In the WSJ, MF writes “The U.S. Underestimates Growth”:
…This is why we shouldn’t place much weight on the official measures of real GDP growth. It is relatively easy to add up the total dollars that are spent in the economy—the amount labeled nominal GDP. Calculating the growth of real GDP requires comparing the increase of nominal GDP to the increase in the price level. That is impossibly difficult.
But John Cochrane gives a “convenient” interpretation of MF in “Feldstein on Inflation“:
The basic idea is that inflation may be overstated, because it doesn’t do a good job of handling new products. As a result, real output growth may be a bit stronger than measured. Marty runs through a lot of sensible conclusions.
He doesn’t talk about monetary policy, but that’s interesting too. So what if inflation really is (say) 3% lower than we think it is, and therefore real output growth is 3% larger than it really is?
That would mean we are a lot closer to “normal” of course.
It´s not Friedman´s Chicago any longer!
Note: Nominal Stability a.k.a. NGDP Level Targeting