Bill Niskanen: Monetary Policy Radical

Bill Niskanen, dual mandate, lender of last resort, monetary policy, Phillips Curve
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Bill Niskanen, dual mandate, lender of last resort, monetary policy, Phillips Curve Several days ago a colleague of mine, referring to the Niskanen Center's recent conspectus, wondered whether Bill Niskanen, the former Chairman of the Cato Institute after whom the Niskanen Center is named, would have agreed with a claim it made. The claim was that promoting sound monetary policy was basically a matter of encouraging "policymakers to support the Federal Reserve's dual-mandate" and of getting "pro-growth" candidates appointed to the Board of Governors.

My short answer to the question was, "No." But it occurs to me that that answer is worth fleshing-out here, because many people may not be familiar with Niskanen's ideas for improving monetary policy, and because those ideas show that he was far from being a cheerleader for the status quo, or for a more "pro-growth" version of the status quo, whatever that might mean.

The Dual Mandate

For one thing, Niskanen was no fan of the dual mandate. That mandate had its roots in the Employment Act of 1946 and was formally established by the 1978 Full Employment and Balanced Growth Act, a.k.a. the Humphrey-Hawkins Act. The latter act originally gave the Fed five years to reduce the overall (16 years or older) unemployment rate to 4 percent, while getting inflation down to 3 percent. The assumption that these goals were perfectly compatible rested, at least implicitly, on legislators' belief in the presence of a stable Phillips Curve, implying a negative relationship between the rate of inflation and the rate of unemployment. Yet that belief had already been discredited by empirical developments by the time the legislation was passed.

It did not take long after the passage of Humphrey-Hawkins for wiser Federal Reserve officials, including Paul Volcker (who became Chair in 1979), to conclude that the "dual mandate," far from defining a new and sustainable approach to monetary policy, was simply a nuisance — something they had to pay lip service to, whilst really concerning themselves with keeping a lid on inflation. For the most part they managed this by insisting that, in the long run at least, price stability was itself the best guarantee of "full employment."

Bill Niskanen shared that perspective. Like all monetary economists who take empirical evidence seriously, he knew that the stable Phillips Curve was a myth, while regretting that other "macroeconomists have confused each other, generations of students, and too many policymakers" by pretending otherwise. Indeed, the evidence for the period between 1960 and 2001 suggested a "strong positive relation between the unemployment rate and the inflation rate lagged one or two years." That meant that the best way to achieve a minimum long-run unemployment rate really was to aim at a zero steady state inflation rate.

In short, so far as Niskanen was concerned, the dual mandate was one mandate too many. If anyone doubts it, I invite them to review the opening passages of Niskanen's entry on "Monetary Policy and Financial Regulation" for the 2008 edition of Cato's Handbook for Policymakers. "For the past 30 years," Niskanen observes,

the Full Employment and Balanced Growth Act of 1978 instructed the Board of Governors of the Federal Reserve to establish a monetary policy to maintain long-term economic growth and minimum inflation. As these two goals are sometimes inconsistent, this congressional guidance has not been very effective. The Federal Reserve has had almost full discretion in the conduct of monetary policy, subject only to the balance of current political concerns.

The intent of Congress would be better served and monetary policy would be more effective if Congress instructed the Federal Reserve to establish a monetary policy that reflects both their [i.e. Congress's] concerns in a single target.

A Nominal Spending Target

Yet Niskanen did not favor the single-minded pursuit of zero inflation. Although he preferred a zero steady-state (or long-run) rate of inflation, he believed that that long-run objective was best achieved, not by having the central bank directly target some measure of the price level or inflation rate, but by having it target the growth rate of total spending on goods and services, as measured by the Department of Commerce's statistical series "final sales to domestic purchasers."

A final demand target, Niskanen explained in a 1992 Cato Journal article, is better than a price level or inflation target "because of the different response to changes in supply conditions." Whereas a central bank that stabilizes spending "would not respond to either positive or negative supply shocks," one that endeavored to stabilize the price level at all times would seek to increase the money stock and spending to keep prices from falling in response to a positive supply shock, and would seek to reduce the money stock and spending to keep prices from rising in response to a negative supply shock. While either approach could be consistent with achieving a zero long-run inflation rate, targeting demand reduces the variance of output.

Although Niskanen's choice of a demand measure distinguishes his proposal from those of Scott Sumner and some other Market Monetarists, who would have the Fed stabilize nominal GDP rather than final sales, the difference is one of second-order importance only.[1] Also like some Market Monetarists, and unlike apologists for the monetary status quo, Niskanen favored a monetary rule imposed upon the Fed by Congress, as opposed to unbridled monetary discretion. Congress, he observed in that 1992 article, has delegated its Constitutional authority to "coin money" to the Fed

either without guidance or, more recently, with sufficiently confused, redundant, or contradictory guidance to permit the Fed to chart its own course. We could do worse. The performance of the Federal Reserve has usually been better than that of most other central banks.

I believe we can also do better — much better… .

We could do better, Niskansen said, by having Congress "approve a target path of total demand in the American economy," specifically by passing legislation "that would formally instruct the Fed to follow a specific target path of nominal domestic final sales," and by having "the administration and Congress…monitor the Fed's performance" as often as once every quarter. That monitoring

should focus on the reasons why actual final sales may have differed from the target path in the previous quarter. An increasing difference between the actual and the target final sales over a period as long as two quarters should automatically trigger… a review. There is ample reason to criticize the Fed for an accumulating difference between the actual final sales path and the approved target path. But as long as the Fed maintains a roughly stable level of final sales relative to this path, both the administration and Congress should refrain from criticizing the Fed… .

In his 2008 Cato Handbook chapter, Niskanen offers more specific advice. Congress would be wise, he says,

(1) to specify a target rate of increase of final sales and (2) to instruct the Federal Reserve to minimize the variance around this target rate. The target rate of increase of final sales may best be about 5 percent a year, sufficient to finance a realistic rate of economic growth of 3 percent and an acceptable rate of inflation of about 2 percent.

Niskanen goes on here to accuse the Fed of "creating three 'bubbles' of aggregate demand" — between 1987 and 1991, 1997 and 2000, and 2002-2006 — each of which in turn contributed to bubbles in other markets, followed by recessions. In every instance, Niskanen argues, the Fed appeared to overreact to a previous financial crisis by allowing demand to increase relative to its target path, instead of merely taking steps "to avoid a decline in the growth of demand relative to the target path."

Observe that Niskanen's proposal would place the Fed on a much tighter leash than the one contained in the FORM (Fed Oversight and Modernization) Act, both in its original, 2015 version  and as incorporated in the latest version of the CHOICE Act. Unlike Niskanen's plan, the FORM Act  leaves the choice of a specific monetary rule entirely to the FOMC.

Last Resort Lending

Besides wanting to place strict limits on the Fed's conduct of monetary policy, Niskanen also wanted to curb its emergency lending powers. In particular, he opposed the de facto broadening of those powers that took place during the first months of the most recent financial crisis, observing (again in the Cato Handbook) that

the combination of deposit insurance and access to the [Fed's] discount window created a serious level of moral hazard that reduced the incentive of both depositors and banks to avoid adverse risks. Adding securities firms and the government-sponsored mortgage firms to the list of financial firms eligible for access to the discount window and subject to regulation by the Federal Reserve would only expand the level of moral hazard in the financial system.

Rather than have it permit a permanent broadening of the Fed's lending powers, Niskanen urged Congress to "consider amending the Federal Reserve Act of 1913 to restrict access to the discount window to depository institutions only." Here again, Niskanen goes further than the CHOICE Act, in essentially proposing a complete repeal of the Federal Reserve Act's section 13(3). The CHOICE Act, in contrast, would still allow the Fed to make emergency loans to non-banks, albeit on more strictly regulated terms, and only if the presidents of nine Reserve Banks (along with five members of the Federal Reserve Board and the Treasury Secretary) agree that allowing the firms in question to fail would "pose a threat to the financial stability of the United States.”

Against Central Banking?

The reforms Niskanen favored show that he was far from being a monetary policy conservative, to give that adjective its literal meaning. But was Niskanen really a monetary policy "radical"? Sure, he wanted to limit the Fed's powers. But that hardly means that he questioned the need for a Federal Reserve System, or some other sort of central bank.

Yet question it he did. What's more, he ultimately became convinced that we would, in principle at least, be better off without central banks. I ought to know, because I'm the one who convinced him!

The occasion was the 7th installment of Cato's Annual Monetary Conference, in 1989, at which I presented my paper "Legal Restrictions, Financial Weakening and the Lender of Last Resort." The argument of that paper is, essentially, that financial systems would be robust enough to avoid major crises altogether, and to do so without the help of central banks, were it not for government meddling, including central bank misconduct, that makes them unnaturally fragile.[2]

Niskanen, who was asked to comment on my paper, began his remarks as follows:

May I make a confession. In some areas of public policy I sense that my views are usually radical, in that I am prepared to promise a substantial reduction of the contemporary role of government. In other areas my views are more conservative, more from lack of understanding than from any conviction that the status quo is appropriate.

George Selgin has convinced me that my conservative acquiescence to the contemporary role of central banks has been misplaced. I had long recognized that central banks were the primary agents of both major recessions and sustained inflation, but I had casually accepted the argument that a lender of last resort and a monopoly of note issue were necessary to prevent panics in a fractional-reserve banking system. …[It] is increasingly clear that the conventional arguments for a central bank are second-best arguments that assume the restrictions that have increased the vulnerability of private banks.

To be sure, Niskanen's new-found understanding didn't cause him to propose that the Federal Reserve Act be repealed in its entirety! It merely caused him to believe that an alternative set of arrangements "would be better… if it could be implemented without transition costs." The challenge is to come up with a transition process that would make the change worth it despite its short-run costs.

Of course I, too, would rather we chip away at the Fed's powers than risk raising havoc by trying to "end" it in one fell swoop. The same goes for many of my fellow free bankers. So Niskanen's position is actually no less radical than ours.

In portraying Bill Niskanen as a monetary policy radical, I've limited myself to his views on the Fed and central banking more generally, without venturing to consider what he had to say about other financial regulatory agencies. But readers may rest assured that his views concerning many of these were equally radical. Had Niskanen had his way, Congress would have done away with Fannie and Freddie, the Community Reinvestment Act, and U.S. support for the IMF; and I'm pretty sure that with a little more digging the list could be made much longer. One thing, though, is certain: Niskanen was never one to settle for conventional wisdom. As he himself explained, when he didn't question some aspect of the status quo, more often than not it was because he hadn't yet had a chance to noodle around with other options.

____________________
[1] Unlike final sales, nominal GDP includes spending on private inventories and net imports exports.

[2] The thesis is essentially the same as that expounded at greater length by Charles Calomiris and Stephen Haber in their 2014 book, Fragile by Design: The Political Origins of Banking Crises and Scarce Credit.

  • "he ultimately became convinced that we would, in principle at least, be better off without central banks. I ought to know, because I'm the one who convinced him!"

    Why am I not surprised?

    From Niskanen: "In other areas my views are more conservative, more from lack of understanding than from any conviction that the status quo is appropriate… George Selgin has convinced me that my conservative acquiescence to the contemporary role of central banks has been misplaced…" This whole passage is excellent and must strike a chord with everyone who has, like myself, come to understand the truth through you, George Selgin. Thank you!

    As I have commented here in the past, I would go further in proposing a decoupling of the Federal Reserve system from the federal government, the same way I would propose a decoupling the USDA from the federal government, and repealing all monopoly privileges and legal tender laws. Like every other government action, all winners require a loser, seen and unseen. The "havoc" and "transition costs" of any such free-market-friendly action, repeal of monopoly privilege and legal tender laws, would be born primarily by those winning under the current regime, the current losers would benefit handsomely.

    I do not believe it below the belt, only honest, to compare appeasement of current U.S. Federal Reserve monetary hegemony, to appeasement of a school yard bully. And, that by concerning ourselves with the "havoc" and "transition costs" of ganging up and kicking the snot out of the bully and his gaggle of followers, we ignore every other child that must go to school, every day, living in fear of being robbed, punched out, and embarrassed, in front of the entire school. We also ignore our own inner-most feelings of inadequacy brought about by standing down.

    Appeasement of bullies never works and, I would guess, there is not one amongst us that wishes they had not stood up to one or more bullies in our childhood. Adulthood offers a second chance, and continuing to stand with the politically powerful in direct support or appeasement at the expense of the politically disadvantaged, harbors the same inadequacy, at least it does for me.

    If CATO is not going to do it, then who?

    • EdwardCDIngram

      I can
      Assuming that we are in agreement on what needs to be done.

  • EdwardCDIngram

    I am reading it. It is interesting.

    The idea of a demand target is basically the same as I am promoting at the Ingram School of Economics.

    Basically this is common sense – maximise output by keeping the evel of demand at least equal to national output.

    Perhaps you people would like to take the unversity course in the subject.

    It is called Macro-economic Design and Management.

    Just email me at edward.ingram2009@gmail.com

    It is not enough to have a target. You also need the means to hit it or get close to it without large overshoots.

    We go into that in a level of detail that no other school of economics has ever done.

    • EdwardCDIngram

      "the combination of deposit insurance and access to the [Fed's] discount window created a serious level of moral hazard that reduced the incentive of both depositors and banks to avoid adverse risks. "

      I have to ask the writer "Who said that depositors are responsible to assessing the risk which their bankers or savings institutions are taking?

      You don't punish the innocent – I least I suggest it is a serious mistake.

      You protect them but you do not shelter the guilty parties.

      As to the means of doing that – deposit insurance is not the best answer in my view.

      Find out what is by joining me at my school of economics of by buying my book.

      • EdwardCDIngram

        "Rather than have it permit a permanent broadening of the Fed's lending powers,"

        Once you have established the KFPP Platform (see below) everything simplifies. A part of doing that is to change the entire banking system to that of deposit taking institutions which bid for deposits.

        The Fed auctions deposits at interest – yes that is lending.

        The market interest rate is found.

        Deposits placed as reserves get interest equal to what it cost at auction or (we are thinking about this) equal to what they onlend at – but what about the risk element when lending?

        To avoid problems, these deposits can be returned penalty free at any time. Even the term desposits bought at auction.

        This market rate of interest means that the best use of the national resource of credit is achieved / optimised.

        Any excess spending or money in circulation gets mopped up by the KFPP Platform without hurting anyone – at least, barely hurting anyone.

        You can have defined pensions with defined benefits.

        You can have mortgages with variable rates which do not hurt anyone as inflation and interest rates change – module 2 of my course in both cases. Or with defined costs and declining cost over the period. No one gets payments fatigue or gets booted out of house and home because of interest rates.

        Paul Volker could have reduced inflation without sending a huge bonus to everyone holding government debt – government debt will be stable and cost around 1% interest because it would protect wealth not create it and not destroy it.

        How does all this work?

        Price adjustments have two parts:

        1. The core part which offsets the falling value of money
        2. The real economic part which, having and the core prices of everything already adjusted, carries on as if money value was irrelevant. Every econonic acivity goes on as usual as if all activity took place upon a rising platform – the KFPP Platform – Keynes's Floating Platform Paradigm – a paradigm shift for economies and for economics.

        Excess money gets moppred up in higher incomes and prices and costs and asset values s the platform floats upwards.

        That is just like what J M Keynes said when he wrote his 'A tract on Monetary Reform. MacMmllan, 1923.

        He effectively said that if all incomes and prices were to double as money halved in value, people woulf be whlly unaffected.

        He as referring to core price changes.

        He then pointed out that this is not how treasuries / bonds work. THEY redistribute wealth. What for?

        There is no way to make people spend the same amount month in month out. Prices change and we have to adapt to that with minimum cost.

        I show how to do that.

        Don;t read any economics book to find out how to do that. The best they can come up with is the prices indec – the nominal rate of change, not the core rate of change.

        And economists cannot write contracts for people wanting something useful and easy to understand, and SAFE. Ask a practitioner to do that – ask me.

        • EdwardCDIngram

          "he ultimately became convinced that we would, in principle at least, be better off without central banks."

          How then is new money created?

          In my model that is teh role of the central bank – plus being the treasury's banker. Plus regulating the lenders.

          Some entity has to do these things.

          • EdwardCDIngram

            "I had long recognized that central banks were the primary agents of both major recessions and sustained inflation, "

            Remember, the instruments in use do not mop up excess money and the reserve ratio must be high if any reasonable degree of accuracy in management of the stock of credit is to be achieved. Don't blame the central banks. If they were to put the reserve ratio at 90% or more it would increase lending costs enormously. So they need to pay interest on the reserves to remove that hurdle.

            The same applies to private deposits of which 90% may be put on deposits.

          • EdwardCDIngram

            "if it could be implemented without transition costs."

            Transitions always have a cost to some and a benefit to others.

            I have done some thinking on this and have proposals to put to a committee of experts which ought to be put in place to drive the process.

            It's all in my book and students at my course will be asked to assist withthese thoughts and solutions.

          • " the instruments in use do not mop up excess money..". When central banks hike interest rates, that "mops up" sufficient money to control inflation doesn't it?

            90% reserve ratio would " increase lending costs enormously"?? Milton Friedman and the other two or three economics Noble laureate economists who backed 100% reserves didn't think so.

            Obviously there’d be a finite rise in borrowing costs, but if funding loans via equity is VASTLY more expensive than funding via deposits, how come several large corporations are funded largely by equity? Google is funded 90% by equity, and doesn’t seem to be a disastrous flop.

            Also, whether borrowing costs rise is irrelevant: the important question is whether they rise to something that equates to a genuine free market level. If they do, then I suggest GDP is thereby maximized because, as is widely accepted in economics, GDP is maximised where prices are at free market level, unless so called “market failure” can be demonstrated.

            In fact I argue (link below) that a 100% reserve system (i.e. a system where privately issued money is banned) is closer to a genuine free market than a system where private banks can issue money, because privately issued money is subsidised by taxpayers.

            http://www.kspjournals.org/index.php/JEB/article/view/740

          • EdwardCDIngram

            Thank you Ralph for these questions.

            Ralp it is not about mopping up money. It is about how it is done. I will return to that a bit later – below.

            I already answered the cost issue of 90% reserve ratios. It would not cost the lenders anything. The central bank must add interest to the reserves to remove the cost.

            As regards 100% Reserves, I said that to Professor Makina and stood corrected by him.

            With a 100% reserve ratio all of the deposit money lies dead at the central bank. None of it can be lent. I do not know what else could be meant by that. Can you explain to me?

            Oh I see you want to fund loans with 100% Equity capital – well that would be very limiting – I think it would strangle the economy – loan starvation. I do not know the figures off hand but a whole lot of money has to be in 'spending circulation' to make the economy run. And… well there is a lot to think about to get the ratio of loans availabel to money putt into circulation by that means. There is the issue of what depositors and savers would get. Maybe nothing? A vacuum in the market? It would be filled. There are far too many objections to this.

            No you cannot tangle one with the other. Equity has one purpose and it is not to create loans.

            Interest rates may rise.. from where they are now?
            Yes a free market rate of interest must be higher but it cannot be achieved in the current circumstances in the USA and some other economies. This is because of the design of the financial contracts on offer as I explained when I mentioned Keynes and the way bond values re-distribute wealth; and so do mortgage contracts – the two main obstacles to rasing interest rates. I have written about this as the LOW INFLATION TRAP on my website. It simply shows that my work on the KFPP Platform is absolutley essential to creating a free market price for credit.

            In fact I show how to get free market prices for everytjhing as best I can while inviting others to chip in with their ideas. Best to get all the ideas we can.

            This is what creates the KFPP Platform which remember please, I said mops up money relatively harmlessly unlike interfering with the market price of credit.

            And yes a free market rate does optimise the use of credit which is what I wrote.

            Finally, I agree that banks should not be permitted to create money – it is subsidised by the communityand it interferes with control of the stock of money in spending circulation. That is why I said they would have to become deposit taking institutions. They take a precisely controlled volume of deposits from the central bank and also from depositors and savers. The amount of savings cannot multiply too much because we are imposing a high reserve ratio. We are removing the cost of that with interest added by the central bank.

            Thanks for your challenges Ralph – it gives me the opportunity to clarify a few points which perhaps other readers were also thinking.

          • “well that would be very limiting – I think it would strangle the economy”. It would certainly have a deflationary effect because the cost of loans rises. But that is easily countered by standard stimulatory measures. The net effect is thus less loan based activity and more non-loan based activity. Assuming the widespread view that there is too much debt is correct, then the net effect should be beneficial.

            “Equity has one purpose and it is not to create loans.” Equity can be used to fund anything you like: restaurants, garages, you name it. Equity is already used to fund loans in that every bank is funded partly by equity. Plus Anat Admati and Martin Wolf argue that the existing capital ratio of banks should be VASTLY increased. They advocate about 25% as compared to the existing 5% or thereabouts.

            “I agree that banks should not be permitted to create money..”. In that case you are forced to agree with funding loans just via equity seems to me. Reason is that if a loan is funded by deposits to any extent, then the fact of a bank making loan involves money creation. E.g. if someone deposits $X at a bank and the bank lends $(X+Y) with the $Y coming from equity, then the money supply has risen by $X: the original depositor still has his $X available to him, and the borrower also has the use of $X (plus the $Y of course).

            And finally, if this stuff isn't complicated then I don’t know what the word “complicated” means…:-)

          • Agreed.

      • My solution: make anyone who wants their money loaned out carry the risk (which is what happens under full reserve banking). If you lend money to a corporation by buying its bonds, you carry the risk. Why should taxpayers carry the risk when you do exactly the same thing via a bank: i.e. deposit money at a bank, with the bank lending to corporations, mortgagors, etc?

        • EdwardCDIngram

          Ralph there is a whole lot of difference between lending by buying a bond from a particuar borrower and putting money on deposit with a bank.

          And I never said the tax payer should rescuce a bank.

          There is a painless way to do that so why not use it? There is a cost to the entire community but the entire communits gets a great benefit – no need to investigate any bank before putting a deposit there, and no need for deposit insurance.

          There are no bank runs.

          But the competition between banks for people's deposits will increase and maybe there will be more failed banks.

          We have regulators to safeguard against that going to unacceptable levels or damaging levels. They need to think – they are paid to do that.

          • Edward, You claim there is “no need for deposit insurance” and you claim
            that “I never said the taxpayer should rescue a bank”. So what happens when a
            bank makes a hash of things? It goes bust and depositors lose out, if I’m not
            mistaken. In which cased depositors are in effect share-holders, which is what
            advocates of full reserve / 100% reserves advocate: that is, those who want
            total safety place their money with the central bank, while those who want
            their money loaned out, but shares in a fund (very much like the money market
            mutual funds which lend to corporations under the new rules for MMMFs).

          • EdwardCDIngram

            Ralph it would be a good idea for everyone reading this discussion to read my book, or maybe some of the book summaries.

            This (below) one is for academics – but may not be as extensive as the BOOK SUMMARY on the adjacent page.

            http://macro-economic-design.blogspot.co.za/p/blog-page.html

            It is written mostly because free market prices is a phrase which will make some economists roll over and look the other way. They are not thinking straight. Just using algoritms t determine what they ought to read. They miss an awful lot.

            TO ANSWER YOUR QUESTION

            What it comes down to is that every economy has times when there is insufficient money in spending circulation.

            Spending money in circulation excludes money placed on standby which can happen increasingly when people are nervous, as for example during a recession.

            When they reverse this, there can be too much spending, and then the KFPP platform comes to the rescue.

            Having rescued and mopped up the spare money, the next cycle will create a new shortage of spending money in circulation and so it goes on. Every slowdown gets sorted with a puff of ne money in the sails of the economy, which then speeds up and the slows again requiring another puff. No government borrowing to spend on favourite projects.

            But if a bank fails, more often than not during a recession, why not give it some debt-free money instead of giving it to the public in reduced VAT or sales tax or creating more debt-based monet for lenders to lend?

            The cost to the public is that they didn't get it.

            I don;t think the public would mind paying that cost bearing in mind that it can be portrayed as the cost of insurance for their own bank deposits and savings. Very cheap. 100% guarantee by the state. Cost to the State – nothing. Cost to tax payers – nothing. Saving for to depsotors – considerable: They are not being accused of having partaken in a moral hazard which they are not qualified to quantify. They can get on with life without needing guidance and the cost of being wrong.

            A FAMOUS ALTERNATIVE SUGGESTION
            Richard Werner, Ben Dyson and two others submitted an alternative to the UK authorities.

            They thought that there should be a separate accounting system for risk free deposits and that any deposits or savings that earned interest should be at risk.

            The risk free deposits would be placed with the central bank and not lent.

            This is complicated and places a burden on the people in deciding what to do with their money. It leaves them in a quandary as they are unable to quantify their risk.

            Everything gets more complicated.

            SIMPLICY IS BETTER – almost invariably.

            Again, thank you for the question – I did not want to explain everything in one go. It is better for people to read the book.

  • Andrew_FL

    "Unlike final sales, nominal GDP includes spending on private inventories and net imports."

    I think you meant to say exports, not imports?

    • George Selgin

      By gosh you are right, Andrew_FL. Good eye! I have repaired the text.