When a work of art imitates life, is it really artificial? Or are we saying it is just an approximation of objective reality so that we can understand what actually exists to measure its obtainment, and so naturally correct for the ambiguity of its non-attainment.
“Hit the Target”
Janet Yellen, testifying before a joint economic committee in Congress today, said the US is close to its target of full employment, and there will be less “drag on inflation” over the coming year.
With the ambiguity of a dual mandate, what is the target?
High employment with low inflation is the measure of success, but Yellen says low inflation is a drag. The discrepancy defines the dual mandate, and when inflation is less than 2%, it means there is a deflationary trend.
Since deflation causes unemployment, we need to have an indicator that can be interpreted to support saying “we are close to maximum employment.”
What’s the TI?
Transacting the interpretation (TI) forms the probable risk. We can say, for example, the Fed’s near-zero-rate program is artificial, but then so are the antecedents.
The Available Ambiguity and Arguable Ambivalence smacks of Cartesian dualism. Like with Pi, and in nature, there is an available ambiguity.
The relationship between employment and inflation has been inverse. This geometric figure correlates the risk with the reward, which is the same thing, remember, because they are supposed to proportionally measure each other. However, currently, for example, we have a close approximation to full employment but with low inflation (which measures low growth). So, how is the discrepancy to be objectively interpreted to transact monetary policy, which then has a measurable effect on the thing being observed (what science describes as TI)?
The risk-to-reward is out of proportion. To wit (like Bernie Sanders keeps telling us): “All new income is going to the top income class.”
Consolidation of the wealth is deflationary. If we want to actually resist deflation (and really empower the free market) with less government and monetary expansion, deconsolidate the wealth!
Really, actually, it’s too easy.
Remember now, consolidation of the wealth empowers economic desperation, which is as far from approximating full employment with low inflation as we can get, yet, nevertheless, the current interpretation is that we have full employment with low inflation.
Is this what the failure of a measurable success (the Available Ambiguity and Arguable Ambivalence) looks like?
Is this a work of art that imitates life, or are we still Waiting for Godot!