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The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Paul Ryan’s Gurus?



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My sense is that Ryan’s views very closely track those of John Cochrane, a distinguished economist at the University of Chicago Booth School of Business perhaps best known for his work on asset pricing. His blog is consistently interesting and he’s changed my mind on a number of issues. Last year, Cochrane wrote an essay for National Affairs, “Inflation and Debt,” in which he warns against the threat of inflation: 

As a result of the federal government’s enormous debt and deficits, substantial inflation could break out in America in the next few years. If people become convinced that our government will end up printing money to cover intractable deficits, they will see inflation in the future and so will try to get rid of dollars today — driving up the prices of goods, services, and eventually wages across the entire economy. This would amount to a “run” on the dollar. As with a bank run, we would not be able to tell ahead of time when such an event would occur. But our economy will be primed for it as long as our fiscal trajectory is unsustainable.

Needless to say, such a run would unleash financial chaos and renewed recession. It would yield stagflation, not the inflation-fueled boomlet that some economists hope for. And there would be essentially nothing the Federal Reserve could do to stop it.

Though Cochrane goes on to explain that his view is not the conventional wisdom, it does bear more than a passing resemblance to Ryan’s views as I understand them. My own sympathies are with Scott Sumner’s call for NGDP level targeting, and these views are far apart.

Ryan has also referenced the work of Luigi Zingales, author of A Capitalism for the People and co-author, with Raghuram Rajan, of Saving Capitalism from the Capitalists, both of which are excellent. 



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