Forget about Fedspeak. Ben Bernanke on Sunday delivered the baccalaureate address at Princeton University, where he once ran the economics department. While the Federal Reserve chairman offered some of the usual commencement platitudes, he also gave a speech that’s being called "excellent," "radical,” "the best graduation speech” this year – and perhaps even more shocking for a Fed speech – "funny."
Bernanke offered insights into who he is and how he thinks. Plus, as Neil Irwin at The Washington Post points out, it’s also likely the first time a sitting Fed chair has mentioned both sexual attraction and intestinal parasites in a public address. “Remember,” Bernanke advised, “that physical beauty is evolution's way of assuring us that the other person doesn't have too many intestinal parasites. Don't get me wrong, I am all for beauty, romance, and sexual attraction – where would Hollywood and Madison Avenue be without them? But while important, those are not the only things to look for in a partner.” In other words, this was not a typical speech from a Fed chairman, even one who’s tried to be more open and plainspoken.
Bernanke quickly bounced from sociology to political science to economics, offering broad observations directed more at newly minted graduates than at those wondering about monetary policy. “All of what follows has been road-tested in real-life situations, but past performance is no guarantee of future results,” Bernanke said. You can watch the full video of the speech below, or read it at the Federal Reserve's website (and don’t skip the footnote). But here are six key points:
1. “Don't be afraid to let the drama play out.” Market players eagerly watching to see how the Fed will "taper" or wind down its quantitative easing program won’t like this idea any more than the driven young graduates of Princeton do. But, but Bernanke’s basic lesson was that “life is amazingly unpredictable” – he borrowed from the poet Robert Burns and “more contemporary philosopher, Forrest Gump” – and the surprising turns are “a good thing, not a bad thing; who wants to know the end of a story that's only in its early chapters?” Besides every Wall Street trader, that is.
2. Meritocracies aren’t only about merit. Bernanke made the argument that the Ivy League graduates in the audience weren’t just there because of their brains but because of their great fortune – and that the elite have a responsibility to the rest of society. “A meritocracy is a system in which the people who are the luckiest in their health and genetic endowment; luckiest in terms of family support, encouragement, and, probably, income; luckiest in their educational and career opportunities; and luckiest in so many other ways difficult to enumerate – these are the folks who reap the largest rewards. The only way for even a putative meritocracy to hope to pass ethical muster, to be considered fair, is if those who are the luckiest in all of those respects also have the greatest responsibility to work hard, to contribute to the betterment of the world, and to share their luck with others.”
3. Learn how to measure success. “Those most worthy of admiration are those who have made the best use of their advantages or, alternatively, coped most courageously with their adversities. I think most of us would agree that people who have, say, little formal schooling but labor honestly and diligently to help feed, clothe, and educate their families are deserving of greater respect – and help, if necessary – than many people who are superficially more successful. They're more fun to have a beer with, too.”
4. Politicians aren’t as bad as you think. “In regard to politics, I have always liked Lily Tomlin's line, in paraphrase: ‘I try to be cynical, but I just can't keep up.’ We all feel that way sometime. Actually, having been in Washington now for almost 11 years, as I mentioned, I feel that way quite a bit…. But my experience is that most of our politicians and policymakers are trying to do the right thing, according to their own views and consciences, most of the time. If you think that the bad or indifferent results that too often come out of Washington are due to base motives and bad intentions, you are giving politicians and policymakers way too much credit for being effective.”
5. Even the best economists don’t have crystal balls. “Economics is a highly sophisticated field of thought that is superb at explaining to policymakers precisely why the choices they made in the past were wrong. About the future, not so much. However, careful economic analysis does have one important benefit, which is that it can help kill ideas that are completely logically inconsistent or wildly at variance with the data. This insight covers at least 90 percent of proposed economic policies.”
6. "Call your mom and dad once in a while." ‘Nuff said.