Prosperity without Inflation

An appropriate set of fiscal and monetary policies would not gyrate between using inflation to cure unemployment and using unemployment to cure inflation. Instead, we need a stable framework conducive to growth, and a dollar of relatively predictable value.

Inflation is simply a growth rate of total spending (nominal GNP) that exceeds the growth of production (real GNP). The objective of fiscal and monetary policies must be to limit the growth of spending while encouraging the growth of production. On the demand side, this means a tight lid on the growth of new money; on the supply side, substantial relief from taxes and regulations to provide incentives for productive effort and investment.

About the Author

Alan Reynolds

Alan Reynolds, National Review’s economics editor from 1972 to 1976, is a senior fellow at the Cato Institute and the author of Income and Wealth.

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An appropriate set of fiscal and monetary policies would not gyrate between using inflation to cure unemployment and using unemployment to cure inflation. Instead, we need a stable framework conducive to growth, and a dollar of relatively predictable value.

Inflation is simply a growth rate of total spending (nominal GNP) that exceeds the growth of production (real GNP). The objective of fiscal and monetary policies must be to limit the growth of spending while encouraging the growth of production. On the demand side, this means a tight lid on the growth of new money; on the supply side, substantial relief from taxes and regulations to provide incentives for productive effort and investment.