'Asymmetric Misinformation'

Paul Krugman:

Asymmetric Misinformation: A follow-up to my post about Jaime Caruana at the BIS. One other thing that struck me was his claim that

policymakers respond asymmetrically over successive business and financial cycles, hardly tightening or even easing during booms and easing aggressively and persistently during busts

Is this true? Anyway, is symmetry in policy responses inherently desirable?

The claim that policymakers have an easy-money bias is one of those things usually said with an air of worldy wisdom; of course people don’t want to take away the punchbowl when everyone is having fun. But the reality doesn’t look at all like that. After all, if policy were consistently doing too much to fight slumps and not enough to curb booms, what you would expect is a steady ratcheting up of inflation — which isn’t at all what has happened over the past 35 years. This supposed piece of wisdom is actually a cliche from the 1970s, which hasn’t been remotely true for a generation. ...

Incidentally, the fake wisdom on monetary policy resembles a corresponding piece of fake wisdom on fiscal policy — the claim that fiscal stimulus inevitably turns into a permanent rise in government spending, because the programs never go away. That didn’t happen this time... And in fact it has never happened in the United States, as far as I can tell...

Beyond that, there are in fact good reasons for asymmetry in the response to booms and slumps...

He goes on to explain why. I'd add another reason why "symmetry is not a virtue," the difference in costs between inflation and unemployment. I believe that the costs of unemployment are much higher than the costs of inflation running a point or two (or three of four) above target, so if there is a mistake to be made, it's best to err on doing too much in a recession.