Monday, November 14, 2011

Conservatives for NGDP Targeting

Goldman Sachs has another research note out on NGDP  targeting and, among other things, has this to say:
NGDP target[ing] enjoys growing support from economists on both sides of the political aisle. Several prominent economists who have recently advocated NGDP targeting, including Paul Krugman, Christina Romer, and Bradford DeLong, lean toward the Democratic side. However, many of the long-standing “market monetarist” supporters of NGDP targeting such as Scott Sumner and David Beckworth identify themselves as political conservatives. Beckworth recently wrote an article advocating NGDP targeting with political journalist Ramesh Ponnuru in the conservative National Review. Gregory Mankiw, an adviser to Republican presidential candidate Mitt Romney, has in the past also published research favorable to NGDP targeting, although he has to our knowledge not weighed in on the current debate.
Actually, Greg Mankiw in a recent Brookings Paper argued for macroeconomic policy that amounts to a NGDP target.  In his own words: 
This policy might be interpreted, for example, as the central bank targeting a higher level of nominal GDP growth.
Other long-time, right-of-center proponents include Tyler Cowen and Alex Tabarrok--their Modern Principles of Macroeconomics textbook has an innovative AD-AS model that is conducive to making the case for a NGDP target--as well as the recently deceased William Niskanen  of Cato Institute.  National Review Senior Editor Ramesh Ponurru could also be considered a long-time advocate since he has supported George Selgin's NGDP target for some time. More recently, though, he has become very vocal in his calls for the loosening of monetary policy via a NGDP target (see here, herehere, and here) and has opened the pages of the National Review to us Market Monetarists (see here, here, here, and here).  More recent endorsements for a NGDP target come the CATO Institute's Tim Lee.  Bruce Bartlett and the folks at FrumForum are also in favor of something like a nominal GDP target.  And then there is all the blogging by the Market Monetarists who tend to be right-of-center.  So yes, there is growing political support from both sides. The problem, though, is that on the right we have a uphill battle against the hard-money view.  

2 comments:

  1. David, the MM revolution could be the new rallying cry for the pro-growth right - the Reagan revolution of this decade.

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  2. I made the following comment on Nick Rowe's similar post, although it is perhaps more relevant here, because you are discussing the wide range of political support for NGDP targeting from the conservative side rather than the left wing side:

    Here is how I think it works. Normally, right wingers are in favour of hard money, because it is part of an Darwinian type of economy in which the risks and rewards are clear, the fittest survive and there are no bailouts. Right wingers tend to be advantaged people who tend to do well in such an economic environment, and believe they deserve to do so. But right wingers tend to hold a lot of wealth in risky assets (houses, stocks etc, and also yield enhanced assets with hidden risk such as ARS and money market mutual funds), and in downturns associated with a substantial and apparently chronic fall in the value of such assets, pragmatic right wingers (as opposed to ideologues) change their tune, and begin to like bailouts. Right now, inflation offers a grand bailout, and NGDP targeting offers intellectual cover for increasing inflation, so many pragmatic right wingers support it.

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