The Right’s Bad Romance With Tight Money

Tim Lee explores the question of why are libertarians such inflation hawks and can’t find any good reasons:

Another likely factor is that American conservatism is a fundamentally populist movement, and the inflation hawks’ position has a simplicity that makes it intuitively appealing, especially to a movement that tends to see all policy issues in terms of virtue. Rhetoric about “printing money,” “debasing the currency,” and so forth are not only intuitively appealing, they also dovetail nicely with broader conservative themes of thrift and self-control. The arguments of inflation doves are more subtle and lack the same kind intuitive appeal.

Until recently, the first factor largely explained my own thinking on the issue. I’ve long regarded the Fed’s Friedman-inspired taming of inflation under Paul Volcker to be one of the great triumphs of libertarian ideas during the 20th century. But as the inflation I feared in 2009 has failed to materialize, I’ve begun to reevaluate my own reflexive hawkishness. It’s not 1980 any more, and perhaps inflation is no longer the most pressing problem facing the Fed.

To give a non-psychological explanation that at least makes a little sense, this is what I think. Many pointy headed elites and business types have various policy reforms that they sincerely believe would boost economic growth on the supply side. They quite genuinely believe that lower social insurance benefits and reduced labor market and environmental protections will make almost everyone better off over the long run. But they’re extremely pessimistic about the politics of persuading anyone of this. They see severe recessions as a moment when voters might be persuaded to swallow unpalatable reforms in the name of boosting growth. But this only works, however, is supply-side structural reform is turned into the exclusive legitimate means of boosting growth and employment. That, in turn, requires a kind of “demand denialism.”