“Helicopter money” started out as, and long remained, nothing more than a heuristic device — and a brazenly counterfactual one at that — employed by monetary economists as a means for gaining a better theoretical understanding of the consequences of changes in the stock of money. “Suppose,” the analysis went, that instead of increasing the monetary base by buying bonds in the open market, central banks dropped new supplies of currency from helicopters, thereby instantly increasing everyone’s money balances. What would that do to spending and, eventually, to prices?
Lately, however, helicopter money has made its way from the inner recesses of economics textbooks to the financial pages of major newspapers and magazines, where a debate has been joined concerning its merits, not as an abstract analytical tool, but as an actual policy tool for relieving Japan, and perhaps some other economies, of their deflationary woes. Look, for some examples, here, here, and here. And see as well this recent blog post by our dear friend Jerry Jordan, written for the Atlas Foundation’s Sound Money Project.
Yet for all the controversy surrounding the suggestion that Japan should actually try dropping money from helicopters (or something close to that), my own response to it consisted, not of either surprise or dismay, but of a strong sense of déja vu. For I myself wrote an op-ed proposing helicopter money for Japan in the spring of 1997, that is, almost exactly 19 years ago. I never tried to publish it, in part because I myself couldn’t quite decide just how firmly my tongue was poking my cheek as I wrote it, and because I had then as I do still an abiding dislike of “clevernomics,” which is the sort of stuff economists write to show just how clever they they can be, rather than because they are seriously trying to help the world along. Worried that I was myself lapsing into that sort of thing, I stuffed the essay into a file cabinet, where it has been buried ever since.
All the recent writing on the subject has, however, emboldened me to resurrect my dusty old essay and to publish it hereunder its original title. I don’t pretend that it adds anything to what recent commentators have had to say on the topic. Consider it a bagatelle, if you like: you’ll get no argument from me.