tag:blogger.com,1999:blog-6837159629100463303.post7985219307564950959..comments2023-06-18T01:25:08.748-07:00Comments on Information Transfer Economics: NGDP targeting is roughly the same as inflation targetingJason Smithhttp://www.blogger.com/profile/12680061127040420047noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-6837159629100463303.post-2358006272186402582015-06-05T20:25:16.214-07:002015-06-05T20:25:16.214-07:00It's mostly scattered across the blog, but thi...It's mostly scattered across the blog, but this post gets at the basic idea:<br /><br /><a href="http://informationtransfereconomics.blogspot.com/2014/01/what-is-and-isnt-explained-by.html" rel="nofollow">http://informationtransfereconomics.blogspot.com/2014/01/what-is-and-isnt-explained-by.html</a><br /><br />And yes, that is the article I borrowed from.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-91360331027552664272015-06-05T11:53:28.768-07:002015-06-05T11:53:28.768-07:00Thanks Jason. Kenneth wrote me a nice response BTW...Thanks Jason. Kenneth wrote me a nice response BTW. Do you have a blog post on this?:<br /><br />"Actually, the ITM is already wrong -- it doesn't explain the deviations from trend associated with recessions. It allows them, but doesn't explain them. There's no reason why a recession couldn't result in a 100% unemployment rate, for example."<br /><br />Is this the Wikipedia article you borrowed the notation from?<br />http://en.wikipedia.org/wiki/FalsifiabilityTom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-80345182420592363192015-06-05T10:46:08.060-07:002015-06-05T10:46:08.060-07:00Pegged interest rates seem to be a good indicator ...Pegged interest rates seem to be a good indicator that you're on a hyperinflation path ...<br /><br />Actually, hyperinflation isn't controllable in the long run -- it leads to accelerating inflation unless you constantly decrease the growth rate of the monetary base.<br /><br />So pegged interest rates with a continuously decreasing monetary base growth rate would be one way to realize a "controlled hyperinflation" ...Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-24299546256019449782015-06-05T10:39:10.687-07:002015-06-05T10:39:10.687-07:00I don't think many people -- not just econ blo...I don't think many people -- not just econ bloggers -- ask themselves that question often. Among econ bloggers, I think only Brad DeLong is truly introspective (that may just be <a href="http://equitablegrowth.org/2015/06/02/new-economic-thinking-hicks-hansen-wicksell-macro-blocking-back-propagation-induction-unraveling-long-run-omega-point-honest-broker-week-may-31-2015/" rel="nofollow">recency bias</a>).<br /><br />Actually, the ITM is already wrong -- it doesn't explain the deviations from trend associated with recessions. It allows them, but doesn't explain them. There's no reason why a recession couldn't result in a 100% unemployment rate, for example.<br /><br />I'm not surprised Nick Rowe couldn't come up with what would falsify his theory -- market monetarism isn't falsifiable in the Popperian sense; (borrowing from Wikipedia) it says your theory T implies some observation O that won't be seen, i.e.<br /><br />T → ¬O<br />O<br />∴ ¬T<br /><br />However for market monetarism there is no O which can't be observed. All NGDP growth rates, levels, inflation rates, price levels, exchange rates etc are in principle observable. Therefore ∄ O : ¬O ∈ U, or O = U (with U being the universe of observations).<br /><br />The other aspect of it is that market monetarism suffers from "no true Scotsman" disease with its predictions. If the Fed doesn't achieve its inflation target, it must not have wanted to achieve it.<br /><br />Market monetarism can be proven wrong (a better word is outperformed) by a more concrete, falsifiable model that gives empirically accurate predictions. Basically if there is a theory that works better than handwaving about central bank mindsets and targets, it wins. But you can see how Nick Rowe reacts to this here:<br /><br /><a href="http://informationtransfereconomics.blogspot.com/2014/11/because-empirical-success.html" rel="nofollow">http://informationtransfereconomics.blogspot.com/2014/11/because-empirical-success.html</a>Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-19266525763830422782015-06-05T10:20:51.849-07:002015-06-05T10:20:51.849-07:00BTW, how could one distinguish between "contr...BTW, how could one distinguish between "controlled hyperinflation" and aggressive inflation targeting (or aggressive NGP targeting)? Either in their rate or level varieties.Tom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-39406456251829205222015-06-05T10:05:14.366-07:002015-06-05T10:05:14.366-07:00"unless you are pursuing a controlled hyperin..."unless you are pursuing a controlled hyperinflation"<br /><br />That reminds me. I visited Vincent Cate's site yesterday to remind him of his prediction of hyperinflation (which he defines with a very low threshold of 26% per year) in Japan starting in the 1st few months of 2016 and also to remind him of his bet with you. You and Vincent so far are the only two econ bloggers who are willing to give me concrete examples of how you'd know if you're wrong. And since the only other people I've asked are Nick Rowe and Kenneth Duda (Duda is not a blogger, AFAIK), that's not a bad percentage so far (between 50% and 67%), Lol. Although I'm pretty sure I asked more people than that back a year or two ago. Here's Nick's response BTW:<br /><br />http://worthwhile.typepad.com/worthwhile_canadian_initi/2015/06/back-propagation-induction-does-not-work-under-inflation-targeting.html?cid=6a00d83451688169e201b8d1227795970c#comment-6a00d83451688169e201b8d1227795970c<br /><br />Admittedly I just picked his latest post in which to ask the question, so perhaps it wasn't the best choice of places. And he did give me an answer, which I appreciate. However, I do find it curious that the falsifying data isn't even describable (at least "not yet."). I have no reason to doubt his unit roots statement. Of course perhaps the real problem is that it would take too long to sketch out what the falsifying data would look like -- especially just to satisfy an inquiry from the likes of me. (c:<br /><br />What I did with Duda was emailed him. I asked him the same question, except slanted towards Sumner's statements: I asked "How would you know if Sumner's economic ideas are wrong?" Again, I'm sure the man has better things to do that answer emails from me, but I'm curious if he ever asked Sumner that question (which I also asked Kenneth about directly).<br /><br />Evolutionary biologists can produce a list of falsifying evidence for the theory of evolution, perhaps the most famous of which is the pre-Cambrian rabbit fossil. So that's how I phrased it for both Duda and Cate: what's your pre-Cambrian rabbit?<br /><br />In your opinion Jason, do you think some of the prominent economist bloggers ask themselves that question very often? I.e. "How would I know if I'm wrong?" It seems like a fundamental question that any honest person purporting to make knowledge claims about reality should ask and discuss publicly. Yet clearly, some (perhaps not so prominent) people resist ever going there:<br />http://jpkoning.blogspot.com/2014/11/gilded-cage.htmlTom Brownhttp://www.google.comnoreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-70235027251167781192015-06-05T08:45:39.229-07:002015-06-05T08:45:39.229-07:00Thanks, M.Thanks, M.Jason Smithhttps://www.blogger.com/profile/12680061127040420047noreply@blogger.comtag:blogger.com,1999:blog-6837159629100463303.post-85924160702828444532015-06-05T02:56:24.549-07:002015-06-05T02:56:24.549-07:00"That might be true, but if the information e..."That might be true, but if the information equilibrium model is correct, then NGDP targeting is no better than inflation targeting unless you are pursuing a controlled hyperinflation."<br /><br />Well put.Mnoreply@blogger.com