I'm increasingly worried about the vast disconnect between finance and economics--well, I'm worried about how it's changing my political views.

I used to think that a good academic economist running the Fed was the perfect choice, which is why I opposed Powell's nomination (although it was clearly better than the other names Trump was floating at the time). Now I'm not so sure, and I'm starting to wonder if we need more financiers and less economists in the Fed.

There are two reasons why I'm coming to this point of view. Firstly, it's the bad finance that I see from economists both in this sub and elsewhere. The recent highly upvoted assertion that WMT share prices correlate to recessions is patently absurd to any financier--it's the sort of thing that would get you laughed out of an office at any hedge fund or investment bank. I'm not trying to dog on that particular poster or that event--I've seen bad finance on this sub many times, and even once did a rather highly upvoted R1 on a mod of this sub for a misunderstanding about bonds. The people here, who are very good on economics, clearly don't know finance well enough.

The other is the Fed's constant failure to understand why PCE growth remains so low. In the financial world, there's no real confusion here: monosponistic labor markets, low money velocity, and low money supply relative to assets have all contributed to low inflation. These aren't really big mysteries to most financiers, but after seeing this phenomenon for a full decade, the Fed still hasn't adjusted their models to account for this.

I assume part of the problem is the rigors of academia result in slow change: a thesis needs to be rigorously tested and peer reviewed before it can be accepted, whereas in finance you need to constantly adjust your thesis and the only testing you can do (backtesting) is notorious for its unreliability. And peer review? A good model won't go further than the team working on it.

If economists are bad at finance, maybe economists shouldn't be running the financial sector, no?