simply put, economies are constantly under competitive pressure to re - invent themselves. as they move toward higher levels of productivity, they necessarily make other production technologies obsolete. schumpeter cautioned that economic policymakers who fail to appreciate the relationship between the relentless churning of the competitive environment and wealth creation will end up focusing their efforts on the methods and skills that are in decline. in so doing, they establish policies that are aimed at protecting weak, outdated technologies, and in the end, they slow the economy ’ s march forward. in retrospect, we can tell that some economic policies of the past century have inadvertently, or in some cases intentionally, done just that. they have had the effect of directing or misdirecting economic growth by either substituting policymakers ’ judgment regarding the distribution of an economy ’ s assets for the combined wisdom of individuals or allowing markets to send false signals. in the long run, such policies were destined to fail. the economic policies of the last century a very broad reading of economic history reveals that policymakers in many countries during the last century attempted to manipulate trade and other forms of economic activity by altering, artificially, the measures of value, that is, prices. one such policy followed by some countries during the last century was known as the “ beggar thy neighbor ” policy, the manipulation of the exchange rate in order to boost a country ’ s exports. trade restrictions were also often used to protect domestic industries from imports. a final example from the international sphere is the system of global fixed exchange rates that emerged following the second world war. to blunt market forces, fixed exchange rates were usually accompanied by capital controls that tried to manage the inflows - and more importantly the outflows - of a nation ’ s investment funds. ultimately, this system of global fixed exchange rates worked poorly and could not withstand the market forces that emerged in the 1970s. in a similar spirit, some economies used taxes or other incentives to promote one industrial activity or discourage another. obviously, the most egregious form of this policy was in planned economies. but many democratic economies, as they recovered from various wars and other national traumas, nationalized entire industries. in our society, we never found that degree of government intervention appropriate, but we did regulate some business decisions for certain industries, such as electric power distribution and airlines, attempting to overcome the “ natural monopoly ” or “ excessive competition ” characteristics perceived in these industries. finally, some central banks in

operated a program called feded, which sends board employees into high schools throughout the washington, d. c., area. this outreach depends on several dozen volunteers from our staff — typically, recent college graduates — who help teach about the fed, economics and finance, and answer questions about work opportunities at the board. the federal reserve is dedicated to promoting diversity in our ranks and in the economics profession, and feded and other programs across the federal reserve system have helped advance this goal by reaching many schools with significant numbers of minority students. let me leave it there, and again thank you for participating in this town hall, and thank you for the valuable work you do every school day. 2 / 2 bis central bankers'speeches