Opinion

The flummoxed Federal Reserve deserves a new variation on the Peter Principle

The Peter Principle is: “In a hierarchy, every employee tends to rise to his level of incompetence.” The Federal Reserve’s behavior illustrates an analogous principle: Institutions that are flummoxed by their primary responsibility will fail upward by embracing more urgent and noble purposes.

The Fed’s primary purpose is to preserve the currency as a store of value: to prevent inflation. The Fed’s newest self-proclaimed purpose is to identify — through guesswork dignified as “scenario analysis” — and mitigate the threat that climate change supposedly poses to the “financial system.” Having failed at its first responsibility, the Fed now adopts a function at which it cannot fail: Whatever it says will be unfalsifiable because “systemic” climate risk cannot, as a matter of common sense or science, be identified.