Some things haven't changed

Attention conservation notice: I have poor taste and enjoy history.

I saw this striking poem on the positions website. I only discovered the site this week and am very excited to keep following it. Translated by Chris Connery.

The Plague Airs by Cao Zhi (192-232 CE)

In 216, the 22nd year of Establishing Peace, the contagion spread, bringing sorrows over corpses in every family, tears of lament in each abode. They died behind shuttered doors or perished by the clan. Some said this was the work of ghosts or spirits. Yet the fallen were the rag-wearers and bark-eaters, in hovels of bramble and sedge. Among those who dwelt in great halls and supped from bronze cauldrons, cloaked in marten fur, on plush cushions… it was rare. The cosmic forces were out of balance; winter and summer had turned around: this was its cause. Some tried to drive it away with far-fetched spells. That was laughable too.

Blanchard on Inflation at PIIE

Attention conservation notice: I will explain why I think Olivier Blanchard should not write about inflation right now unless he is seriously concerned about it because him expressing any worry about inflation is likely to have an outsize effect on discourse and policy. It wouldn't matter if you skipped this because I am not a trained economist nor do I have any media or policy experience and you could see the same ideas by logging onto econtwitter today.

Olivier Blanchard recently posted a piece at PIIE discussing deflation and inflation risks. Most of the piece is actually devoted to inflation risks. There has been some debate on twitter, less about the merits of his arguments and more about their overall effect. I am not qualified to agree or disagree with his concern. It does seem to me that Blanchard likely puts a small probability on inflation that would be consistent with the general consensus that seems to have emerged about the greater risk of deflation.

Having said that, I don't think he should have written the piece and here is why:

1) There is very real risk that we are not going to see adequate fiscal support for advanced economies. The risk of inadequate support seems much larger than the risk of excessive fiscal support.

2) Olivier Blanchard entering any debate has a validating effect on both sides of the debate. He's Olivier Blanchard! If he is spending time thinking about something it is very reasonable to think one should also be thinking about it.

2) In the piece he highlights inflation risks. This gives ammunition to deficit hawks. Blanchard has been a public figure for a long time. He should know how quotes will be taken out of context to oppose effective stimulus measures. I'm not saying he should never highlight inflation risks, just that this dynamic should bias him against writing about inflation during a crisis when inflation risks seem low.

3) He also doesn't define what he would class as high inflation or mention whether the costs of high inflation or low inflation would be larger. 

5) The effect of Blanchard entering this debate, warning about inflation, and not being specific about the degree of risk appears to have overshadowed the nuance to his piece and lended credence to arguments about inflation risks. See this piece in the FT. Maybe his piece will have no effect on policy making. But if there is an effect I would bet that it increases the risk we see inadequate policy support for the economy.

6) Hence, he should have just not written the piece. Just to get this out of the way, I'm sure Blanchard can make a living writing about any number of things. He doesn't need to write about inflation risks. If he becomes really concerned about inflation risks, by all means he should share his concern. However, it does not seem like that is his view at the moment. Given that the negative effects of his piece were foreseeable he should have just written about something else.

It is not as if his arguments were especially novel either. There is and has been plenty of debate on inflation, and in a strictly economic sense this particular contribution added little.

Finally, if he wants to debate inflation risks for the development of his own thinking, I'm sure there is a long risk of people he can call! He doesn't need to enter the public sphere to do that.