Friday , November 22 2019
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You win by convincing the next generation of leaders

Summary:
The UK government is about to appoint a new Governor of the Bank of England, as Mark Carney’s term is expiring. Oddsmakers have made Gerard Lyons the even money favorite to be picked, partly because he’s the only candidate who supported Brexit and partly because he’s known and liked by Boris Johnson. Commenter wlb directed me to a Bloomberg interview where Lyons suggested that it was time to re-examine the BoE’s remit, particularly the question of whether they should stick with inflation targeting or consider a “money GDP” target.  I can’t be certain, but listening to him talk it’s hard not to reach the conclusion that he finds the latter option more appealing.  Otherwise, why suggest the need for reconsidering the BoE’s remit? Meanwhile, in the US there are rumors that St.

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The UK government is about to appoint a new Governor of the Bank of England, as Mark Carney’s term is expiring. Oddsmakers have made Gerard Lyons the even money favorite to be picked, partly because he’s the only candidate who supported Brexit and partly because he’s known and liked by Boris Johnson.

Commenter wlb directed me to a Bloomberg interview where Lyons suggested that it was time to re-examine the BoE’s remit, particularly the question of whether they should stick with inflation targeting or consider a “money GDP” target.  I can’t be certain, but listening to him talk it’s hard not to reach the conclusion that he finds the latter option more appealing.  Otherwise, why suggest the need for reconsidering the BoE’s remit?

Meanwhile, in the US there are rumors that St. Louis Fed President James Bullard might be picked to replace Powell in 2020, assuming Trump is re-elected. Bullard has recently argued that NGDP targeting has several important advantages over inflation targeting.

It’s often said that the Keynesians didn’t win by convincing the economic establishment of the 1930s, rather they convinced a younger generation of economists who were open to their ideas.  Those economists took over the reins of power after WWII.

I see something similar happening with NGDP targeting.  It will succeed gradually, as more and more younger economists (who have no experience of the high inflation 1970s) see its advantages over inflation targeting.

PS.  Over at Econlog, I give the Fed advice on how to implement NGDP targeting.


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Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment".

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