Back of the fag packet macro plan that solves all society’s problems

Partially for Frances Coppola, partly as a reference to myself – my ideal big-picture policy regime.

At the moment monetary policy is meant to be conducted so that inflation is 2% in the medium term. The target is hit mechanically by moving interest rates, although interest rates serve more as a signal of the future path of monetary policy than a binding constraint in themselves. Also people are poor. And immigrants get a raw deal.

I think all those things are stupid.

A much better policy would make things clearer (that monetary policy involves creating more money, not moving interest rates) and combine with my other favourite policies in such a way that they all reinforce one another.

So first things first, monetary policy’s aim should be to hit a 5% level target for per capita nominal gdp. Actually, it should probably be a 5% level target for per capita nominal wages as they’re the price we’re most worried about. We don’t want nominal rigidities forcing people out of work, I don’t much care if nominal rigidities create a glut of girders, just people.

What policy should be used to hit this? A Citizen’s Basic Income. First of all, a CBI is a policy in which every citizen gets a basic income regardless of anything which is enough to subsist on. You remove housing benefit, unemployment cover, in work benefits and just pay everyone the same. If you’re worried about kids give everyone a lump sum payment on birth. If you’re worried about the longterm disabled cover that via healthcare. Benefits are thus extremely simplified.

This is where the clever bit comes in (which I think I stole from interfluidity), this CBI is topped up via the central bank. All currency creation is done via direct payments which top up this CBI. This means in times of financial stress etc. when nominal growth is in danger of causing unemployment etc. everyone gets a payment. In boom time this top-up CBI is scaled back. This clarifies what the bank does (prints money) and creates incentivises to support loose policy in bad times which lesson in good times.

Finally, an open borders migration policy, but migrants only get signed up to the CBI scheme after ten years. This creates an interesting incentive for citizens. Because money only enters the system via direct payments to citizens and the central bank is targeting a per capita (resident, not citizen) nominal target an increase in immigration causes an increase in payments to citizens. The policy pays off the local population automatically with a share of the increase in wealth caused by immigration. Because the deal looks pretty good to migrants (10 years ain’t so long) they don’t disrupt the equilibrium.

There we go. All my favourite ideas in one place, all reinforcing one another. What does everyone think?


How did I spend Valentine’s Day? At a lecture on feminist development economics. That’s right.


I went to an interesting lecture today on the role of feminism in improving developmental economics. The arguments were very simple. First of all, the business case for introducing feminism into development economics is incredibly strong, as the World Bank emphasise.

We’ve seen it in the west. The long post-war boom was fed by a decline in discrimination and more women entering the labour force. Something analogous in the developing world will increase economic growth. There are very few things which we can say for certain do, but that is one of them.

To get the most bang for your buck out of this increase in economic participation you have to make sure that women have access to the same inputs as men. This means anything, from something basic like title deeds to their land to simple things like equal access to fertiliser or irrigation.

Equalising access would increase the value of agricultural output about 4% (not sure if that is 4 percent of 4 percentage points), which would feed around 100 million people. Dollars lying on the sidewalk, as they say.

That ties into making sure  women are empowered. That’s nothing airy fairy, it means making sure women have an appropriate say in investment decisions and can act safely and confidently in the public sphere. It means they can state their own case at home and in public to protect their access to these economic inputs.

It’s interesting to know that institutions, which regular readers know I’m obsessed by, play a really tangible role in the shape of inequality in different places. In Ecuador, because of its colonial legacy, inheritance rights mean that land and property is split  fairly evenly between the sexes. This is in contrast to Ghana and Karnataka where women own significantly less property.

The lecture was very focused on agriculture and discussion of urbanisation, population ageing and so on was not on the agenda. That was a pity, but I understand the time constraints and there was a lot of meat in just the agricultural side of it.

If I had a criticism it echoes what I wrote yesterday. If you create institutions which create incentives to pursue economic expansion, you are also likely to create institutions that incentivise men to expropriation their partner’s land and to force them into patterns of unpaid labour. With the best of intentions but limited political capital there’s every reason to think that development will never be gender neutral.

Oh and this is nice. A few years ago, people were surveyed and asked whether they had felt love the previous day. This was later plotted against GDP by Justin Wolfers. It produced this lovely, and statistically insignificant, heart. Happy Valentine’s Day everyone.