Wednesday, November 25, 2009

Selgin on the Productivity Norm

George Selgin's Less Than Zero is now available online. His discussion of monetary disequilibrium is very good. As usual, he provides great scholarship on the history of thought and interesting economic history as well.

I still favor targeting the growth path of nominal expenditure at 3 percent, which would result in a stable price level on average. Selgin's arguments against trying to reverse changes in the price level due to unexpected changes in productivity are persuasive. I am less convinced by the arguments for a trend rate of deflation. The trend growth rate in productivity can be anticipated, and especially, a targeted growth rate for nominal incomes can be anticipated.

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