3 ms·

Wow. I was trying to be balanced about it. I didn't read the comments ( mea culpa ). I generally read Sumner first. But I've caught that criticism of market mo

Wow. I was trying to be balanced about it. I didn't read the comments ( mea culpa ). I generally read Sumner first. But I've caught that criticism of market monetarism from other sources. Now I wonder if it's valid. I was talking about two things - nGDP and a 4% inflation target. I wish we were talking about a 4% inflation target, although after watching the Yellen grilling a coupe of Mondays ago I wonder of we can even do that.

eru 10y ago
What we are actually interested in is eg industrial output and unemployment. Stable nGDP growth seems pretty closely correlated with those two. Inflation less so. The standard examples are: the oil price shocks of the 1970s gave us inflation, but nGDP crashed. The IT bubble and the housing bubble saw nGDP grow above trend, but not inflation. Nominal GDP is relatively straightforward to define and measure; inflation comes with all kinds of thorny philosophical questions about quality improvements. That being said, targeting the trajectory of the price level (=`level targeting') might still be a better idea than the current system, where the central banks see their inflation targets as ceilings instead, and don't make up this year for the targets they missed last year. Scott Sumner argues that targeting aggregate nominal labour income might actually be slightly superior to targeting nGDP, but it's wages that are sticky. But the labour share of GDP is pretty stable over time in rich, diversified economies, so it doesn't make too much of a difference. The best advertisement for nGDP targeting I've read was Scott Sumner's slogan that it's making the world safe for laissez faire capitalism: it's much harder to organise political opposition to creative destruction, if everyone knows that full employment is almost guaranteed, and there won't be any recessions. Let the banks fail, abolish tariffs, let the immigrants in, review restrictive licensing requirements, etc.
- ArkyBeagle 10y ago
  Yep. Having (mis)read "A Monetary History of the United States" as an undergrad and having done an actual research paper on "why was there a Depression" by interviewing older relatives in the 1970s, I was extremely receptive to Sumner's ideas. And your point about the oil shocks - and WIN buttons - also contributed to this.
  - eru 10y ago
    WIN buttons? I am currently reading Sumner's book about the Great Depression ("The Midas Curse"). Seems pretty interesting so far. Now, I just need to find a country to migrate to that does nGDP targeting and finances itself via land value taxes alone.
    - eru 10y ago
      Oh, found it: https://en.wikipedia.org/wiki/Whip_inflation_now https://en.wikipedia.org/wiki/Whip_inflation_now

eru 10y ago

What we are actually interested in is eg industrial output and unemployment. Stable nGDP growth seems pretty closely correlated with those two. Inflation less so. The standard examples are: the oil price shocks of the 1970s gave us inflation, but nGDP crashed. The IT bubble and the housing bubble saw nGDP grow above trend, but not inflation. Nominal GDP is relatively straightforward to define and measure; inflation comes with all kinds of thorny philosophical questions about quality improvements. That being said, targeting the trajectory of the price level (=`level targeting') might still be a better idea than the current system, where the central banks see their inflation targets as ceilings instead, and don't make up this year for the targets they missed last year. Scott Sumner argues that targeting aggregate nominal labour income might actually be slightly superior to targeting nGDP, but it's wages that are sticky. But the labour share of GDP is pretty stable over time in rich, diversified economies, so it doesn't make too much of a difference. The best advertisement for nGDP targeting I've read was Scott Sumner's slogan that it's making the world safe for laissez faire capitalism: it's much harder to organise political opposition to creative destruction, if everyone knows that full employment is almost guaranteed, and there won't be any recessions. Let the banks fail, abolish tariffs, let the immigrants in, review restrictive licensing requirements, etc.

ArkyBeagle 10y ago
Yep. Having (mis)read "A Monetary History of the United States" as an undergrad and having done an actual research paper on "why was there a Depression" by interviewing older relatives in the 1970s, I was extremely receptive to Sumner's ideas. And your point about the oil shocks - and WIN buttons - also contributed to this.
- eru 10y ago
  WIN buttons? I am currently reading Sumner's book about the Great Depression ("The Midas Curse"). Seems pretty interesting so far. Now, I just need to find a country to migrate to that does nGDP targeting and finances itself via land value taxes alone.
  - eru 10y ago
    Oh, found it: https://en.wikipedia.org/wiki/Whip_inflation_now https://en.wikipedia.org/wiki/Whip_inflation_now