Managing the Macroeconomy Isn’t “Closest Without Going Over”

Source: Niskanen Center
by Matt Darling

“In the game show ‘The Price Is Right,’ contestants guess the retail price of fabulous prizes. Unlike many guessing games where you try to make the best possible guess, the contestant who guesses the number closest to the actual price — without going over — wins. Contestants have to resist the inclination to make the most accurate guess without going over the actual value. Experts have argued that macroeconomic management has a similar dynamic. In a recent blog post, Alex Domash and Larry Summers argue that high wage growth can sometimes leave workers less well off. Rising wages are, after all, going to be associated with other price increases. … Like contestants on ‘The Price Is Right’ macroeconomic policymakers need to be careful in placing policy over the optimal amount.” (05/04/22)

https://www.niskanencenter.org/managing-the-macroeconomy-isnt-closest-without-going-over%EF%BF%BC/