For several months, we’ve witnessed the Fed discuss the need to orchestrate a, “soft landing,” for the economy. Attempting to orchestrate an easy descent from this inflationary high; however, I believe the entire goal displays a flawed understanding of economics. Despite that, Mr. Powell still possesses a rational reason to attempt the impossible.

To start off, the economy is incredibly complex, so no central manager (the Fed included) can effectively control the ascent or descent of the economy. Sure, we can implement policies that, ceteris paribus, will manipulate the economy positively or negatively. However, it is man’s hubris that leads us to believe we’ve finally cracked the code to effectively “manage” the economy. The truths of Hayek’s The Use of Knowledge in Society still hold true; in short, Hayek argues that the knowledge needed to “run” the economy is too vast, too disparate, and too fluid for a central planner to collect and act on. Therefore, the Fed’s notion that it can orchestrate a smooth transition out of the inflation problem it created without economic turmoil is delusional. No matter Powell’s knowledge or power, the Fed’s discretion will create problems. Obviously, I do not know what is going to happen, but I can say for certain that man’s tinkering with the price system will not lead to optimal results in the long run.*

I believe the idea that we can “solve” the economy will never vanish, because scripture teaches us that man is prideful. Because Powell and the other Fed leaders are political actors, the system incentivizes prideful behavior.** He has to act to keep the political pressure off because voters want to see the government taking some action. Furthermore, if this all blows up, the Fed can come up with some external force (the war in Ukraine, greedy oil executives, consumer irrationality, etc.) to blame for an economic collapse. However, if the moves the Fed makes do not exacerbate any economic downturn and things turn out moderately bad, Powell will be praised as a masterful central banker and a hero (probably not as well loved as Greenspan). His political career would be forever made because he “saved” the economy from the inflationary mess of 2022. This is his rational reason to attempt to puppet master the economy. If things turn out relatively okay, he can spin the narrative to say he orchestrated the country’s economic salvation (I’m sure everyone else in Washington will take credit along with him).

Essentially, I believe the idea of an orchestrated soft landing comes from man’s hubris. Despite the obvious flaws with the idea that central planners can perfectly managed the economy, political figures will continue to strive for control because it helps solidify their power. I’m not suggesting that nothing should be done. Instead, I’m suggesting that the market itself is the best tool we have to overcome an economic downturn.

*I say tinkering with the price system because by manipulating the supply of money or the interest rate, the Fed can manipulate the “price” of money.

**If you believe the Fed appointees are not politically motivated, I would love to hear your thoughts in the comments.