Woods, Salerno, White, Selgin, and Wenzel in a spat

Somebody whose last name starts with “S” needs to continue this WSWSW pattern.

Tom Woods interviewed Joseph Salerno on the wrong-headed economics associated with NGDP targeting, a monetary policy prescription usually associated with so-called “market monetarism”, even if it has deeper Keynesian roots under the surface. Larry White, who has over the years been associated with Austrian economists, sometimes as a comrade-in-arms, sometimes just as a fellow traveler, but other times (like this time) as a sore thumb, recently proposed NGDP targeting in an interview as a viable and prudent policy prescription. George Selgin, who seems to take things very personally even though he was only mentioned briefly in the interview, wrote up a cranky blog post about how wrong Salerno was to criticize such a policy and the monetarist/Keynesian analysis that leads to such a conclusion, even bringing Hayek to battle (reminds me of how Dan Sanchez said libertarians on social media call on the big names like throwing a Poke ball in a Pokemon battle). Salerno and Wenzel parried each of Selgin’s attacks, including a remark on how Hayek had rebuked NGDP targeting-type policies in Prices and Production.

As a Salernian (see the brilliant last line of Peter Klein’s afterword to Salerno’s new festschrift), I hold to the standard Austrian dictum: Any artificial increase in the stock of money via credit markets triggers a business cycle. I may be able to add a bit on price stickiness, however, since it comes up a lot in these discussions. The “stickiness” of prices is a choice variable. Prices and wages are just as sticky as the market actors proposing and accepting the prices want them to be. Wage contracts may be fixed for longer periods of time, but it’s because the wage earners and payers agree to such an arrangement. Gas stations with digital signs may be able to adjust their prices with the push of a button. This same technology is even used by department stores like Kohl’s and other firms. Voluntary price stickiness shouldn’t be an issue, especially as internet and digital pricing make their way into regular use. Price controls, government regulation, and taxation are notable cases of involuntary price stickiness, the effects of which would be discoordinating.


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