Friedrich Hayek endorsed the core of ‘NGDP targeting’ 3 years before the idea was ‘first proposed‘ by James Meade in 1978:
“If I were responsible for the monetary policy of a country I would certainly try to prevent a threatening deflation, that is, an absolute decrease in the stream of incomes, by all suitable means, . . . → Read More: Hayek endorsed anti-deflationary, publicly announced NGDP targeting in 1975
Let’s compare Stephen Williamson’s account of “New Monetarism” with Hayek’s account of the expansion and contraction of the supply of various types of monies, near monies, shadow monies, and money-substitute assets of changing liquidity.
A New Monetarist thinks that, under current circumstances (a large stock of excess reserves, and the interest rate on . . . → Read More: Stephen Williamson’s “New Monetarism” = F. A. Hayek’s Monetary Economics in a New Bottle with a New Label
In a paper written for the Adam Smith Institute (pdf). Quotable:
George Selgin pointed out that NGDP targeting would produce lower than normal inflation during a productivity boom. One of the criticisms of inflation targeting is that because central banks focus on consumer prices, they allow asset bubbles to form, which eventually destabilize the economy. . . . → Read More: ARTICLE: Scott Sumner Makes the Case for NGDP Targeting
Monetary policy has to go beyond inflation stability, adding output and financial stability to the list of targets, and adding macro-prudential measures to the list of instruments.
Of course, Hayek established the fundamental significance of this point in the 1920s, in his book Monetary Theory and the Trade Cycle.
Much can be added . . . → Read More: IT’S BACK TO HAYEK ALL OVER AGAIN
Or, PAUL KRUGMAN DISSEMBLES AGAIN.
David Beckworth and Scott Sumner — citing Hayek, Selgin, Horwitz, and White — claim the mantle of Friedrich Hayek in making their case for NGDP targeting, quantitative easing, and a monetary disequilibrium understanding of the current economic pathology.
And Beckworth explicitly cites Hayek as among those who informed and inspired . . . → Read More: WILL THE REAL “AUSTRIAN” PLEASE STAND UP
“Stable monetary conditions require that the stream of money expenditure is the fixed datum to which prices and wages have to adapt themselves, and not the other way around.” — F. A. Hayek
David Beckworth gives some reason to believe that Hayek would have supported QE2. And Scott Summers make the case for believing Hayek would have supported monetary easing in Europe.
“The Hayek Rule: A New Monetary Policy Framework for the 21st Century”, (pdf) by Marius Gustavson and Anthony Randazzo Nov. 9, 2010. Quotable:
“We propose a new policy framework for monetary policy, one that looks at monetary aggregates and factors in the connections between monetary policy and asset prices. Our proposed “Hayek rule” is a . . . → Read More: THE HAYEK RULE — A NEW MONETARY FRAMEWORK
David Beckworth reports:
The FOMC minutes released today reveal a big change in terms of policy options being discussed by the Fed. For the first time the FOMC has discussed the possibility of targeting the level of NGDP. Here is the key excerpt (my bold):
With short-term nominal interest rates constrained by the zero bound, . . . → Read More: Blogosphere debate over NGDP targeting makes its way to the boardroom of the Federal Reserve
“The moment there is any sign that the total income stream may actually shrink [during a post-bust deflationary crash], I should certainly not only try everything in my power to prevent it from dwindling, but I should announce beforehand that I would do so in the event the problem arose.”
– F. A. Hayek, in . . . → Read More: Hayek — against a Fed created post-bust deflation
George Selgin on how he became an economics and other matters. Quotable:
After college I first tried to combine my main interests by working toward a degree in marine resource economics at the University of Rhode Island. The program turned out to be a disappointment to me – neither fish nor free-markets, you might say; . . . → Read More: Just Don’t Call Him an “Austrian”
George Selgin is one of the best of the current generation of monetary economists. Scott Sumner is perhaps the most engaging economist blogger on the internet. What happens when Sumner blogs on Selgin? Take a look. Selgin responds in the comments.