Research Round-Up: North Dakota's Economic Success and Monetary Policy Futures Markets
How to Beat the Boom and Bust in North Dakota
Last Tuesday, Jeremy Jackson, James Caton, Raheem Williams, and Kali Christianson released a study on North Dakota’s path to economic prosperity.
North Dakota’s economy and state funds rely on a few volatile industries: oil, natural gas, and agriculture. When times are good, these sectors of the economy can grow at a tremendous pace, boosting wages, creating jobs, and securing revenue for new government programs. When times are bad, these same effects are drastically reversed. Jackson et al. focus on ways that North Dakota can stabilize its sometimes-fragile funding.
They identify three areas for reform:
- Revenue - The study suggests that low income taxes and transparent revenue sources are the best combination for state funding. The former encourages individuals and companies to move to and flourish in North Dakota, while the latter communicates the true cost of government services to taxpayers.
- Expenditure - Education spending ought to be tied to student outcomes, and the state government ought to devolve funding and decision-making to localities and parents where possible. Infrastructure spending should be limited to strategic investments, and pensions should be fully funded.
- State funds - State funds should have specific purposes and certain funds should be capped.
To read the full study, click here.
Monetary Wisdom from the Crowd
In 2017, the Mercatus Center and Hypermind began to run a prediction market that forecast nominal GDP (NGDP). That project stands at the intersection of two trends. First, social science literature increasingly supports the idea that the aggregate guesses of crowds is more consistently correct than any single forecast. Second, a growing number of monetary policy experts are rallying around the idea of “NGDP targeting”—an alternative to the current policy of inflation targeting. As a result, Mercatus’ prediction market is a valuable economic experiment.
Dr. Scott Sumner breaks down the results of that experiment in his latest policy brief. To read Dr. Sumner’s report, click here.