October 8, 2018 — Congratulations to Bill Nordhaus and Paul Romer on winning the ultimate prize in Economics. When I first heard, I wondered what the two have in common, beyond both doing path-breaking Nobel-worthy research.
The recent surge in interest in Nominal GDP Targeting, as an alternative to money targeting or inflation targeting if the central bank is to commit to a nominal target of some sort, has prompted some pushback. This is not surprising. But one of the responses is most peculiar. This is the allegation (1) that the surge comes from liberals opportunistically adopting an idea that was originally proposed by conservatives, and (2) that they will not stick with this “fad” in the longer run because it is only designed to fit current circumstances of high unemployment and low output. Remarkably, every component of this argument is wrong.
My preceding blogpost, the Hour of the Technocrats, was inspired by the recent accession of Mario Monti and Lucas Papademos, both professional economists, to the prime ministerships of Italy and Greece, respectively. Today we turn to the U.S., where the political process seldom views academic credentials benevolently.
In the United States, Senator Richard Shelby scorned President Obama’s 2010 nomination of Peter Diamond, an eminent MIT Professor of Economics, and prevented his confirmation as a governor of the Federal Reserve Board. The Alabama Senator farfetchedly claimed that the nominee was not qualified, and persisted despite the coincidence that Diamond won the Nobel Prize in Economics soon after his nomination (deservedly). But, then, Shelby was holding up an astounding 70 of President Obama’s nominations, just to try to get two pork projects in his home state funded. Diamond finally withdrew in June 2011, because Shelby and other anti-technocratic Senators had blocked the confirmation process for 14 months and were clearly going to continue to do so. Diamond, like Axel Weber in my preceding blogpost, was comfortable foregoing the limelight.