaign are to:

1. Ensure that monetary policy contributes to sustained growth and prosperity. In order to achieve this, the Federal Open Market Committee should delay interest rate hikes until we reach full employment.
2. Engage Fed officials in a discussion of the meaning of its “dual mandate.” Under Federal law, the Federal Reserve’s goal is to promote both “maximum employment” and “stable prices.” Maximum employment should feature rising wages, not stagnant ones, and should see more people pulled into the labor force, not fewer.
3. Ensure that the American public is properly represented on the Boards of Directors of the regional Feds. Commercial banks play a central role in choosing Federal Reserve Presidents, through their power to appoint members of the regional Boards of Directors. There should be more opportunities for the public to express its opinions about who should be appointed to the Boards and presidencies and regional Feds and the public should have more of a voice in the regional Feds’ policy decision-making process.3

We essentially interpret the first two goals as trying to shift the center of the Federal Open Market Committee in a slightly more “dovish” direction (i.e. placing more weight on unemployment/slack as opposed to inflation, in favor of accommodative monetary policy), towards the position of Fed Chair Janet Yellen, who we would guess is already fairly close to, but slightly more dovish than, the center of opinion of FOMC members.4 We do not have terribly high confidence that shifting the FOMC slightly in Yellen’s direction would be beneficial for policy, but we think it is more likely than not because:

• A broadly dovish stance seems to be called for based on the current state of the economy: while unemployment has been declining, there seems to continue to be considerable economic slack.5 Inflation has continued to run below the Federal Reserve’s 2% target, though it may be picking up.6 This is not to say that we are confident that a more dovish policy than the FOMC has currently set would be more appropriate, but only that a broadly dovish stance, including the current FOMC stance, seems appropriate to hold.
• The large majority of outside advocacy to FOMC members appears to come from corporations and the financial industry,7 and most popular advocacy on monetary policy seems to come from conservatives and “hawks” (who have the opposite views as “doves”).8 While there is some debate about whether the FOMC could have had more expansionary policy over the last few years, the persistent underperformance of inflation relative to the 2% target suggests that to some extent they have erred on the side of more slack rather than more inflation.9

We regard both of these points together as important for making the argument that it would be better to have some outside advocacy to shift the FOMC in a slightly more dovish direction; neither seems sufficient on its own. If a dovish position were unwarranted, it would be undesirable to move the FOMC in a more dovish direction, regardless of what other outside advocates are pushing for. And if a broadly dovish position were warranted but the majority of outside advocates were pushing for a dovish position (and, as is the case, the FOMC was already taking a relatively dovish stance10), it would be much less clear that efforts to push the FOMC further in a dovish direction would be positive.

All of that said, because the Federal Reserve is a highly independent and not-particularly-publicly-accountable institution, we see the prospect that the campaign has a substantial impact on the conduct of monetary policy as relatively unlikely. We do not see any chance of moving the policy outside the range currently contemplated by FOMC members (and we regard that as a positive point). We anticipate devoting considerably more effort in the coming months to trying to understand the distribution of opinion on the FOMC and trying to determine with more confidence whether moving the center of FOMC opinion closer to Yellen would be likely to lead to better macroeconomic policy.

We find the campaign’s third goal more uncontroversially desirable. Regional Federal Reserve Bank presidents, who attend FOMC meetings and vote on a rotating basis, are selected by their boards of directors.11 The boards are made up of elected representatives of local banks and some representatives appointed by the Federal Reserve Board, but the selection process does not appear particularly transparent or accountable to the public.12 While we don’t see a huge amount of direct utilitarian consequences for this consideration, there seems to be a strong procedural presumption in favor of a more credible, transparent selection process for regional Federal Reserve Bank board members and, in turn, presidents.

In addition to our tentative view that the campaign’s goals are worthwhile ones, we see this opportunity as testing an important premise of the case for macroeconomic policy as a potential focus area. Many people we have spoken with have pointed to the lack of advocacy around the FOMC from those concerned about unemployment, and we have taken that argument as evidence that macroeconomic policy may be neglected as a philanthropic cause relative to its importance. By providing early stage funding that allows the campaign to get started more quickly and that allows us greater access to follow the campaign as it unfolds, we hope to test the hypothesis that there are good funding opportunities in advocacy around macroeconomic policy that are currently going unfunded.

While we would guess that the basic case we’ve articulated is reasonable, we see a number of reasons for concern around this opportunity:

• We could be wrong about what kinds of economic policy would actually be beneficial. There is substantial disagreement between economists on this question, and the arguments above could be mistaken.
• Most economists seem to believe that central bank independence is very important for maintaining sound macroeconomic policy, and it seems plausible that a successful campaign to influence Federal Reserve policy could undermine the Fed’s independent technocratic decisionmaking by encouraging advocates across the monetary policy spectrum to mobilize more thoroughly to represent their interests.13 Though conceptually possible, we think this outcome is very unlikely, in part because the Fed is already subject to outside advocacy (as described above).
• The possibility that the campaign could encounter organized opposition makes transparency more difficult than it would be for many other grants, since it makes the campaign—understandably—hesitant to be as publicly transparent about the details of their plans as we would normally expect.
• We don’t perceive ourselves to be in full agreement with CPD about optimal economic policies or to have a perfect grasp of precisely which activities the campaign will prioritize, raising the possibility that they could use funds to pursue ends that we would regard as harmful.

Overall, we see this as a potentially very important policy area, and CPD’s proposed campaign is the only example we have come across of an effort to try to engage the public more actively with these issues and to use public advocacy to try to move the center of FOMC opinion in a slightly more dovish direction.

Based on the balance of these considerations, we decided to make a grant of $100,000 to help the campaign get started, and to be able to follow the campaign more closely as it moves forward. We’re unusually uncertain about this grant, and we’re planning to investigate the considerations above in more depth in the coming months (conditional on retaining macroeconomic policy as a high-priority cause) to reach a decision about whether to contribute a more significant portion of the campaign’s overall budget. #### Read more: #### Sources DOCUMENT SOURCE Bernstein 2014 Source (archive) Blanchflower and Posen 2014 Source (archive) CPD Federal Reserve Campaign Budget Unpublished CPD Federal Reserve Campaign Paper Source CPD Memo on the Alleged Insulation of the Federal Reserve from Political Pressure Source DeLong 2014 Source (archive) Directors of Federal Reserve Banks and Branches Source (archive) Economist 2014 Source (archive) Federal Advisory Council Meeting May 2014 Source (archive) Federal Reserve Bank Presidents Source (archive) Fernald 2014 Source (archive) FOMC Projections, June 2014 Source (archive) FOMC Transcript March 2008 Source (archive) Kiley 2014 Source (archive) Notes from a conversation with Joe Gagnon on February 4, 2014 Source Notes from a conversation with Josh Bivens on February 6, 2014 Source Notes from a conversation with Laurence Ball on April 17, 2014 Source Notes from a conversation with Mike Konczal on January 23, 2014 Source Reuters Fed Dove-Hawk Scale Source (archive) Weisenthal 2014 Source (archive) WSJ 2014 Source ## Center for Popular Democracy — Fed Up Campaign (2015) Organization Name: Center for Popular Democracy Award Date: 1/2015 Grant Amount:$750,000
Purpose: To support a campaign to educate the public and policymakers about monetary policy issues.

Published: February 2015

Center for Popular Democracy (CPD) staff reviewed this page prior to publication.

Note: This page was created using content published by Good Ventures and GiveWell, the organizations that created the Open Philanthropy Project, before this website was launched. Uses of “we” and “our” on this page may therefore refer to Good Ventures or GiveWell, but they still represent the work of the Open Philanthropy Project.

The Center for Popular Democracy is running a campaign (“Fed Up”) that aims to prevent premature tightening of monetary policy and encourage greater transparency and public engagement in the governance of the Federal Reserve. We previously contributed $100,000 to help the campaign get started. While we remain uncertain about the campaign’s prospects for making an impact, it has demonstrated some preliminary success during the last few months. Our best guess is that the campaign is unlikely to have an impact on the Fed’s monetary policy, but that if it does, the benefits would be very large. Additionally, we see some value in the campaign’s call for greater transparency and public engagement in the selection of regional Federal Reserve Bank leadership, and in enabling CPD to experiment with an advocacy campaign in macroeconomic policy. Based on these considerations, we decided to grant an additional$750,000 to the Center for Popular Democracy to support the Fed Up campaign. We anticipate that this grant will make up roughly 75% of the campaign’s overall funding for the year.

GiveWell staff member Alexander Berger has led our work on macroeconomic policy to date and was responsible for initial drafting of this page. Unlike much of our other output, the complexity of the debates in this area has made it impractical for other GiveWell staff to construct and check a complete trail of evidence and counter arguments for each claim in this review. (More on our process for forming and vetting the views contributing to this grant below.) As a result, while we stand behind the content of this page, the case for many of our beliefs has not been fully captured in what we’ve written up.

## 1. Background

#### 1.1 Campaign overview

Fed Up is a campaign run by the Center for Popular Democracy in association with 19 other progressive national advocacy organizations, unions, think thanks, and regional community-based organizations.The campaign targets the Federal Reserve, and its stated goals are both substantive (to “create a strong and fair economy”) and procedural (to “create a more transparent and democratic Federal Reserve”).2

The campaign’s current projected budget for 2015 is around a million dollars, with spending breaking down roughly evenly between two components:3

• Subgrants to 13 regional partner organizations.
• National staff time (~75%), research support (~15%), and other campaign costs (~10%).

This budget was informed by our decision to commit $750,000; an earlier draft was about 50% more ambitious in terms of spending.4 In addition to our commitment, the campaign has also raised$100,000 for its 2015 operations from another foundation, and anticipates some continued fundraising into 2015.5

The campaign envisions a number of different potential activities, with substantial variation based on decisions made by regional partner organizations. These activities largely break down into two categories: efforts to make clearer to Fed decision-makers the humanitarian stakes of their decisions, and efforts to credibly demonstrate that decisions by Fed policymakers will be subject to substantial public scrutiny.6 CPD asked us to keep the lists of specific campaign activities they’ve considered confidential on the grounds that publication might undermine their effectiveness. Future updates will look back on the specifics of CPD’s activities.

#### 1.2 Organization overview

CPD was formed from a merger of two smaller organizations (one of which was also called CPD) at the beginning of 2014.7 Their current annual budget is roughly $8 million, and they have an affiliated 501(c)4 organization (Action for the Common Good) with an annual budget of about$2 million; together they have about 50 staff members.8

CPD is a progressive national advocacy group that works with local community groups across the country to promote their agenda.9 About half of their funding comes from the Ford, Open Society, and Wyss Foundations, and relatively little of it is unrestricted.10

We have not investigated CPD’s track record in depth. Program officers for other foundations that we asked about CPD in informal conversations reported generally positive impressions. One example of a campaign that CPD reports was successful was the “Campaign for a Fair Settlement,” undertaken prior to the merger, which pressured the Department of Justice to pursue a sizable settlement against banks that played a role in the financial crisis.11

Overall, our view about this grant is driven far more by our view of the campaign than by our assessment of CPD as an organization.

#### 1.3 Campaign progress to date

To date, the campaign has conducted two major public activities, largely aimed at driving press attention:

1. Protests at the Federal Reserve’s August meeting in Jackson Hole, Wyoming.
2. A meeting with Federal Reserve Board Chair Janet Yellen in Washington, D.C. in November.

Before the August protests at Jackson Hole, CPD and 70 other progressive advocacy groups issued an open letter calling on the Fed to keep interest rates low until wages rise further, which prompted some initial media coverage.12 The protesters at Jackson Hole were covered widely in the media, including stories in the New York Times, Washington Post, Wall Street Journal, Associated Press, Reuters, and Bloomberg News, amongst others, and the group met with Kansas City Fed President Esther George for about two hours.13 Binyamin Applebaum, a New York Times economics reporter who was at the conference, said, “Their presence has been mentioned repeatedly by Fed officials and speakers, suggesting that it has made an impression.”14

Overall, we see these early actions as supporting two premises of the campaign, and reducing the risks associated with failure on either of these assumptions:

• The campaign will be able to interact with Fed policymakers.
• The campaign will be able to draw significant media coverage.

However, we continue to see the question of whether the campaign might have any more substantive impact as an open one.

## 2. Policy goals

#### 2.1 Substantive goals

The campaign describes three substantive goals:

• Good Jobs for All: The Federal Reserve should commit to building a full employment economy. It should keep interest rates low so that wages can rise significantly and everybody can find a good job.
• Investment in the Real Economy: The Fed should use its existing legal authority to provide low- and zero-interest loans so that cities and states can invest in public works projects like renewable energy generation, public transit, and affordable housing that will create good new jobs.
• Research for the Public Good: The Fed should study the harmful effects of inequality and examine how policies like raising the minimum wage and guaranteeing a fair workweek can strengthen the economy and expand the middle class.21

We wouldn’t necessarily endorse these priorities verbatim. We see the first one as the key substantive priority, and would summarize it as suggesting that Federal Reserve policy should be somewhat more dovish at the margin, i.e. erring on the side of keeping interest rates lower longer than it might currently plan to. We think that such a change would likely be very beneficial in humanitarian terms. However, monetary policy is extremely technical and subject to widespread disagreement, so we could fairly easily be wrong on the merits, a risk we elaborate on below.

#### 2.1.1 Desirability of these goals on the merits

The central reason we believe that marginally more dovish Fed policy relative to the current baseline would carry net benefits is that, at roughly their current rates, we see unemployment as more costly in humanitarian terms than inflation. Our view comes partly from the impressions we’ve formed on following public debates on macroeconomic policy, and appears consistent with what we’ve found in a relatively cursory review of the literature:

• Though there is empirical evidence that high levels of inflation (e.g. above 8%) harm economic growth, we are not aware of empirical estimates of the costs of inflation at relatively low values (e.g. under 5%).22
• Model-based estimates of the welfare costs of inflation (typically fit to some kind of economic data) yield widely varying results, and we have not conducted a systematic review of the literature. Our impression is that estimates based on the demand for money suggest that overshooting on inflation by 1 point would lead to a welfare loss of between ~0.02% and ~0.07%.23 However, estimates based on dynamic models that incorporate non-inflation-indexed portions of the tax code can yield much higher results (e.g. welfare costs of 0.3-0.5% per point of inflation).24 Other prominent estimates based on relatively simple New Keynesian models suggest that central banks will maximize welfare by placing substantially higher weight (e.g. 10-20x more) on inflation stabilization than unemployment, due to the welfare costs of price dispersion caused by inflation, but don’t specify welfare costs of a point of inflation.25 (Our impression is that more recent work by the authors of these models tends to argue in favor of price-level or nominal GDP (NGDP) targeting, which, with the current price and NGDP level well below the pre-crisis trend, would argue in favor of continued expansionary monetary policy.26) Given the fairly wide range of findings and our lack of familiarity with the methods involved, we have not placed heavy weight on these findings.
• We believe unemployment is directly costly in humanitarian terms, reducing happiness and income for the unemployed and their neighbors, with potentially adverse long-term impacts on human capital and we have seen some literature supporting this idea.27
• Additionally, a slack labor market may reduce wage growth for lower-income people. This idea is intuitive to us, and we have seen some literature supporting it. Using data from 1989-2007, the Economic Policy Institute estimates that increasing unemployment by 1 point decreases annual nominal wages for the bottom decile of men by 1.96%, for the bottom decile of women by 1.49%, and for median wage men and women by ~0.9%.28 Katz and Krueger 1999 use data from 1973-1998 and a similar methodology to estimate that a one point increase in the unemployment rate reduces wages at the tenth percentile by 1.57% and at the median by 0.86%.29
• Empirical research using subjective well-being assessments also supports the conclusion that unemployment should be weighted more heavily than inflation. Di Tella, MacCulloch, and Oswald 2001 uses survey data on life satisfaction from 12 European countries over the period 1975-1991 to estimate that a point of unemployment is 1.7 times as socially costly as a point of inflation.30 Using similar data and methods but a larger set of countries (16) and a longer time period (1973-1998), Wolfers 2003 estimates that a point of unemployment is roughly 4-5 times as socially costly as a point of inflation.31 Blanchflower et al. 2014 uses, again, a broader set of European countries (31) over a longer time period (1975-2013) and finds that a point of unemployment carries roughly 5 times as much social cost as a point of inflation.32 We’re not aware of significant literature arguing for the opposite conclusion based on subjective well-being data, though we have not conducted an exhaustive search.

While we believe that at current levels, a point of unemployment is more costly than a point of inflation, central banks cannot arbitrarily trade off unemployment and inflation: in the long run, efforts to permanently push unemployment too low would result in the unanchoring of inflation expectations and an inflationary spiral.33 However, inflation expectations are extremely well-anchored right now, with survey-based measures broadly stable at around the Fed’s 2% target and market measures of expectations generally below target.34 This suggests that the Fed should be able to keep rates low to further reduce unemployment while having only a small impact on inflation (and be pushing it in the desired direction—towards the 2% target).35 More generally, short run tradeoffs between unemployment and inflation are not believed to be 1:1. Conventional estimates tend to suggest that keeping unemployment a full point below the “non-accelerating inflation rate of unemployment” for a year would result in inflation 0.5 points higher for the indefinite future, with more recent research suggesting a somewhat lower tradeoff.36

In addition to this central argument from the welfare asymmetry of inflation and unemployment for keeping interest rates low when inflation is below target and expectations are well-anchored, we also see the risks from tightening too soon as outweighing the risks from tightening too late. The Fed’s recent experience struggling to provide sufficient monetary stimulus at the zero lower bound on nominal interest rates suggests that it is worth being disproportionately careful to avoid tightening too soon, in order to avoid a rapid return to the zero lower bound, and the attendant risk of not being able to stimulate adequately, in the future.37 Market participants currently estimate the probability of the Fed being back at the zero lower bound within two years of initially raising rates as roughly 20%.38 On the other hand, the Fed is capable of tightening more than currently planned in order to control inflation should it emerge later.

A relatively tight labor market seems unusually unlikely to prompt high inflation today because corporate profits are at a record high while the labor share of income is historically low, though if those factors are driven by secular trends, a tight labor market may cause inflation rather than shifting profits to wages.39

Finally, estimating the non-accelerating inflation rate of unemployment (NAIRU) is quite challenging and involves significant uncertainty.40 In the face of such uncertainty, testing the estimate to see whether unemployment below that level does in fact cause faster inflation could be prudent.41

#### 2.1.2 Expert disagreement about these goals

The Fed is extremely technocratic and well-informed, but officials within it nonetheless disagree about the appropriate path of monetary policy. For instance, members of the Federal Open Markets Committee (FOMC), which is responsible for setting monetary policy, disagree substantially about the appropriate pace with which to tighten in the coming years.42

In this section, we try to describe why some Fed officials with access to all of the information above, plus substantially more professional expertise, might nonetheless not agree with us that policy should err on the dovish side.

The below bullet points give our best guess at the main forces in play, with examples of people arguing that these are significant forces in the footnotes:

• Institutionally, the Federal Reserve sees the Volcker-era “victory over inflation” as its biggest success, and is reticent to run any risk of reversing it.43 More hawkish experts have regularly marshaled the example of 1970s-era inflation rates as a potential risk from keeping interest rates low (in spite of the fact that inflation expectations have remained well-anchored).44 (We think that more hawkish experts would react to this observation by defending the comparison to the 1970s and saying that recent Fed policy risks de-anchoring expectations.)
• Based on some prominent macroeconomic models, economists have often accepted the idea that central bankers should focus on inflation rather than unemployment in order to maximize welfare.45 Our impression is that these intellectual arguments have been assumed to argue against more expansionary monetary policy, because they did so in the past, even though they typically support more expansionary policy when inflation is below target and anchored and there is a remaining output gap (as is the case today).46 (We think that more hawkish experts would react to this observation by defending the models that recommend a strong focus on inflation and pointing out that the conventional Taylor Rule would recommend a non-zero interest rate at today’s unemployment and inflation rate levels.)

We are not very confident in these guesses, though, and overall, would not say that we have a strong sense of what drives expert disagreement in this area. Commentators have offered a variety of other explanations.47

The more hawkish presidents of the Philadelphia and Dallas Federal Reserve Banks have given speeches recently outlining their positions (see footnote),48, while the more dovish presidents of the Chicago and Minneapolis Federal Reserve banks have also offered their perspectives (see footnote).49 We encourage readers to consider both arguments.

#### 2.1.3 Political context

Separate from the arguments above on the merits, we see two other reasons to support a campaign around these policy goals:

• In recent years, attention to and pressure on the Fed has come disproportionately from conservatives concerned about potential inflation risks, and less from liberals and those more concerned about unemployment.50 By amplifying more dovish voices, the campaign aims to bring the balance of popular attention to and pressure on the Fed into greater alignment with the distribution of expert opinion, and we see that as valuable. Were such voices already equally-represented in the popular discussion and advocacy around the Federal Reserve, we would be less likely to support this campaign.
• Even if we are wrong on the merits, we believe that broader discussion and debate around these issues is genuinely useful, and likely to produce marginally better monetary policy. Also, we expect that a campaign aiming to influence policy is more likely to push policy in the desired direction if it is directionally correct, so even in the context of a priori uncertainty about which direction is desirable, increasing advocacy on one side of it is more likely to be beneficial than harmful.

#### 2.2 Procedural goals

The campaign describes three procedural goals:

• Ensure That Working Families’ Voices Are Heard: Fed officials should regularly meet with working families and community leaders, not just business executives, in order to get a more accurate picture of how the economy is working.
• Fed Officials Should Actually Represent the Public: In regional banks around the country, Fed leaders come overwhelmingly from financial institutions and major corporations. The Fed should appoint genuine representatives of the public interest to these governance positions.
• Create a Legitimate Process for Selecting Fed Presidents: In late 2015 and early 2016, the regional Fed banks will select their next presidents, who will serve five year terms. Currently, the process for selecting those presidents is completely opaque and involves no public input. That needs to change, so that the public has a real role in the selection process.51

We see these procedural goals as more unambiguously positive than the campaign’s substantive policy goals, though we struggle to evaluate how beneficial they would be.

Regional Federal Reserve Bank presidents, who attend FOMC meetings and vote on a rotating basis, are selected by their boards of directors.52 Each board has 9 members:53

• 3 Class A directors, elected by member banks to represent their interests
• 3 Class B directors, elected by member banks to represent the public
• 3 Class C directors, appointed by the Board of Governors in Washington to represent the public.

Only Class B and Class C directors are allowed to vote on the selection of regional bank presidents, and their appointment is subject to approval by the Board of Governors.54 The substantial role of Class B directors, who are elected by member banks, in selecting regional bank presidents strikes us as hard to justify.

While we don’t see a huge amount of direct utilitarian consequences for this consideration, there seems to be a strong procedural presumption in favor of a more credible, transparent selection process for regional Federal Reserve Bank board members and presidents.

## 3. Outside influences on the Federal Reserve

The Fed is an independent institution with wide authority over monetary policy. It is under no particular obligation to listen to a campaign by members of the public, and given its technocratic bent, may be particularly disinclined to do so.

To assess the likelihood that this campaign might be able to able to have an influence, we reviewed the literature on FOMC decision-making and considered the campaign’s specific plans.

The literature in this area consists of both reporting by journalists and (former) Fed officials, historical accounts based on vote data and meeting minutes, and econometric analyses, typically of the historical vote data. We attempted to read broadly in that literature, but we have not been exhaustive, and we have not reviewed the econometric evidence with the same depth and skepticism that we typically do in the context of top charities.

#### 3.1.1 The role of the Chair

Most academic research suggests that Chairs carry disproportionate weight in the deliberation and votes of the FOMC. Quantitative and qualitative assessments of the Arthur Burns-era FOMC suggest that he accounted for around 40-50% of the FOMC’s decisions, while Alan Greenspan seems to have effectively dominated his FOMC, accounting for nearly 100% of its decisions.55 Less information is publicly available on the Bernanke and Yellen tenures, but they seem to both have more consensus-oriented styles that would put them closer to the Burns end of the spectrum (or perhaps even further along towards carrying less weight).56 Overall, we would guess that Yellen’s views do not dominate the FOMC like Greenspan’s did, but we would nonetheless estimate that they carry substantially disproportionate weight.

#### 3.1.2 FOMC decision-making dynamics

According to the transcripts of FOMC meetings and anecdotal reports, FOMC members do not typically register a formal dissent even when they would prefer a different policy than the chair or the majority.57

However, records of officially registered dissents are publicly available soon after meetings and give a sense of the dynamics of disagreement between FOMC members. Basic descriptive statistics on dissents are easy to capture:

• In the last 20 years, Governors have only dissented from FOMC decisions a total of four times, while regional bank presidents have dissented far more frequently.58
• Regional bank presidents tend to be more likely to dissent in favor of tighter policy, while Governors are more likely to dissent in favor of looser policy (though, as noted above, Governors very rarely dissent).59
• In the last 20 years, there have never been more than two dissents at a single FOMC meeting, except at the August and September 2011 and December 2014 meetings (which each had three).60
• Over the period 1978-2000, FOMC members, including both Governors and regional bank presidents, were more likely to dissent in favor of loose policy if the region they were from had above-average unemployment, and more likely to dissent in favor of tight policy if their regional had below-average unemployment (though the effect size is fairly small).61

Although legally speaking, a majority of the FOMC is sufficient to make decisions about monetary policy, in practice the committee does not appear to operate by majority rule (as the greater weight vested in the Chair attests). Evidence from transcripts of meetings during the chairmanship of Arthur Burns suggests that when members other than the chair make a difference, the distribution of influence seems to be somewhere in between a median voter (i.e. majority rules) and mean voter (i.e. average of what each member would like) model.62 Transcripts from the Greenspan era show that the FOMC followed his wishes, which suggests that it was driven more by the median voter than the average voter.63 An econometric model of rate-setting under the Burns and Greenspan FOMC finds that a consensus decision procedure best explains the observed patterns in the time series of interest rates (but doesn’t make use of minutes or dissent data).64 This makes it somewhat difficult to make firm predictions for the impact of changing the views or votes of individual members on overall committee decisions.

From the reports we’ve seen, regional bank presidents who do not have a vote at a given meeting appear not to have historically influenced the monetary policy outcomes of those meetings.65

With 10 voting members of the FOMC, as there are today, we would guess that the bulk of policy-making authority would fall on Chair Yellen, with the secondary authority falling to the second through fourth potential dissenters (presumably regional bank presidents).66

Interestingly, under the Greenspan chairmanship, Yellen, who was then a Governor and is now Chair, argued in favor of tightening in order to limit the risk of inflation, but did not dissent from Greenspan’s recommendation not to raise rates.67 Reflecting on that decision, Chappell et al. 2004 write:

While the arguments of Meyer and Yellen demonstrate a concern for inflation, they also illustrate another phenomenon. Despite an acknowledged risk of inflation, these members were willing to risk higher inflation to sustain the prevailing expansion. Even Greenspan recognized that this was implicit in his recommendation: ‘Having said all that, I fully acknowledge that we have a very tight labor market situation at this stage. I think identifying the current situation as an inflationary zone, as some have argued, is a proper judgment at this point. But it is a zone, not a breakthrough, and I would therefore conclude and hope, as I did last time, that we can stay at

‘B,’ no change’ (Transcripts, September 24, 1996, 31). In hindsight, Greenspan’s recommendation seems to have been the correct one. When Burns era policymakers had chosen to take similar risks, however, the outcomes had been less favorable.

#### 3.1.3 Outside influences on the FOMC

The Fed guards its independence scrupulously, and political considerations are virtually never raised at FOMC meetings.68 However, the Fed is subject to outside attention and pressure.69

There is a substantial empirical and theoretical literature on “political business cycles,” in which the central bank might keep interest rates artificially low in the period prior to an election to increase the probability of re-election for the incumbent party.70 There is relatively limited econometric evidence in support of the idea, and it suggests that to the extent this has been an issue in the United States, it ceased to be one by the 1980s.71 More anecdotal accounts suggest that the Fed may have behaved politically in this way during the Arthur Burns chairmanship, but generally not since then.72

The most notable example we are aware of in which the Fed explicitly acted in response to political concerns in the post-Burns era was the shift to targeting monetary aggregates rather than interest rates during the Volcker era.73 In order to reduce inflation, the Fed needed to raise interest rates to unusually high levels. To get some of the more dovish members of the FOMC on board with raising rates and to deflect public criticism from the Fed, Volcker decided to start officially targeting monetary aggregates instead of the interest rates themselves.74 This was a strategy that Minneapolis Fed president MacLaury called for explicitly as political cover in prior FOMC meetings.75 There is some nuance to this example: it is not clear to us whether the move was driven more by the need to get the more dovish FOMC members to go along with raising rates or the need to deflect public criticism, though to the extent that the doves were worried about public criticism, which seems to have been the case, the two would overlap.

During the same period, a variety of interest groups protested against the Fed’s high interest rates (e.g. by mailing keys to represent unbuilt homes), with no apparent impact on Fed policy.76

Today, the financial industry probably dedicates the most organized attention to the actions of the FOMC, but there is little evidence of explicit lobbying on monetary policy issues, and the Federal Advisory Council (a group of bank representatives that advise the Fed) does not appear very influential.77 However, FOMC members, especially but not only regional bank presidents, likely interact much more with the financial industry formally and informally than they do with other sectors of society (e.g. the unemployed).78 According to her calendar, which was recently obtained by the Wall Street Journal under an open records request, Yellen has spent notably little time with bank executives since becoming chair in early 2014.79

#### 3.2 This campaign

Based on the above summary of historical evidence, we think any outside efforts to influence U.S. monetary policy, including this one, are relatively unlikely to succeed. However, we think it has a non-trivial chance and that in this case the small chance of an important impact is sufficient to justify the investment.

In our view, the Dallas and Philadelphia Fed presidents retiring in early 2015, combined with the fact that all of the regional Fed presidents are up for renewal or replacement in January 2016, may give the campaign an unusual potential for influence.80 We see the most likely outcome of this campaign being an increase in the transparency with which regional Fed presidents are selected, with little or no impact on personnel decisions, but we can also envision scenarios in which the campaign results in somewhat different regional Fed personnel outcomes in 2016.

In terms of short-term monetary policy decisions, any impact seems relatively unlikely, but we could imagine the campaign making FOMC members marginally less likely to prefer hawkishness policies (or to threaten to dissent in favor of them) or marginally more likely to take a dovish stance relative to the center of the committee.

## 4. Rationale for the grant

#### 4.1 The cause

We are considering macroeconomic policy as a potential focus area, and accordingly have prioritized it for possible “learning grants”. As part of our search for potential grant opportunities, we made an initial grant to CPD to help this campaign get started.

As we wrote in our initial writeup, many people we have spoken with have pointed to the lack of advocacy around the FOMC from those concerned about unemployment, and we have taken that argument as evidence that macroeconomic policy (in particular, advocacy regarding macroeconomic policy) may be neglected as a philanthropic cause relative to its importance.

#### 4.2 Case for this grant

We see the case for this grant as being based on three potential impacts:

1. A slim probability of moving monetary policy in a marginally more dovish (i.e. lower unemployment, higher inflation) direction. Based on the arguments above, we think this would be importantly positive from a humanitarian perspective.
2. A reasonable chance of achieving some of the campaign’s procedural goals, including raising the level of transparency around how regional Fed presidents and board member are selected.
3. Enabling CPD to experiment with an advocacy campaign in this area, potentially laying the groundwork for future advocacy efforts in the area, and testing our hypothesis that advocacy around macroeconomic policy is a promising and relatively neglected philanthropic area.

In deciding to make this grant, we’ve put the most weight on the first consideration.

Our best guess, based on the history of outside efforts to influence the federal reserve and the specifics of this campaign, is that the campaign will probably have no impact on monetary policy, but that it has a slim chance of making a very large impact, which justifies the investment.

The history of the Federal Reserve over the last few decades points to a few decisions as having been particularly influential (e.g. Volcker’s decision to target monetary aggregates, Greenspan’s decision to keep the unemployment rate below the then-estimated NAIRU during the late 1990s). The humanitarian impact of these decisions is difficult to calculate, but likely very large. Even a small chance (e.g. below 0.1%) of causing such an important change could have a high expected value.

We haven’t conducted a formal cost-effectiveness analysis for this grant, but we think it is likely to be competitive with other policy advocacy grants we’ve considered.

#### 4.3 Room for more funding and fungibility

We think this campaign would be unlikely to occur at anything resembling the planned scale without our support. CPD has limited unrestricted funding,81 and is not aware of any other sources of funding that would consider funding the majority of the campaign.82

The initial budget we saw projected expenses of around $1.5 million, and we decided to contribute roughly half that amount. We tried to settle on an amount that would still require CPD to seek funding from other sources but would be sufficient to enable some level of campaigning to take place even if they failed to do so. We take the fact that the budget was revised downward after our commitment to support the notion that CPD wouldn’t be able to find the amount of funding that we’ve contributed from other sources, and that accordingly our contribution is largely non-fungible. #### 4.4 Risks to the success of the grant We think this grant could fail in two broad ways: 1. It could fail to achieve any policy impact. 2. It could unintentionally cause harm by subjecting the Fed to more populist pressure, by causing a more powerful counter-mobilization, or by succeeding in pushing policy in the desired direction but turning out to be wrong about what direction would be desirable. As discussed above, we think the first and more prosaic failure mode is more likely than not to occur: the campaign is unlikely to have a policy impact because the Fed is a relatively insulated, technocratic body. However, we could nonetheless still be over optimistic in believing the campaign has a non-negligible chance of having an impact, especially since we do not have a fully detailed understanding of the mechanisms through which the campaign aims to do so. We also see this grant as carrying a limited but non-negligible risk of causing harm: • A left-leaning campaign around monetary policy issues could conceivably risk destabilizing a technocratic consensus in support of the Fed.83 However, we doubt the existence of such a consensus: the Wall Street Journal and the New York Times editorialize in opposite directions on Fed decisions,84 the Cato Institute recently launched a new center on monetary policy aiming to “challenge [the Fed’s] credibility,”85 and members of Congress regularly call for audits of the Fed’s decision-making.86 Most economists strongly support the premise of central bank independence and oppose Congressional efforts to impose tighter restrictions on that independence,87 but we see this campaign as falling substantially closer to newspaper editorializing than to Congressional action to limit the Fed’s authority. • Separate from general concerns about destabilizing a hypothetical technocratic consensus around the Fed, stronger mobilization by those who would prefer looser monetary policy could prompt a more powerful counter-mobilization by those who would prefer tighter monetary policy. To some extent this has already occurred, as described above, with a Wall Street Journal editorial and press conference by a conservative group in response to the campaign’s meeting with Yellen in November.88 However, to our knowledge, those responses received much less press attention than the initial campaign actions, and we would generally expect that pattern to continue. We do regard this as a substantial risk to the project. • Perhaps most importantly, we could be wrong about the appropriate stance of monetary policy, in a number of ways: • Inflation could be more likely to take off, or have worse humanitarian impacts, than we’ve been able to detect. • Keeping interest rates low could promote financial instability or accelerate the onset of the next recession, either through increased instability or by causing a later, more extreme tightening. Former Federal Reserve Governor Jeremy Stein has been a prominent advocate for the view that monetary policy should take financial stability concerns into account and, likely, tighten faster than inflation and output would suggest,89 but our impression is that most of the other people who have considered the issue have concluded that current monetary policy is not particularly risky and that it is more appropriate to ensure financial stability using “macroprudential” tools.90 Dallas Fed President Richard Fisher has emphasized the risk of recession due to needing to tighten more extremely at a later date.91 We think neither of these risks are dispositive. • Monetary policy could be structurally less powerful in influencing unemployment and other humanitarian outcomes than we’ve assumed it is. There is fairly widespread disagreement about these issues amongst economists, so it is not difficult to believe we could be mistaken. However, we see broader discussion and debate around these issues as genuinely useful, and likely to produce better monetary policy, even if we are mistaken. We expect that the campaign is more likely to succeed if it is directionally correct, so even in the context of uncertainty about whether we have correctly weighed these risks, increasing advocacy on one side is more likely to be beneficial than harmful. Additionally, while we’ve tended to regard the campaign’s goals around accountability and transparency in the process of selecting regional Fed presidents as an unmitigated good, they could be a problem if people with opposing views about monetary policy were more likely to effectively exploit the new openness (which might be the case),92 or for unanticipated reasons. ## 5. Plans for learning and follow-up #### 5.1 Key questions for follow-up Questions we hope to eventually try to answer include: 1. What activities does the campaign undertake? 2. What sort of attention does the campaign receive from policymakers or the press? We expect to largely rely on CPD’s press tracking to answer this question. We may check the transcripts of 2015 FOMC meetings after they are released in 2021 to see whether any of the FOMC members discuss meetings with workers that inform their perspectives on policy. 3. To what extent does the campaign appear to influence monetary policy or the process of selecting regional bank board members and presidents? We think it is unlikely that the campaign will have an influence on monetary policy, or that we would be able to find out if it did, but nonetheless the possibility that it will plays a central role in our decision to make this grant, and we intend to at least ask the question. We are more optimistic that the campaign might influence the (transparency of the) process of selecting regional bank board members and presidents, and we also anticipate being more likely to be able to attribute changes to the campaign (since few other actors are mobilized on the topic). 4. What do we learn from CPD and their approach to running a campaign like this? This is a relatively novel kind of philanthropy for us, and we expect that we will learn something about how to assess campaign funding opportunities in the future. #### 5.2 Follow-up expectations We expect to have a conversation with campaign staff every 2-3 months for the duration of the grant, with public notes if the conversation warrants it. Towards the end of the duration of the grant, we plan to attempt a more holistic and detailed evaluation of the grant’s performance, aiming to answer the questions above. As mentioned above, we may check the transcripts of 2015 FOMC meetings after they are released in 2021 to see whether any of the FOMC members discuss meetings with workers that inform their perspectives on policy. We may abandon either or both of these follow-up expectations if macroeconomic policy ceases to be a focus area, or perform more follow-up than planned if this work becomes a more central part of our priorities. ## 6. Our process CPD approached us for support for the campaign after hearing about our interest in potentially funding advocacy in this space. We made a previous grant of$100,000 to CPD to help get the campaign started.

Prior to deciding about this grant, we had a number of further conversations with Ady Barkan of CPD about the campaign’s plans, followed the initial progress of the campaign in drawing press attention, and looked more deeply into research on monetary policy.

We shared a draft version of this page with CPD staff prior to the grant being finalized.

#### 6.1 Process for forming and vetting views on monetary policy

We became interested in macroeconomic policy as a potential focus area because of the attention it has drawn in the press and blogosphere since the beginning of the Great Recession. Many of our initial impressions about the topic were formed by reading blogs by economists such as Paul KrugmanBrad DeLongTim DuyScott Sumner, and Tyler Cowen (though this is not to suggest that these individuals agree with each other or with us).

In trying to form more confident views and to understand the perspective of the people who disagree with us, we pursued a number of avenues:

• Reviewing more of the academic literature on specific questions of interest (such as the welfare costs of inflation), typically by searching in Google Scholar and following citation networks. Because of the complexity of many macroeconomic models and the large size of this literature, we didn’t find this especially informative or conclusive, but we review what we found above. We didn’t do this at the level of detail that we do in some of our other work.
• Reading blog posts, op-eds, and speeches by prominent economists with more hawkish views.93
• Off the record conversations with a prominent conservative monetary economist and two former senior Fed officials.

## 7. Sources

DOCUMENT SOURCE
Appointment of Reserve Bank Presidents and First Vice Presidents Source (archive)
Associated Press 2014a Source (archive)
Associated Press 2014b Source (archive)
Atkinson, Luttrell, and Rosenblum 2013 Source (archive)
Ball 2013 Source (archive)
Bernstein 2014 Source
Bernstein and Baker 2013 Source (archive)
Blanchflower and Posen 2014 Source (archive)
Blanchflower et al. 2014 Source (archive)
Blinder 2007 Source (archive)
Bloomberg News 2014a Source (archive)
Bloomberg News 2014b Source (archive)
Bloomberg News 2014c Source (archive)
Bloomberg News 2014d Source (archive)
Chappell et al. 2004 Source (archive)
Chodorow-Reich 2014 Source (archive)
Clarida 2014 Source (archive)
Coyne 2005 Source (archive)
CPD Fed Open Letter Source (archive)
CPD Federal Reserve Campaign Budget Unpublished
CPD Federal Reserve Campaign Paper Source
CPD Memo on the Alleged Insulation of the Federal Reserve from Political Pressure Source
CPD – Our Meeting With Janet Yellen Unpublished
Crump et al. 2014 Source (archive)
DeLong 2014 Source (archive)
Di Tella and MacCulloch 2007 Source (archive)
Di Tella, MacCulloch, and Oswald 2001 Source (archive)
Directors of Federal Reserve Banks and Branches Source (archive)
Drazen 2001 Source (archive)
Duy 2014 Source (archive)
Economic Projections of Federal Reserve Board Members and Federal Reserve Bank Presidents, December 2014 Source (archive)
Economist 2014a Source (archive)
Economist 2014b Source (archive)
Economist 2014c Source (archive)
EPI State of Working America 2012 Source (archive)
Evans 2014 Source (archive)
Fed Up 2015 Budget Unpublished
Fed Up 2015 Budget Draft for GiveWell Unpublished
Fed Up Campaign Plan Unpublished
Fed Up Coalition Priorities Source (archive)
Fed Up One Pager Source (archive)
Federal Reserve Bank Presidents Source (archive)
Feldstein 1997 Source (archive)
Fernald 2014 Source (archive)
Financial Times 2014 Source
Fisher 2014 Source (archive)
Mishkin 2008 Source (archive)
FOMC Projections, June 2014 Source (archive)
FOMC Transcript March 2008 Source (archive)
FRED chart of five year and five year forward inflation expectations Source (archive)
Gerlach-Kristen and Meade 2011 Source (archive)
GiveWell’s non-verbatim summary of a conversation with Brian Kettering on October 16, 2014 Source
Goldman Sachs Global Investment Research, July 25, 2014 – FOMC Preview: Eyes on the Dashboard Unpublished
Goldman Sachs Research US Daily: Q&A on “Why Renege Now?” (Hatzius) 9-15-2014 Unpublished
Greider 1987 Source (archive)
Helliwell and Huang 2014 Source (archive)
Hilsenrath 2014 Source (archive)
How is a Federal Reserve Bank president selected? Source (archive)
IGM Survey on Congress and Monetary Policy Source (archive)
IMF 2013 Source (archive)
Ireland 2009 Source (archive)
Katz and Krueger 1999 Source (archive)
Kiley 2014 Source (archive)
Kocherlakota 2014 Source (archive)
Krugman 2014 Source
Lucas 2000 Source
Meade and Sheets 2005 Source (archive)
Meltzer 2010 Source (archive)
Meyer 2004 Source (archive)
Washington Post 2014a Source
Notes from a conversation with Joe Gagnon on February 4, 2014 Source
Notes from a conversation with Josh Bivens on February 6, 2014 Source
Notes from a conversation with Laurence Ball on April 17, 2014 Source
Notes from a conversation with Mike Konczal on January 23, 2014 Source
New York Times 2014a Source
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New York Times 2014c Source
New York Times 2014d Source
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New York Times 2015 Source
PBS 2014 Source (archive)
Plosser 2014 Source (archive)
Reuters Fed Dove-Hawk Scale Source (archive)
Reuters 2014 Source (archive)
Riboni and Ruge-Murcia 2010 Source (archive)
Schonhardt-Bailey 2014 Source (archive)
Stein 2014 Source (archive)
Sumner 2014 Source (archive)
Survey of Professional Forecasters Fourth Quarter 2014 Source (archive)
The Hill 2014 Source (archive)
The Structure of the Federal Reserve System Board of Directors Source (archive)
Thornton and Wheelock 2014 Source (archive)
Washington Post 2014b Source
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Weisenthal 2014 Source (archive)
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Woolley 1984 Source (archive)
Wynne 2013 Source (archive)
Yellen 2014 Source (archive)
Yellen and Akerlof 2004 Source (archive)