FORTUNE — Would we all be better off if Ben Bernanke were more like Simon Cowell? A new paper published this week by the National Bureau of Economic Research seems to suggest so.
The paper by economics professor Laurence Ball of Johns Hopkins University, which is titled
Bernanke and the Zero Bound
, asks why the Federal Reserve hasn’t been more aggressive in trying to revive the economy. Ball goes through a number of possibilities, including political pressure and the fact we haven’t actually had deflation. In the end Ball lands on this one: Bernanke’s a shy guy.
Can you really blame a lack of QE3 on personality? Before Bernanke joined the Fed he wrote extensively on what the Fed should do to revive the economy when, as is the case now, short-term interest rates are at near zero. In fact, he was considered an expert on the subject. Ball says Bernanke consistently advocated such drastic measures as an aggressive depreciation of the dollar, raising inflation targets and so-called money-financed tax cuts, where the Fed “prints” money so that the rest of us can pay less to the government, which is generally considered an inflation no-no. Ball cites one speech in 2000 in particular where Bernanke takes Japan’s central bankers to task for not doing more to revive their nation’s economy.
Yet, Bernanke as actual chairman hasn’t tried any of these. The Fed, for instance, at its most recent meeting adopted a mild 2% inflation target, instead of the 4% or more that some economists like Harvard’s Ken Rogoff have suggested. So what happened? Ball says he doesn’t know, but he thinks Bernanke’s shyness may have played a role. In mid-2003, when short-term interest rates were cut to 1%, members of the Federal Reserve debated what else they could do to stimulate the economy. The majority argued against using many of the policy measures that Bernanke had earlier backed. Bernanke’s views appear to have quickly conformed to the rest of the group.
Vincent Reinhart, Morgan Stanley’s chief U.S. economist, disagrees. He was a top economist at the Fed in the mid-2000s, and Ball, in part, credits Reinhart with changing Bernanke’s views. But Reinhart says the change in Bernanke is more a factor of what you brainstorm about as an economist and what you realize is really possible as a true central banker, than any influence he had on Bernanke. “Would a shy person put in place all the collection of special facilities during the financial crisis,” says Reinhart. “There are a number of members of the FOMC who would question right now whether Bernanke has been too aggressive.”
Indeed, Bernanke’s most vocal critics have often wondered whether he has done too much to stoke inflation, not too little. And Bernanke and the Fed’s recent stance that the economy remains weaker than it appears has only invited more ire from some economists and Republicans. What’s more, Bernanke is the first Fed chairman to hold regular press conferences, not something you would expect a shy person to do. Still, Ball thinks Bernanke about-face on policy measures to revive the economy is significant, and in Ball’s view unfortunate.
“I don’t think Albert Einstein would have gone to a lecture on physics that said he didn’t know what he was talking about and then agree with it,” says Ball. “But in Bernanke’s case that’s essentially what happened.”