15 Oct 2014

Acton and Market Monetarism

Shameless Self-Promotion 3 Comments

==> For those in the Grand Rapids area, on November 4 I’ll be speaking at the Acton Institute on the importance of sound money.

==> Speaking of which, how about those Market Monetarists? In this Mises CA post I pit Nick Rowe against Scott Sumner.

3 Responses to “Acton and Market Monetarism”

  1. Transformer says:

    I don’t think it necessarily think it matters if individual care about NGDP or not – there will still be economy-wide benefits from keeping the growth path of NGDP stable.

    Suppose business experiences a loss of demand for its product at its current price level. This could be because either 1) demand for its product has declined relative to other products or 2) demand for all products relative to the demand to hold money has changed.

    In both cases it will respond with a combination of price and quantity changes. However if the cause is 2) then all other businesses will do the same thing and potentially lead to a complex set of changes in the economy that might get magnified into a recession. It may take a long time to get things re-coordinated.

    If NGDP is kept stable (either by processes that might emerge on a free market, or by the CB targeting it) then loss of demand faced by business is much more likely to be due to 1) and the chances of serious dis-cordination reduced.

    This would be a benefit even if no-one knew that NGDP was being stabilized. I think however there would be additional benefits in terms of business and personal planning if everyone knew that AD would fluctuate as the demand to hold money varied.

    • Andrew_FL says:

      You could make a pretty strong argument a free market would have stable nominal income. If necessary you could have the bitcoin guys write a program for managing the reserve commodity, if you thought it necessary to improve on gold.

  2. Nick Rowe says:

    Bob: I posted a second comment on your Mises blog, but it never appeared.

    What I said was (roughly): when The Revolution comes, and state-owned central banks wither away, the question of what those central banks ought to do will seem like a strange question. But until that Glorious Day comes, we need to try to answer that question as best we can, because it matters. We can’t duck it. What should central banks target, to reduce the likelihood that central banks will make it harder for market coordination to work? Should it be the price of gold, the monetary base, inflation, the price level, NGDP, or what?

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