As I said, this is a dispute we can have another time. I asked you to stipulate, for the sake of argument, that "running an economy hot" is good policy. Unemployment leaves its scars, so do inflations, there's a dispute to be had. 1/

But we agree, I think, that IF running an economy hot is wise, and running an economy risks (does not require, but risks) inflation, there's a time-inconsistency for governments under most contemporary democratic institutions. 2/

"And, of course, there is a third alternative: GDP=Potential GDP, inflation on target." This I think is pure theology, mere cult. What is "target"? Where does it come from? "Potential GDP", the same. 3/

Only in very stylized model is there some ex ante optimal long-term growth path that can be hewed or not hewed. That is a human construction, constructed not because it describes anything humans have experienced of the world, but because it simplifies certain kinds of analysis. 4/

To then claim there actually does exist in the world an ex ante optimal growth path and all we must do is follow it is to succumb to idolatry and call it science. In real life, the opportunity set is unknowable, there is no achievable optimal, we must decide in which direction to err. /fin