Ryan Avent on policy counterfactuals
Ryan Avent recently made a very astute comment:
In my new book (of which I just received a copy), I argue that when considering demand shocks to the economy we should think of causation in terms of policy counterfactuals. Thus if the lowest cost way of preventing the Great Recession would have been to set monetary policy in a different (more expansionary) position, then it makes sense to argue that tight money caused the Great Recession. As an analogy, if a bus driver could have avoided going off a cliff by setting the steering wheel at a different position, then it makes sense to argue that inept steering by the bus driver caused the accident (not a turn in the road).