Is it possible for opposite policies to both be wrong? Over at the Washington Examiner, I argue that it is. The U.S. is ending its quantitative easing program just as Japan is ramping its up. Those seemingly opposite policy paths are rooted in the same mistaken philosophy. I argue instead for a humbler monetary policy:
Both Yellen and Kuroda should move their focus away from stimulus, exchange rates and constant tinkering, and toward stability, honesty and predictability in their price systems. Easing of $1.66 trillion has had almost no effect on the U.S. economy. How reality will stack up against the Bank of Japan’s predictions, no one knows.
Along the way there are discussions of Keynesian liquidity traps, the Taylor rule, NGDP targeting, and Bitcoin. The larger point is that central bankers are barking up the wrong tree. Instead of manipulating various economic indicators, they should concentrate on creating a stable, predictable, and honest price system that enables more investment, better investment decisions, and more innovation. Entrepreneurship, not interest rate tinkering, is what causes economic growth and mass prosperity.
Read the whole thing here; see also a facsimile of the print edition here, starting on p. 26.
Washington Examiner columnist (and former CEI Warren Brookes Fellow) Tim Carney has a must-read column today on Texas Governor and presidential candidate Rick Perry’s economic policies. They appear suspiciously similar to Bush and Obama’s policies:
“I’m a pro-business governor — I don’t make any apologies about it,” Rick Perry told the crowds in Iowa this week. He’s right, but we can get more specific. Perry is pro-Merck, pro-Boeing, pro-Mesa Wind, pro-Texas Instruments, pro-Convergen, and pro-dozens of businesses that donate to his campaigns and hire his aides as lobbyists.
Perry promises to “get Americans back to work,” but his policies — from backroom drug company giveaways to green energy subsidies — eerily mirror the unseemly big business-big government collusion that has characterized President Obama’s presidency. Judging by his record in Texas, Perrynomics might just be low-tax Obamanomics.
Pro-business politicians like Perry and Obama are a dime a dozen. What the economy needs to recover are more pro-market politicians. Instead of putting their thumbs on the competitive scales to favor one business or another, Congress and the president should allow an open, competitive market process.
That means the rules of the game would be both clear and few; they would also be consistently enforced. Unlike Perry and Obama, markets respect no special interest. If they did, no company would bother with a Washington office.
Consumers do a much better job of picking winners and losers than politicians with campaigning and fundraising on the brain. They should be allowed to try it sometime.
What a shame that no presidential aspirant is likely to admit that; such is the curse of “do-something” bias.
As he often does, Gene Healy hits a home run in his Washington Examiner column. More and more hilarious stories of bumbling, incompetent terrorists are coming out. Gene shares some of the better ones and asks, “You ever get the feeling that some of these guys aren’t the sharpest scimitars in the shed?”
This leads to a conclusion reached by far too few:
We’ve given al Qaeda power over us they don’t deserve. When we recognize that they’re often inept and clownish, we weaken their ability to sow terror. For the sake of our liberty and security, it’s prudent and patriotic to allow an occasional smirk to cross your stiff upper lip.
He’s right. Terrorists win when we overreact. And overreact we have. From airport security theater to the 854,000-employee post-9/11 homeland security aparatus, Americans have willingly handed al Qaeda a bigger, longer-lasting victory than they could ever have hoped for.
Over at the Washington Examiner‘s Opinion Zone, I apply what I learned back in Economics 101 to the net neutrality debate. It’s all about scarcity.