Targeting GDP Is A Stupid Endeavor

Let’s try an intellectual exercise.

Suppose I charged you with task of monitoring one individual, and reporting to me their activities at any given moment.

This, you might be able to do, provided you had the freedom from personal needs (such as food and shelter) to spend your every waking moment watching this individual. And even then, in your non-waking hours, you would have to surrender that the individual could slip away from you.

However, your chance of success is arguably high.

Now, let us up the ante, and say I charge you with the task of watching 2, 3, or even 4 such individuals. Could you possibly monitor their every activity?

For those of you with children, I daresay you will happily respond “Hell no. They’re everywhere.”

And finally, suppose I asked you to monitor the activities of somewhere between 133 to 200 individuals, of whom anywhere between 30-60 we have no inclination of how to find at any given moment? In fact, as many as 20 people are actively trying not to be found.

That’s the best case situation.

The worst case situation is more like you being asked to track 400 such persons. Or 1,000. In fact, since many people in the government are charged with equivalent tasks, you could very well be asked to keep tabs on the activities of 100,000 people.

Far from ever being able to organize or direct such a crowd with much control, you probably don’t even stand a chance of keeping tabs on what these groups of disperse individuals are doing.

This is about how much of a chance Bernanke and the Federal Reserve have at “targeting GDP”.

The Federal Reserve had almost no chance whatsoever of targeting inflation, which can at least be directly affected by money printing.

Now, they are saying they’re going to target economic activity itself.

This is the equivalent of the farmer saying “My sheepdog sucks at herding sheep. So I’m going to see how he does herding feral hogs.”

This guy’s dog is going to get ripped to shreds. And the farmer is going to be so sad. And left looking like an idiot.

But as I don’t care about his dog, I’m more than too happy to watch him try.

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