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submitted 8 months ago by girlfreddy@lemmy.ca to c/world@lemmy.world

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.”

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[-] porcariasagrada@slrpnk.net 21 points 8 months ago

“It wasn’t ruthlessly scientific.”

nothing about economics is scientific. economics is modern day astrology, it uses math but it all comes down to belief.

[-] ShittyBeatlesFCPres@lemmy.world 7 points 8 months ago

Economics filtered through politics and media can get silly but actual economists doing actual economics create rigorous models (like any science) and most don’t even necessarily make predictions about the future. A cross-discipline academic project on the effects of past coastal erosion might, for instance, have an ecologist, historian, and economist all write separate papers. That’s more common than pontificating on TV.

Econ is also prone to being misrepresented by politicians because there’s almost always trade-offs in the real world. Like imagine a proposed tax on gas/petrol to fund public transportation. An economist would just predict who will benefit or be harmed but you probably already know exactly what the different political parties and media outlets in your country will focus on.

[-] naeap@sopuli.xyz 3 points 8 months ago

Every time I hear economist, I directly first think about Friedman and the whole thing goes to shit...

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this post was submitted on 01 Feb 2024
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