Larry Ball makes the case that we would be a lot better off with a 4 percent inflation target rather than the 2 percent that is now central bank orthodoxy. Intellectually, this position is hardly outlandish; indeed, Ball’s case is very similar to the case Olivier Blanchard made three years ago, just stated more forcefully and with more evidence.
Here is Rogoff, writing in a December 2008 op-ed for Project Syndicate, “Inflation is Now the Lesser Evil”:
It is time for the world’s major central banks to acknowledge that a sudden burst of moderate inflation would be extremely helpful in unwinding today’s epic debt morass…. Moderate inflation in the short run – say, 6% for two years – would not clear the books. But it would significantly ameliorate the problems, making other steps less costly and more effective.
By any standard, that was a prescient call – a bit too early to build popular support, but a year earlier than Blanchard, and sufficient to demonstrate the Rogoff was anything but a single-minded budget-cutter. In 2011 he renewed the prescription.
A lawyer who withheld exculpatory evidence like that from his argument would have his case tossed out of court. A columnist for a great newspaper should be held to a similar standard.
I have known Krugman for a long time; I admire him. I share many of his convictions. I would even say that we are friends. His career as a journalist, like his career as an economist, has been studded with brilliant coups.
But as in the Little Rock case, he lacks a governor; or, in this situation, even an editor. The earlier episode ensured that Krugman would never again serve in government. (He had done a turn the CEA as a junior staffer under Martin Feldstein in the early 1980s.) This one surely cinches the case that he should never win a Pulitzer Prize. The habitual thumb on the scale has become contempt for the balance itself.
Whoa, that would make me stop and think.
The "Little Rock case" refers to the time during the Clinton administration when Krugman ripped the administration economists, mostly Tyson and Reich, for daring to get the jobs and attention that he seemed to want.
In terms of economics (and politics) I sometimes agree with Krugman. But after a snicker or too, I never agree with his "rip 'em to shreds" approach, which always detracts from his arguments.