Amor Fati

From wikipedia ...

Amor fati is a Latin phrase that loosely translates to "love of fate" or "love of one's fate". It is used to describe an attitude in which one sees everything that happens in one's life, including suffering and loss, as good. That is, one feels that everything that happens is destiny's way of reaching its ultimate purpose, and so should be considered good. Moreover, it is characterized by an acceptance of the events that occur in one's life. It is almost identical to the Jewish concept of Gam Zu Letovah (this too is for the best).

The phrase is used repeatedly in Nietzsche's writings and is representative of the general outlook on life he articulates in section 276 of The Gay Science, which reads,

I want to learn more and more to see as beautiful what is necessary in things; then I shall be one of those who make things beautiful. Amor fati: let that be my love henceforth! I do not want to wage war against what is ugly. I do not want to accuse; I do not even want to accuse those who accuse. Looking away shall be my only negation. And all in all and on the whole: some day I wish to be only a Yes-sayer.

Quote from "Why I Am So Clever" in Ecce Homo, section 10^[1]:

My formula for greatness in a human being is amor fati: that one wants nothing to be different, not forward, not backward, not in all eternity. Not merely bear what is necessary, still less conceal it—all idealism is mendaciousness in the face of what is necessary—but love it.

MABE 2009: Revision Questions

In this post, I will answer questions that some of you sent me while revising for exams.

1. As, Price stability suggests that inflation should be "low and stable", should we set inflation close to zero as possible? Is the result of setting inflation close zero mean that we will be at risk of deflation? And what is the appropriate rate of inflation (inflation Targeting) or it depend on each in country forecast as New Keynesian suggested?

This is a good question, and one that I didn't get to address properly in lectures. If price stability is so important, why don't we aim for zero inflation? After all, our ultimate aim is price stability rather than inflation stability. There are at least 2 reasons why, in practice, targeting a low but positive inflation may be a good idea.

First, as you stated, there is a danger of deflation, which can make monetary policy ineffective and thus can be very costly (Japan's lost decade is the prime example here). So, even if zero inflation may be desirable in principles, the upside and downside costs of missing your target is highly asymmetric: you are much happier to end up with 1% inflation, rather than -1%. Just to be on the safe side, targeting a small but positive inflation reduces the deflation risk.

Secondly, it is well-known that our measurement of inflation is imperfect, especially because we cannot account for the quality improvement of goods. For example, the cars' prices may rise every year, but does that mean we have a higher inflation, or simply that cars this year are better than last year model? Due to this unseen quality adjustment, economists are aware that our measured inflation is probably subject to upward bias: it tends to overstates the true inflation. Hence, while we may aim for close to zero inflation, in practice we target a slightly positive number.

What inflation number precisely? I think most central banks would agree that somewhere around 1-2% represents price stability. Countries with higher targets may be those whose inflation targets are still 'converging' towards their long-run ultimate objective.

MABE 2009: Lectures 7,8,9,10 and Exams Prep

Long-overdue presentations for the rest of the course have been uploaded.

• Lecture 7: Stock Market
• Lecture 8: Review of Macro Theory
• Lecture 9: Monetary Policy Frameworks
• Lecture 10: Assessing Inflation Targeting
• Exams Prep
  

If you have any questions/problems during your revision, please let me know!

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