Not All NGDP is Created Equal : A Critique of Market Monetarism

Market Monetarism, with its policy rule of NGDP targeting, has in common with free banking that both seek to avoid monetary disequilibrium. One might conclude that these are different approaches to achieving the same end. The purpose of this paper is to show that the proximate ends are in fact conceived differently: Stable NGDP as an object of choice by a central bank is different from NGDP as the emergent outcome of the market process. Furthermore, well-known insights on knowledge, the pricing process, and the institutional context of economic activity suggest that this difference has important implications