The latest EconTalk podcast is a discussion with Tyler Cowen that centers on monetary theory and policy. While the podcast as a whole is worth a listen, I found myself quite disappointed upon hearing Cowen’s views on deflation. Cowen not only rejects modest deflation as an optimal policy, but actually advocates a low, stable rate of inflation.
In my view, this largely stems from a misunderstanding of deflation prevalent in monetary theory that I have previously detailed here. Thankfully, David Beckworth, who has done great worth on the topic of malign versus benign inflation, presents a great counter-point to Cowen’s analysis.