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« Could Deflation Be Salvation? | Main | Carl Menger Essay Contest »


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The idea behind the helicopter drop is to "stabilize the price level" while avoid the distortionary effects of implementing government spending to increase the money supply, right? So effectively, the fed will announce an exchange rate and our banks will swap out the $100 worth of JuneDollars in our bank account and replace them with, say, $104 of JulyDollars?

If that's what gets the monetarists on board then that's great - whatever we can do. I have a chapter coming out in Guinevere Nell's book on basic income guarantees that discusses it in terms of the helicopter drop and offers reasons why from an Austrian perspective it might be an improvement on current policy. (I'm not entirely sold on a basic income guarantee myself - it was more of an interesting exercise to work through).

I'm less concerned about other types of spending than Beckworth is. Given state borrowing constraints a lot of the spending that goes on at the federal level is just a matter of keeping teachers paid. Beckworth's concerns don't seem to apply to that in quite the same way. Plus I think there's plenty of good stuff to do and we are quite far in practice from the point where the costs of corruption/boondoggles outweighs the macro and micro benefits of the work.

The other obvious point to make, of course, is differential MPCs when we compare cutting checks to just going out and spending it.

Here are some responses:



It seems to me that a concession to the fiscalists fails to take seriously the argument presented by Buchanan and Wagner in Democracy in Deficit: The Political Legacy of Lord Keynes. Permission to run deficits in bad times--even as a backstop--enables persistent deficits.

It is not enough to corral the horses; one must close the gate so they do not get out again.

The main problem with ngdp targeting is the long lags between policy and effect. The lags can be up to five years according to some econometric studies. But the Fed can't predict with any accuracy the ngdp two quarters out, and neither can anyone else. That guarantees Fed policy will continue to be pro-cyclical.

The BIS does a pretty good job of trashing the consensus:

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