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Bill Woolsey
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The Sumner quote is not about public choice issues in the operation of index futures targeting. It is rather about public choice issues in its introduction. And so, there is no part of constitutional political economy that doesn't suffer the same problem. Who has a selfish incentive to incur costs associated with implementing rules when the benefits will be shared broadly and spread over the generations? As for the other question, whether nominal GDP is the best target or futures targeting is best, isn't this a comparative institutional question? What is the alternative? Buchanan recently proposed a constitutional rule to target the price level. The public choice problems with actually implementing that aren't much different than the problems of implementing a nominal GDP level target. What are the radical libertarian alternatives? Freeze the monetary base? Why do you think it will be kept frozen? Fix the price of gold forever? Why do you think it will remain fixed? Let people use alternative monies? Why do you think it will make much difference given the network effects of money? Separate money and state? Why don't you think that the result won't be the use of the Euro in the U.S.? Is the ECB better? Unlike Sumner, I favor the privatization of hand-to-hand currency. But it really doesn't solve the problem. It just shifts it to the question of what serves as the means for final settlement of interbank claims. Gold at a permanently fixed price? A frozen quantity of fiat currency? Euros? Or does its quantity adjust to the demand to hold it but with a nominal anchor like the price level or growth path of spending on output? I support protecting the right to use alternative monies. But I don't think that removing whatever restrictions there are to switching to the Euro would prevent the Fed from continuing with some kind of modified Taylor rule. I don't think the gold standard or a frozen quantity of base money would be improvements.
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Jul 29, 2013