Nominal GDP targeting is the latest mainstream fad, which is allegedly going to improve central banking when compared to inflation targeting. In a certain sense, I have some sympathies. If a central bank could stabilise nominal GDP growth, it has abolished the business cycle. I am in favour of abolishing the business cycle. Doing so would not solve all economic woes, but it would be the most that can be hoped for from macroeconomic stabilisation policy. Unfortunately, there is no reason to believe that the central bank can wave a magical expectations wand and abolish the business cycle — despite the claims of some Market Monetarists.
I am only just starting to read but I would not consider it the latest fad as it has been around for a while. I saw it a few years back from market monetarist Scott Sumner first but even self-identified Old Keynesians (who I really think are New Keynesians) like John Quiggin have taken it up. Either way, as we know, the only way to do it effectively is through fiscal policy anyway.
I honestly found this difficult to believe. Is economics really this stupid? it seems every new thing to target is another abstraction layer further from the actual conditions of people. At least with inflation targeting, there was some loose connection to people's reality - even if it was just mythology. "Gee, broccoli is expensive. We'll need to smash that with some interest rates".
(For more on that, look at this link: https://www.rbnz.govt.nz/hub/publications/bulletin/1999/rbb1999-62-03-06 . The "target" of 0-2% is a number that Roger Douglas pulled out of his arse, so that his Labour government could appear "tough on inflation". Nothing to do with "science" or economics, it is pure politics!)
But how does GDP manifest in our experience? Will we need a "things have been a bit shit lately" index? It will mean economists taking actions people don't understand to fix issues people have never seen or felt for themselves - which is about as pointless as praying for growth. At least there is a potential silver lining to this. When (not if) we need to target degrowth to prevent us all from boiling, these idiots might accidentally design the tools to do it. Though of course, achieving degrowth by these means will be about as effective and equitable as smashing broccoli prices with interest rates.
I am only just starting to read but I would not consider it the latest fad as it has been around for a while. I saw it a few years back from market monetarist Scott Sumner first but even self-identified Old Keynesians (who I really think are New Keynesians) like John Quiggin have taken it up. Either way, as we know, the only way to do it effectively is through fiscal policy anyway.
I honestly found this difficult to believe. Is economics really this stupid? it seems every new thing to target is another abstraction layer further from the actual conditions of people. At least with inflation targeting, there was some loose connection to people's reality - even if it was just mythology. "Gee, broccoli is expensive. We'll need to smash that with some interest rates".
(For more on that, look at this link: https://www.rbnz.govt.nz/hub/publications/bulletin/1999/rbb1999-62-03-06 . The "target" of 0-2% is a number that Roger Douglas pulled out of his arse, so that his Labour government could appear "tough on inflation". Nothing to do with "science" or economics, it is pure politics!)
But how does GDP manifest in our experience? Will we need a "things have been a bit shit lately" index? It will mean economists taking actions people don't understand to fix issues people have never seen or felt for themselves - which is about as pointless as praying for growth. At least there is a potential silver lining to this. When (not if) we need to target degrowth to prevent us all from boiling, these idiots might accidentally design the tools to do it. Though of course, achieving degrowth by these means will be about as effective and equitable as smashing broccoli prices with interest rates.