The “natural rate of interest” is a theoretical concept in economics that describes the interest rate at which the economy operates at full employment with stable inflation. If this price actually exists and economists can calculate it then that would be a pretty important number to know when implementing policy.  Of course, it’s a totally vague concept to begin with because there isn’t just one interest rate in the economy and we can’t even reliably calculate what the natural rate of interest would be.

There’s been a lot of chatter about this in recent days. Tyler Cowen is thinking out loud about it.  Brad Delong is thinking out loud about it. And Paul Krugman seems a little annoyed about it.  But I don’t even know why we’re having this discussion.  Don’t we already know that we don’t know what that price is and that monetary policy isn’t going to get us there any time soon?  How long does the economy have to flail for us to realize this?  Here’s my broader view: