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Fall 2013

ISSN 0890-913X

Volume 29, Number 1

Not all NGDP Is Created Equal: A Critique of Market Monetarism

Alexander William Salter, George Mason University

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NotAllNGDPIsCreatedEqual:ACritiqueofMarketMonetarismAlexanderWilliamSalterGeorgeMasonUniversityTheJournalofPrivateEnterprise29(1),2013,41–52AbstractMarketMonetarism,withitspolicyruleofNGDPtargeting,hasincommonwithfreebankingthatbothseektoavoidmonetarydisequilibrium.Onemightconcludethatthesearedifferentapproachestoachievingthesameend.Thepurposeofthispaperistoshowthattheproximateendsareinfactconceiveddifferently:StableNGDPasanobjectofchoicebyacentralbankisdifferentfromNGDPastheemergentoutcomeofthemarketprocess.Furthermore,well-knowninsightsonknowledge,thepricingprocess,andtheinstitutionalcontextofeconomicactivitysuggestthatthisdifferencehasimportantimplications.JELCodes:B53,E42,E50Keywords:Freebanking;MarketMonetarism;Marketprocess;Monetarydisequilibrium;Monetaryinstitutions;NGDPI.IntroductionThisarticlemakesasimplebutimportantpoint:NGDPastheemergentoutcomeofthemarketprocessisnotthesamethingasNGDPasanobjectofchoicebyacentralbank.TheriseoftheMarketMonetaristSchoolandtheirpolicyrecommendationthatthecentralbanktargetthelevelofnominalGDPdrawssupportfrom,amongstothersources,theliteratureonmonetaryequilibriumtheory.NGDPtargetingthushasbeenlikenedtofractional-reservefreebankinginthatitisameansforachievingmonetaryequilibriumand,asaconsequence,stablenominalspending.1ButtheprocessbywhichNGDPiscreatedandsustainedmatters:NGDPasan1Forexample,Sumner(2012a,p.21)citesablogpostbyChristensenwhereinthelatterlistsasoneofthebenefitsofNGDPtargetingthatitemulatesfreebanking.ElsewhereSumner(2011,p.95)seemstosuggestthatNGDPtargetingisoneofasubstitutablenumberofproposalstocurrentmonetarypolicyproblems;however,beingthemostpoliticallyfeasible,itisthemostdesirable.SeealsoHendrickson(2012)onNGDPtargetingasa“technology,”sotospeak,formaintainingmonetaryequilibrium.41

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Title	Not all NGDP Is Created Equal: A Critique of Market Monetarism
Authors/Creators:	Alexander William Salter, George Mason University
Year:	2013
Volume:	29
Number:	1
Pages:	41 - 52
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	Banking, Finance, Monetary policy

Citation:
Salter, Alexander William / 2013. "Not all NGDP Is Created Equal: A Critique of Market Monetarism." The Journal of Private Enterprise, 29(1): 41-52.