If I were the Fed-head, but still subject to the usual political constraints, I'd first give up on the idea that monetary policy is the only way to manage the economy. Not only can fiscal policy help a lot -- if nothing else, by abandoning the sequester nonsense -- but there are other policies. As long as the economy is below full employment, incomes policies (wage and price controls) can be used to fight inflationary expectations and thus inflation. Those controls usually end up being anti-labor, but if we get full employment out of it, it might be worth it. Whether or not it's worth it is the kind of decision that should be made democratically. (Of course, currently having faster inflation would be a good thing for the economy, but that's another topic.)
Further, labor-market policies should be used in order to link unemployed workers with jobs that fit their skills, reducing the role of mismatch unemployment. If done right, this lowers the "Non-Accelerating Inflation Rate of Unemployment" (the "natural" rate in Friedman's jargon) and raises potential output. Higher demand would be allowed, which would help reduce unemployment permanently by (again) linking unemployed workers with jobs that fit their skills. A program with the government as the employer of last resort would also help. Of course, these days, less than full employment and low wages are seen as a good thing, since the US is more like an "underdeveloped" country than it used to be. These policies wouldn't go very far. It's amazing how _radical_ these old-fashioned Keynesian policies seem. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
