Just last month, I put on my thinking cap and tried to come up a list of criteria our economic policy levers should attempt to meet.
This post wasn’t inspired by Nick Rowe here, because I created this list on January 12th. But its related.
MMR is trying to create a largely non-political way to think about the economy. But I am not a perfectionist, and while I haven’t asked my co-bloggers their opinion on this exact topic, I suspect they lean to being pragmatic over being theoretically perfect. We’re engineers, not mathematicians.
I started this list when thinking about how poorly monetary policy works at times because it uses real estate as the channel to impact the economy, and then has this rather large secondary channel in business lending which can be on an entirely different cycle! It was almost a joke, like “Here’s what a real economic policy should do”! But this list doesn’t seem like a joke after I read it a few times. It seems like common sense and the basis of good policy.
There’s probably more, and these could probably be stated more clearly and more concisely, and I’m probably wrong somewhere-somehow in this list. So with that in mind, I thought I’d post a list of criteria our policy levers should meet. Comment are welcome!
Process should be readily understandable by citizens
Easy for Citizens to calculate/observe impact on their personal lives
Largely rule based
Responsive to the democratic process
Relatively Stable over short time frames
Linked to Output we want to impact
Directly Observable and Measurable
Direct impact on Outputs
Rapid impact on Outputs
Fully Controlled by Policy Makers
Wide Dispersion of Effect
Possible Geographic Precision
Use Markets to disperse benefits
Economic Growth Oriented
Indifferent to Economic Class
Monetary Policy doesn’t meet many of these criteria.