Monday, September 26, 2011

Futility, ctd...

In an oddly responsive blog post, Yglesias dismisses at least a part of my quibble saying that any recovery will make gas more expensive. This is true. But not the point I am making.

The point is that in pursuing the higher levels of inflation and NGDP we need to keep in mind that distribution of gains matters. To the extent that the policy raises prices of food and commodities by a lot and immediately, while lifting wages and employment very little and over a very long time (or not at all), this could be a bad policy notwithstanding the fact that NGDP inches closer to trend line. We also need to bear in mind that it is certainly possible to achieve nominal wage growth with declining real median wages and more people slipping bingo poverty. Policies like that, I venture, are also bad.

The second point is that direct monetary transfersp to the populace suffer no obvious flaws of this kind, because it's policy that is targeted at the core of the problem very directly.

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