I once likened central bankers to firemen who are sent to put out a blaze but do not understand cause and effect so that they are as likely to throw a ham sandwich on the fire as to pour water. This is exactly the position of today's intellectuals coping with the apparent dilemmas of so-called "monetary policy." Given that central planning has never worked and can not work in any sector of any economy, you might think they would question whether it could work when applied to the entire monetary and banking system of the largest economy in the world. Yet, their approach is never to understand cause and effect much less to question the very system of central banking itself. Instead, their approach is to study data empirically and correlate lagging economic statistics to the various central planning "levers" at their disposal, hoping that some combination of the throttles will move some contrived statistic, such as unemployment or GDP, in some direction they have arbitrarily decided is to everyone's benefit.
But what if we consider cause and effect?
As George Reisman explains in great depth (see Chapter 19 Part B Section 5-9 from his book Capitalism full book downloadable here and here for the work of other Austrian economists), printing money out of thin air inflates revenues and incomes and encourages excessive debt to be held against this revenue and income. Artificially low interest rates encourage malinvestment or investment in businesses that only appear profitable because of inflation (see real estate in the 2000's). When inflation stops, revenues and incomes contract leaving no means of paying back the debt which in turn leads to insolvency and bankruptcy setting off a "self-reinforcing spiral of deflation." As depression and deflation take root, modern politicians and central bankers, ever in search of the path of least resistance, are led to re-inflate (create even more money out of thin air) as they attempt to reverse the disasters unleashed by their own policies. In other words, inflation of the money supply by the government (and private fractional reserve banks) is the cause of depressions and deflation and the so-called boom-bust cycle. In light of these facts, the solution to the boom-bust cycle must be the abolition of the federal reserve system and the imposition of a 100% reserve gold standard.
The fact that central banking itself is the cause of the very disasters that central bankers seek to remedy is of monumental importance yet completely ignored by establishment economists. Here we are, years into the worst depression in a half century, and their best minds are recommending dropping money from helicopters and creating trillion dollar coins. In this light, it is clear that what retards the intellectual growth of this profession is not just bad ideas but their method of thinking. Scientific conclusions can be objectively scrutinized - weighed with reason and evidence and accepted or rejected. But irrational methods, like those of the religious mystic or the modern Keynesian economist, are impenetrable and can lead to truth only by accident.
Consider another example not from monetary policy. Imagine you proposed cutting the government's budget by $2 trillion. Most modern economists would instantly focus on the effect of the cut on the all important GDP since this would reduce government spending, a component of GDP. In fact, Keynesian economists urge the government to deficit-spend to increase so-called GDP and therefore, such a cut would be regarded as positively horrifying. They might perform a historical regression to measure the empirical effect of budget deficits on GDP. Most would add that cuts of this kind will lead to unemployment, a drop in consumer spending, and a spiraling downward effect on GDP...oh no!
Now, forget about GDP (a flawed Keynesian concept to begin with). Imagine that instead of sending $2 trillion to Washington D.C. we invest it in the technology companies of Silicon Valley (or any productive area of the economy). In the short run, many people in Washington D.C. would become unemployed. (It might actually lead to a bad "jobs number" next month!) In the long run, imagine how much better off we would be if this capital were redeployed in productive enterprises engaged in researching and developing technologies that make the world more efficient, healthier, and enjoyable rather than being spent on inefficient bureaucrats pushing paper in Washington (or worse, making life more difficult for businessmen by enforcing strangling regulations). Imagine that eventually, all of the inefficient bureaucrats were eventually employed by businesses spun off by the new technologies created with the $2 trillion. In which scenario would we all be better off?
The modern economist would never think this way. There is no regression to compute and no printing press and certainly no helicopter.