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.