I look in my garage and admire the lovely lines of my MX6. But it's a 21 year old car that I'm using for my daily driver, and I really should get a new car. But what sort of new car? Sometimes I look at the new MX5 and the Toyobaru twins, but........no. Both are close, but neither is quite right for me.
Suppose they came out with some really cool new stuff that everybody just had to buy. So everybody went out and bought it. Production and employment would increase to meet the increased demand for that cool new stuff. Aha! Maybe that's why the recovery from the global recession was so slow. They simply didn't come up with enough stuff that was cool enough and new enough that people really wanted to buy it! Bingo!
I know exactly what some of you are thinking: "But Nick, if everyone went out and bought an extra $1,000 worth of cool new stuff we would all be living beyond our means and going even deeper into debt!" And you would be thinking wrong. You are forgetting national income accounting 101. You are committing a fallacy of composition. Because at the aggregate level income and expenditure are the same thing. If aggregate expenditure rises by $1,000, then aggregate income rises by $1,000.
And I can guess what some of the rest of you are thinking: "But Nick, there really has been lots of cool new stuff coming out over the last few years!". And you would cite a list of examples. And others would say that your list of examples weren't really that cool or new. And maybe the more diligent would try to construct an index of cool new stuff coming out each year. And then there would be an argument over whether that index had been higher or lower than normal over the last few years compared to previous years. And did that index have the predicted inverse correlation with recessions? And if it did, which way did causation run? Maybe it was recessions that caused a slowdown in cool new stuff coming out? Or maybe both recessions and lack of cool new stuff were both caused by some third thing. It could be a lovely argument that would keep going for decades. And think of the possible policy implications! Could we use R&D tax credits for countercyclical policy, or would the lags be too long and variable?
But I simply can't be bothered. I don't care what your index of cool new stuff shows or doesn't show.
And I have exactly the same reaction to the debate about whether political uncertainty is to blame for the slow recovery.
Because stuff changes all the time. And one of the things that changes is the amount of change itself. And another thing that changes is the amount of uncertainty over the changes. And it's the job of the central bank to conduct monetary policy in such a way that, despite those changes, the economy does not fall into recession. "You had one job....and you didn't do it."
If there were no change, the gold standard would be an excellent monetary policy. The apple standard would be an equally excellent monetary policy. The k% rule with k=0 would be an equally excellent monetary policy. They would all be exactly the same damn policy. Any idiot could do it.