Steve Waldman’s Latest Post: A Series of Riffs

Steve Waldman is known around the internets as mega-smart. His latest post is another in a long line of incredible posts and comments.

One of the things I find most remarkable about Steve’s work is that it tends to generate more ideas. It’s not just his posts are stand-alone smart ideas which improve the world by existing. Nope – he helps out by creating a fertile atmosphere where you feel as though “Yes, You too can answer the big questions facing our world.”

I feel smarter and more creative after reading his work. One time I told him “Every sentence of your posts demands a 1,500 word comment and response.”

I don’t have time to write a 100,000 words in response to his last post – but perhaps team MMR can get part of this undertaking done. So, over the next week, I’ll post a series of short posts with observations, comments, riffs, unsupported speculations, opium-dream ravings – and probably a heap of balderdash- on and about this post. Feel free to add in.

Here’s something I found interesting about Steve’s latest post – Why did he choose to point out U.K. NGDP levels?

Here’s the reason: The U.K. are the modern masters of NGDP level targeting. David Beckworth wrote a fantastic post several years ago showing this was the case, after the FT claimed it was the case.

Yet, Steve points out the BoE has not been successful in maintaining the NGDP level target post-crisis! 

So, If the U.K is having problems maintaining NGDP levels – who can be successful? Is targeting NGDP even our best idea?

This is a bit of a strike against the NGDP level crowd. It’s not that NGDP level targeting is stupid goal – it’s way better than our current inflation target – but rather we can’t be assured of hitting it even when we try! Scott Sumner is all about having an explicit rule – but wouldn’t the BoE still be trying extremely hard to hit NGDP levels even without an explicit rule?

Perhaps monetary policy isn’t enough, and we need fiscal too?

To be 100% clear: I very much prefer NGDP per capita level targeting over our current inflation targeting. 


Steve is too polite to say this is a flaw with using monetary policy alone in a depression this directly. And, it’s only a small plank in his post – but I thought I’d put a bit of meat on the choice of U.K. NGDP levels as a primary piece of evidence in his post.




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5 Comments on "Steve Waldman’s Latest Post: A Series of Riffs"

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Oilfield Trash
5 years 1 month ago

Well, if the fed had a legal NGDP level target mandate, Ben Bernanke would be forced to announce he wants fiscal spending and he would keep rates at zero until the NGDP level path was back to normal.

This seem to be wondering off the MMR resveration just a tad. Let’s see where you go with this. Opium-dream ravings may be the best you can hope for, but I will take anything over the on going hyperinflation debate. I quit counting the number of times that topic has backtrack on itself.

Detroit Dan
5 years 1 month ago

NGDP “targeting” has always struck me as nonsense. Our target should be reduced unemployment, with various policies used to attain that goal. NGDP is neither a reasonable target nor a concrete policy. It’s a political ploy that makes no sense politically. Oy!

Oilfield Trash
5 years 1 month ago

Why should targeting NGDP, be any better than targeting inflation, or the price level?

Until a monetary model of capitalism is built from combination of Goodwin’s growth cycle, Minsky’s Financial Instability Hypothesis, an d a Circuit theory of endogenous money creation you can try to shoot at NGDP all you want, but the FED would suffer the same results as the BOE.

5 years 1 month ago

Hey Mike! Yes I too appreciate Steve. I’m pretty new to him but already feel like he brings a lot of clarity to so many of the blog wars.

As to this point about Britian, it’s a very good point-they themselves have failed to hit the NGDP target. I made the point this morning in a post that MMers like Sumner and Nick Rowe label those who ask about a transmission mechanism as “hydraulic Keynsesians” and the “people of the concrete steppes” but if “Old Keynesians” are mechanical in their understanding of monetary policy aren’t the MMers-really Monetarists in general-kind of like the economy’s psychoanalysts.

Remember when Phil Gramm said that the US was in a “mental recession?” Is not the MM position that it’s simply “all in our heads” that if we can just think the economy is growing again it will be?

My view on the fiscal vs. monetary divide is that it’s a question of too different kinds of medicine or tools-monetary policy is the right medicine for stablizing the financial economy but for the real economy we need the fiscal authorities to do most of the heavy lfiting.

I don’t necessarily say “End the Fed’ but the Fed should stick to its own role-and maybe have some of its “independence” curtailed.