He says that the economy's stellar performance of late might require tweaking some rules that have long governed interest-rate policy, but by no means invalidates them. Just Wednesday, in a speech in Pittsburgh, Meyer pointedly emphasized that the Fed could not afford to ignore the lessons economists have gleaned from long study of the past in assessing whether the present has changed so much that it promises a rosier future. They may not be the old limits that disciplined policy in the past. But even if the limits are new, they must be respected. Overheating is a natural product of expansions that overtax these limits.
Recessions typically follow overheating.
Good policy must therefore balance regularities and possibilities. As a sparring match, the intellectual face-off between Greenspan and Meyer is not much. There is no animosity between the men, and their statements on the subject are directed at answering the most vexing question to face policy makers in years, rather than at each other. Their debate is couched in the dense reasoning and the cautious language employed by Fed officials whenever they speak publicly. And despite their differing perspectives, Meyer has voted in lockstep with Greenspan over whether and when to change interest rate policy, and seems likely to continue doing so.