abstract.The Federal Reserve (Fed) regularly faces novel challenges to its broad statutory mandates. Often, these challenges—from financial crises to pandemics to climate change—raise a critical question. When should the Fed act beyond the boundaries of its core institutional identity and expertise? On the one hand, some voices demand the Fed “stay in its own lane,” avoiding experimentation so that it may preserve its perceived legitimacy to carry out core historical functions. On the other, hewing too closely to precedent and existing expertise risks institutional failure of a different sort.

To navigate that tension, this Feature sketches an ethos of technocratic pragmatism—one that permits the Fed to develop the expertise necessary to address emergent problems as long as it remains constrained by norms designed to preserve its long-run legitimacy. We illustrate the ethos by examining three cases where the Fed has confronted, or is confronting, challenges that test the boundaries of its expertise: engagement with cyber risk, emergency lending before and during the COVID-19 pandemic, and nascent efforts to understand the intersection of central banking and global climate change. We also engage with cases where the Fed has transgressed legitimacy-preserving limits by intervening in policy disputes beyond the range of its statutory concerns. Taken together, these cases illustrate how the Fed must walk a fine line between valuable experimentation and the usurpation of politics.

author. Peter Conti-Brown is Assistant Professor at the Wharton School of the University of Pennsylvania and Nonresident Fellow in Economics Studies at the Brookings Institution. David A. Wishnick is Academic Fellow at the University of Pennsylvania Law School Center for Technology, Innovation & Competition. We thank Brian Feinstein, Jeff Gordon, Bill Laufer, David Schleicher, Katharina Pistor, David Zaring, and participants at the Third Conference on Law & Macroeconomics for helpful conversations on this paper and Edwin Bogert for excellent research assistance. We also thank the editors of the Yale Law Journal and especially Jonathan Liebman and Sumer Ghazala for their scholarly editorial support.

“The ghost of Andrew Jackson stalked before my face . . . and haunted my couch for nights,” Carter Glass, one of the authors of the Federal Reserve Act, wrote in his memoir about the fear of creating a monster that would evolve beyond democratic control.1 A version of that fear haunts legislators, bureaucrats, and scholars today, driven in no small part by the Federal Reserve (Fed)’s uneasy turns as crisis-fighter-in-chief. Over its century of existence, the Fed has answered call after call to take “unprecedented”2 actions in response to everything from international crises in Mexico, Russia, and East Asia in the 1990s to the 2008 crisis and today’s pandemic-driven economic collapse.

With every new crisis come two calls in opposing directions. On the one hand, some who celebrate the Fed’s successes advocate the expansion of its powers address to new problems, such as wealth inequality, structural racism, or climate change.3 On the other, some who critique its missteps call on the Fed to retreat from crisis-fighting experiments to make way for more accountable and appropriate entities to tackle what they view as resolutely “political” problems well beyond the Fed’s core capabilities.4

This Feature seeks to navigate the tension between these opposing viewpoints in favor of pragmatic—and accountable—experimentalism. A pragmatic Fed should not fear acting at the outer edge of its statutory authority and should not blanch at recognizing an absence of—and thus a need for—relevant expertise. Instead, it should experiment energetically in the name of expertise development. At the same time, an accountable Fed must respect bounds imposed by key, legitimating limitations. Further, it must be mindful of the overwhelming effects its actions can have on markets, firms, and even the political system itself.

The ethos we sketch rests on two arguments grounded in historical experience. First, we argue that a pragmatic and experimentalist Fed is best suited to develop the expertise necessary to address complex, emergent problems that affect the Fed’s broad statutory missions. Failures to embrace statutory authority and develop new expertise to address such problems will undermine the Fed’s ability to deliver on the statutory mandates it has already received. Second, we argue that the Fed’s pragmatic experimentation should be constrained by bounds designed to preserve its long-run legitimacy.

We call this ethos “technocratic pragmatism.” The term nods at the Fed’s democratic deficit: the Fed is not meant to be a purely political deliberative body, but must rely instead on the kind of expertise that contributes to the legitimacy of technocracy. But the term also recognizes that if the Fed is to live up to Congress’s statutorily inscribed ambitions, the particular components of its technocratic ambit can and must change over time.

To be legitimate, however, this technocratic form of pragmatism must be constrained by vital norms of legality, accountability, and noncoercion. Legally, the Fed’s technocratic pragmatism must serve the statutory delegation granted by Congress and embodied in the Federal Reserve Act, but construed broadly and with purpose. Norms of statutory interpretation—albeit not narrowly textual ones—should police that boundary, even and especially in the absence of judicial review. The emphasis against narrow textualism but in favor of broad legality is crucial. While the Fed can be broad in its legal interpretations, it cannot—contrary to other theories of executive action in a crisis5—justify lawlessness. Law matters to long-run legitimacy, especially given the absence of judicial review for the most important of the Fed’s actions.

Politically, as the Fed learns about new challenges that implicate its statutory mandates, it must open itself to more searching congressional oversight. Traditions of secrecy and opacity, deep in central banking’s DNA, must yield to norms of transparency in periods of experimentation. This is true despite the fact that congressional oversight may, at times, be little more than a partisan circus.6 The generation of information, funneled through constitutional government, nevertheless imposes an important check on the Fed’s innate tendency toward secrecy, especially when it is moving into unchartered waters.

And finally, the legitimacy of technocratic pragmatism depends on a norm of noncoercion: agency experimentation beyond core expertise should be tempered by due consideration of the coerciveness involved. Formulated as a rule of thumb, Fed experimentation beyond its (current) core expertise should be inversely correlated with the level of coercion it requires. Thus, within broadly construed legal boundaries, a technocratic-pragmatic Fed uses experimentation at its fullest when the actions taken in the experiment are least coercive.

Technocratic pragmatism thus optimizes two important goals that are often in tension: (1) the need for the Fed to develop expertise to attack complex problems adjacent to its core statutory responsibilities, and (2) the requirement that democratic governance select the values and problems that deserve the Fed’s scarce resources to combat. A Fed that arrogates the power of the democratic process to attack just any complex problem its central bankers choose would present a profound risk to constitutional government. Technocratic pragmatism embraces no such usurpation. Instead, the ethos encourages experimentation but requires significant guardrails to channel the development of expertise, including substantial congressional oversight, adherence to broad conceptions of statutory mandates, and efforts to focus experimentation away from the agency’s coercive powers. In this way, technocratic pragmatism stands against a common view among scholars,7 courts,8 political leaders,9 and Fed bureaucrats themselves that the Fed must “stay in [its] lane,”10 not by ignoring the concerns that animate it, but by articulating sources of guidance that constrain and channel the evolution of the idea of the Fed’s rightful “lane” in the first place.

Technocratic pragmatism also sheds new light not only on the facts of central-bank expertise—a topic well studied in existing literature—but on the process of how that expertise is acquired over time. Where most accounts of endogenous expertise production focus on traditional staff-led information development, interagency process, Federal Advisory Committee Act committees, and other core administrative processes,11 we argue that the most important methods of endogenous expertise production at the Fed are those that sit at the “boundary” of the agency’s legal authority.12 In particular, we foreground nontraditional modes of Fed experimentation to support policy decisions—the creation of academic research departments, experimentation through market participation and internal operations, embedded supervision, trial-and-error market interventions in crisis, and creative structures of congressional oversight.

A note on scope: this Feature seeks to develop a framework to guide Fed expertise-development. We rely on thick institutional description, legal analysis, and history to describe how technocratic pragmatism within the Fed has worked in the past and how it might work in the future. We hope this conception of technocratic pragmatism will find interested interlocutors focused on other areas of the administrative state, where similar institutional arrangements exist. But the core scholarly effort is to develop a framework to guide Fed experimentation in the service of its broad mandates.

This Feature proceeds in two parts. Part I details the core tension that technocratic pragmatism seeks to resolve, between the acute need for novel Fed expertise and the risk of illegitimacy in an age of crisis. It then introduces the ethos and describes how the successful development of technocratic pragmatism can enhance the Fed’s functional legitimacy. Part II then elaborates on the value of technocratic pragmatism by examining three cases where the Fed has confronted, or is confronting, challenges that test the boundaries of its expertise: engagement with cyber risk, emergency lending before and after COVID-19, and the nascent efforts to understand the intersection of central banking and global climate change. It also applies where the Fed has transgressed the limits of technocratic pragmatism by venturing into policy disputes beyond the range of its statutory concerns, such as participation in debates about social-security privatization during the Bush Administration and ongoing efforts by a Federal Reserve Bank president to amend the Minnesota State Constitution to promote a particular conception of education policy. Taken together, these case studies illustrate the ethos of technocratic pragmatism in action.