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Does Ben Have the Wrong Map?

August 1, 2012 by Robert Asahina

As the United Kingdom’s top sailor, Ben Ainslie, tries for his fourth gold medal in the Olympics, the assumption among informed spectators is that he has the right map of Weymouth Bay. And as the director of the 4% Growth Project, Amity Shlaes, writes in her Bloomberg column, “Ben has the right map” is also the assumption among informed commentators about Ben Bernanke as he attempts to navigate the choppy waters of the Great Recession at the Federal Open Market Committee meeting this week. But what if our Ben has the wrong map? As Shlaes notes, Vernon Smith and Steven Gjerstad argue in their contribution to “The 4% Solution” that the traditional North Star, business investment, may be the wrong guide for monetary policy in these parlous times. Smith and Gjerstad reject the very notion of a “business cycle” and find that purchases of new single- and multi-family homes are a much better predictor of the timing, depth, and duration of recessions. In addition, Shlaes writes, “Smith and Gjerstad argue that the best course for recovery seems to be for the government to practice austerity, by reducing spending, even during the recession” — in other words, adopting a “procyclical position,” which runs counter to the received wisdom that “countercyclical” government spending is the way to battle the headwinds of a recession. “Any legislation or paper that provides a close-up of monetary navigation, and makes new suggestions, deserves its own gold medal,” Shlaes concludes. Her column can be found here. Click here for more on “The 4% Solution.”


Author

Robert Asahina

Robert Asahina has been a newspaper and magazine editor and writer, a book publishing executive and editor, and a data management consultant. He was editor in chief and deputy publisher of Broadway Books, president and publisher of the adult publishing group of Golden Books, and vice president and senior editor of Simon and Schuster; deputy managing editor of The New York Sun and an editor at The New York Times Book Review, Harper's, George, and The Public Interest; and a consultant at Freddie Mac. He is the author of "Just Americans" and of numerous articles and reviews for The Wall Street Journal, Harper's, The New York Times Book Review, and elsewhere.

 

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