Goldilocks Economics

Scientific method: Let's try this. If it works, do it again. If not, try something else.

Differential diagnosis: Eliminate what it ain't. What's left, is what it is.

Thomas Edison said he did not fail 99 times before he succeeded. He found 99 things that did not work.

   Which is better as a way to bolster economic growth, monetary or fiscal policy? Or should it be a combination of both? If so, how much of each?
   Start with some definitions: Monetary policy is what the Federal Reserve does to control the money supply. Fiscal policy is what government does in spending money. And since money is the lifeblood of a modern economy, analysis of a nation's money can reveal the health of the economic body politic.
   Insufficient money stunts economic growth. Weak money means an anemic economy. Too much money equals inflation, raising prices and threatening hyperactivity and the economic equivalent of a stroke. And if a monetary unit is too strong, relative to other nations' currencies, stuff become expensive, and foreign trade suffers.
   What's wanted, then, is a Goldilocks Economy, where the ingredients are neither too hot nor too cold, too much nor too little, too spicy nor too bland, but "just right."
   In turn, however, "just right" depends on the cultural preferences of the citizens. Just as New Yorkers want ketchup on their burgers and Chicagoans prefer mustard, so economics consumers expect things to suit their tastes.
   All of which leaves the chefs at Club Fed as well as the congressional and administration culinarians in a monetary and fiscal stew.
   The questions, then, become how much of each? Which dominate? When, how, and why?
   One problem, of course, is that the Fed, Congress and the Executive branch are independent entities, and you know what they say about too many cooks ...
   Whether they should be independent entities is another issue. Other countries at other times have combined government and central bank operations, and results have been questionable, if not disastrous. When government controls the money supply (monetary policy), as it did in inter-war Germany, rampant inflation can destroy an economy and bring dictatorship. Alternatively, austerity -- severe cutbacks in spending (fiscal policy) can also destroy an economy. Or, tight controls on the amount of money available can produce poverty, resulting in a two-class society -- those with money, and those without. The very rich and the very poor.
   So there are two extremes, and neither is a cure-all. At times, one is a more effective tool. Sometimes, the other is more appropriate. Usually, both techniques should be used. The trick is in best-guessing how much of each to use, when and how.
   Economics is not an exact science, in the sense of being able to predict what will happen to X if we change Y. It is a social science, with all the flaws, foibles and variables found in any society. In short, there are too many variables in the economic equation to say anything with certainty.
   The ceteris paribus (other things equal) assumption is a heroic assumption at best, since in the real world, other things never remain equal for long.

   You can't step into the same river twice.