Adam Smith Institute seminar on NGDP targeting

I recently participated in an Adam Smith Institute seminar on NGDP targeting (with Anthony Evans and Matt Kilcoyne.) I had my usual technical problems with Zoom, and lost my train of thought a few times. But otherwise it went well.

I also updated my 2011 NGDP paper.

Commenter Matt Moore pointed me to another pro-NGDP targeting paper by another UK think tank (The Centre for Policy Studies). It’s written by Sajid Javid, who was recently the Chancellor of the Exchequer.

Perhaps the tide is turning in the UK. In any case, it’s only a matter of time.



14 Responses to “Adam Smith Institute seminar on NGDP targeting”

  1. Gravatar of Philo Philo
    24. June 2020 at 12:27

    “In any case, it’s only a matter of time.” You are on the right side of history!

  2. Gravatar of Richard Richard
    24. June 2020 at 13:47

    What would be even better than NGDP targeting is abolishing the FED!
    The new American Mantra for the last 100 years has been to fix bad policy with more bad policy. If these politburos would get their weight off the entrepreneurs back, and get out of the way, we’d be 100x better off.

  3. Gravatar of Rodrigo Escalante Rodrigo Escalante
    24. June 2020 at 14:29


    I have several comments about your interview. I remember reading Ben Bernanke’s memoirs several years ago. What has resonated the most from living in Europe is the phrase Ben wrote “Europeans believe in no pain no gain even if the pain brings no gains” meanings that they believe that people must suffer for their consequences even if it brings no benefit. They believe this in their bankruptcy system (no debt forgiveness) and in life in general, but still they advocate unemployment benefits that last for years and a healthcare system that is competently free to the consumer (even myself as an american). Still they hate government debt and believe countries should live within their means. Not to mention the emission of a euro bond (they hate this) Most importantly when I try to explain that it was the ECB that caused their double dip recession they justify it by saying that the ECB has a strict inflation mandate therefore they acted correctly in 2011 when they raised interest rates! this is when I give up.

    PS. You should patent the phrase “Never reason from a price change” I learned it in college from you in college and it has been such a useful thought tool. (if not policy tool)

    Hopefully we can see you in the fed next year when Biden wins the elections.

    Former Student

  4. Gravatar of Benjamin Cole Benjamin Cole
    24. June 2020 at 15:13

    Go NGDPLT!

  5. Gravatar of sean sean
    24. June 2020 at 16:33

    “Never reason from a price change”

    I know econ professors at UC who use the phrase and didn’t realize you were the creator.

  6. Gravatar of Benjamin Cole Benjamin Cole
    24. June 2020 at 18:08

    OT, BTW some red-meat for media-haters:

    Bolton did NOT keep his notes from his days of service in the White House. He had all his notes destroyed when he left the Trump Administration.

    Bolton now says he reconstucted his conversations with Trump from memory.

    “Bolton acknowledged (in the National Public Radio interview transcript linked just above) “Well, look, this, the book is my best recollection.”

    Gee, I got the impression Bolton kept contemporary, verbatim and copious notes, upon which his recollections are atrictly based.

    And now this from Newsweek:

    “John Bolton Says He Destroyed Notes Before Leaving White House”

    This hardly charges anything substantial, Trump’s personality is loathsome in many regards, even as many Trump policies are better than establishment policies.

    But what to say about US media? Bolton was elevated to a peerless stenographer. Now…is Bolton but a discarded warmonger, settling up a score?

  7. Gravatar of Rajat Rajat
    24. June 2020 at 20:18

    Positive though this development is, as I pointed out to Britmouse back in the day, Thatcher’s former chancellor, Nigel Lawson supported NGDP targeting – albeit only in principle due to the standard concerns re measurement and lags. There’s a section in chapter 33 (“My Monetary Principles”) of his 1992 memoir, “The View From No. 11” where he explains the importance of having a nominal framework for macroeconomic management and the advantages of targeting nominal GDP over prices especially under serious recessionary conditions and in an environment of wage and price rigidity or in the event of one-off supply shocks.

  8. Gravatar of Matthias Görgens Matthias Görgens
    25. June 2020 at 00:50


    There’s more than one person in Eruope. And more than one country.

    The contradictions you see are partially because you are mixing up policies and views form different countries and different people.

    Eg the Brits have their NHS and might not charge American patients under some circumstances. The Brits have no direct influence on the ECB. The ECB mostly reflects German traditions.

  9. Gravatar of Spencer Hall Spencer Hall
    25. June 2020 at 04:46

    Lending by the commercial banks is inflationary (MMT more so). Lending by the nonbanks is noninflationary (other things equal). To match savings with investment, you must activate savings. The only way to activate savings is for the owners to invest/spend directly or indirectly outside of the payment’s system period (a velocity relationship). That is accounting 101.

    From a systems’ perspective (not an individual bank’s), commercial banks, deposit taking, money creating financial institutions, or DFIs, as contrasted to financial intermediaries (non-banks or NBFIs): never loan out, and can’t loan out, existing funds in any deposit classification (saved or otherwise), or the owner’s equity, or any liability item.

    When DFIs grant loans to, or purchase securities from, the non-bank public, they acquire title to earning assets by initially, the creation of an equal volume of new money (demand deposits) – somewhere in the banking system. I.e., the DFI’s bank deposits are the result of lending, not the other way around.

    Using LSAPs in conjunction with the remuneration rate as its credit control device, the trading desk lowers the real rate of interest. That in effect lowers AD.

  10. Gravatar of Postkey Postkey
    25. June 2020 at 05:48

    “Lending by the commercial banks is inflationary . . . ”

    Here: is someone who would disagree?
    ” . . . when banks create credit for the real
    06:07 economy but it’s used for business
    06:10 investment in the creation of new goods
    06:12 and services productive investment or
    06:14 implementation of new technologies that
    06:16 creates growth without inflation and
    06:18 without crises and as long as you ensure
    06:23 that bank ready creation is used for the
    06:25 green box you get high growth no crises
    06:27 and no problems . . . “

  11. Gravatar of Ed Zimmer Ed Zimmer
    25. June 2020 at 07:29

    IMO, NGDP targeting is worthless without the resolve to follow through with government spending as needed to meet the target.

  12. Gravatar of ssumner ssumner
    25. June 2020 at 11:04

    Thanks Rodrigo. I’m afraid there’s no chance of me at the Fed, however. I have a long paper trail, and wouldn’t want to work there in any case.

    Thanks Sean.

    Rajat, Yes, it’s a “long march”.

  13. Gravatar of Andre Surkis Andre Surkis
    27. June 2020 at 06:17

    If the NGDP is indeed a new structure, and not just a basis for maintaining monetary policy, which should be discarded when conditions change, then we should look back at how it would work in a period of high nominal growth – and high inflation.

  14. Gravatar of ssumner ssumner
    27. June 2020 at 11:30

    Andre, It would have worked great in the 1960s and 1970s.

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