May 23, 2016

Macro Musings 07: George Selgin on the Productivity Norm, Deflation, and Monetary History

Hosted by David Beckworth of the Mercatus Center, the Macro Musings podcast pulls back the curtain on the important macroeconomic issues of the past, present, and future.

George Selgin, director of the Cato Institute’s Center for Monetary and Financial Alternatives, makes the case that central banks, rather than focusing on the price level or inflation rate, should instead allow inflation to reflect changes in productivity growth. According to this productivity norm, deflation can actually be a good thing if it reflects improved productivity. Selgin examines the Great Deflation of the late 1800s and dispels some of the popular myths surrounding that period. He also discusses what the Fed got wrong in the lead-up to the recent financial crisis.