A theory he thought to be sound
Ignored a taboo
By changing his view
When facts that disproved it were found.
"You have to learn from the data," says Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis (pictured at right). This, he says in an interview with The Wall Street Journal, is why he set aside his concerns regarding "structural unemployment" and came to support the Fed's easing efforts more strongly. Structural unemployment results when the jobless lack the skills or mobility to fill open positions, while cyclical unemployment merely reflects a temporary economic downturn. Mr. Kocherlakota has been studying the problem of structural unemployment and concluded that it is less important than he previously espoused. In fact, he now believes that the Fed's most effective course is to keep interest rates low until the jobless rate falls to 5.5%.
The Minneapolis Fed president's comments, first conveyed in a speech on Thursday, appeared to move him from hawkish to the dovish side of the Federal Reserve board. However, Mr. Kocherlakota's public change of mind also serves as a reminder of the silliness and artificiality of "sides" in questions as complex as growth, inflation and employment.