But let’s focus on the choice of a 2% target. After the high inflation of the late 1970s and early 1980s, when it reached over 20% in the UK, central banks were left scrambling to find some new theoretical model to deal with rising prices. The first central bank to propose an inflation target of 2% was in New Zealand. But where did they get it from? Apparently, from thin air.
Recently, I came across this one story that suggested the choice of 2% was the result of an off the cuff remark by then New Zealand finance minister, during a TV interview, who told reporters he would be happy with an inflation between 0% and 1%. This led the governor of the central bank at the time, Don Brash, to factor in an inflation bias of roughly 1% to arrive at the magical number of 2%. Michael Reddell, a colleague of Brash’s at the time at the Reserve Bank, admitted: “It wasn’t ruthlessly scientific.” Brash himself admitted as much: “It was almost a chance remark. The figure was plucked out of the air to influence the public’s expectations.”
Yeah, I’m sorry but this is stupid. I think you’re on to something here in that technocracy has led to a situation where corporate stooges are put into positions of power as “experts” who just make policy that benefits capital. On the other hand economics is a legitimate science with rigorous case studies to back up at least some of its theories. The real problem is there are a lot of junk theories out there that have been implemented through the political weaponization of faux-expertise. Chicago Boys’ economics is a good example of the problem.
its not a science. that is my point. all that comes from economists must be taken with a massive grain of salt. even if it confirms my biases.