The Minneapolis Fed has long been the fountainhead in the Federal Reserve system of New Classical macroeconomics and rational expectations. Neil Wallace still hangs out there and the U. of Minnesota and Thomas Sargent used to, although he has weakened in his belief in rational expectations since his sojourn at Santa Fe in the early 90s. Sargent and Wallace were among those who developed models arguing that systematic macro policy is "impotent" in a world of ratex. Barkley Rosser On Sun, 17 May 1998 12:58:04 -0400 Doug Henwood <dhenwood at panix.com> wrote:
> The May 1 issue of the San Francisco Fed's Economic Letter has an article
> by one J. Bradford DeLong (no space - I'm confused on this) called "The
> Shadow of the Great Depression and the Inflation of the 1970s. Formed by
> the Great Depression, a generation of policymakers and central bankers let
> inflation get out of control. "Only after the experiences of the 1970s were
> policymakers persuaded that the minimum sustainable rate of unemployment
> attainable by macroeconomic policy was relatively high, and that the costs
> - at least the political costs - of even moderately high one-digit
> inflation were high as well.... By the end of the 1960s, the U.S. had
> finished its experiment to see if it was possible to push unemployment
> below 4% without accelerating inflation. The answer was 'no.'"
>
> So, Brad, since you're here - is that "macroeconomic" a wiggle word? Are
> there other policies that could make it possible to push U below 4%? Or can
> the U.S. never get by with less than 5 million unemployed? What about that
> political cost of inflation: some people's political costs (e.g., rentiers)
> seem to carry more weight than others (e.g., the unemployed). And what
> about the 4.3% U.S. unemployment rate now? Is that too low?
>
> (The FRBSF Economic Letter is available at <http://www.frbsf.org>. Note
> that the Fed branch banks use .org, not .gov, as their domain. This
> parallels their phone book listings - in the white business pages, not the
> blue government pages.)
>
> Friday's mail also brought the FRB Minneapolis' Quarterly Review, which has
> an article called "Zero Nominal Interest Rates: Why They're Good and How to
> Get Them." That wonderful idea, inspired by Milton Friedman, requires
> persistent mild deflation, to yield a positive real interest rate. Didn't
> the FRB Mpls used to be a Keynesian outpost?
>
> Doug
>
>
-- Rosser Jr, John Barkley rosserjb at jmu.edu