Charles Plosser, President of Philadelphia Fed gave a speech recently. He says Ice Hockey great, Wayne Gretzky provides lessons for Monetary Policy.
This realization was driven home to me here in Rochester. As my children were growing up, I found that there was a way to combine all three of these things into one event — “early morning hockey practice.” Driving through the cold and snow to a 6:00 a.m. hockey practice at Lake Shore was always an exhilarating way to start the morning. Yet, as I learned more about the game of hockey, I found that hockey players could teach us things that are relevant and useful in other disciplines, including, believe it or not, monetary policy.
Hockey great Wayne Gretzky was once asked about his success on the ice. He responded by saying, “I skate to where the puck is going to be, not to where it has been.” He didn’t chase the puck. Instead, Gretzky wanted his hockey stick to be where the puck would be going next. He scored many goals with that strategy, and I believe monetary policymakers can better achieve their goals, too, if they follow the Gretzky strategy.
Good monetary policymakers, like good hockey players, must be forward-looking in their actions. Setting policy that is appropriate for where the economy is today, or has recently been, is not likely to deliver the kind of economic outcomes we desire. Anticipating where the economy is headed is important because monetary policy actions affect the economy with long and variable lags. The major impact of policy often comes only after several quarters, or sometimes several years.
Wayne Gretzky emphasized that anticipation was important to being a successful hockey player. Failing to anticipate in hockey means that you always end up chasing the puck and never catching it. Since monetary policy works with a lag, policymakers must also anticipate and be forward-looking in their actions. Failing to do so would mean that policy would always be behind the curve — playing catch-up so to speak. The result would be greater instability in the economy and a failure to achieve our policy objectives.
John Taylor in his blog has a nice anecdote on how Gretzky example would save some embarrassment in his monetary policy class.
There was a very interesting speech by Mervyn King on how monetary policy lessons can be drawn from Maradona.
It is always interesting to draw lessons from sports arena. I r’ber Australian coach John Buchanan giving lectures to company management on mentoring. Same is the case with Steve Waugh who gives leadership lectures once a while. Infact, we see quite a few sportsmen giving these kinds of lectures these days.
Though I think Plosser misses on not emphasizing importance of knowing history as well. Forward looking is all good and important but without a proper reference to history turns into a disaster. I am sure Gretzky goes for the puck based on his experience and lessons he has learnt from the past. Infact, the challenge for central banks is more backward looking right now as they have to figure out why they have been ignoring lessons from financial crisis for so long.
I was just wondering Ice Hockey is very popular in Philadelphia part of the world and Football/Soccer in UK. Hence the examples. Cricket is very popular in India. Say RBI official is giving a speech on similar lines drawing analogy from sports. Which cricketer helps draw some lessons for monetary policy? Here are some ideas:
- Sunil Gavaskar for his excellent concentration, focus and new ball skills
- Kapil Dev for his allround skills
- Saurav Ganguly for his leadership
- Anil Kumble for achieving most objectives and still keeping a low profile
- Rahul Dravid for excellent technique, commitment and a team player
- Sachin Tendulkar for being such a fine player for so many years and managing the expectations so well. I don’t really know how to describe Sachin.
- VVS Laxman for making batting look an art
- Virendra Sehwag for questioning the conventional and turning all cricketing theories on its heads.
I am sure the readers would have their own names. I have watched cricket only since 1985 so just named a few from this period onwards. Obviously, Indian central bankers would have their own favorites from cricket or other sports as well.