My bottom line is that monetary policy should react to rising prices for houses or other assets only insofar as they affect the central bank's goal variables - output, employment, and inflation.

Will capitalist economies operate at full employment in the absence of routine intervention? Certainly not.

After adjusting for inflation, the average income of the top 5% of households grew by 38% from 1989 to 2013. …By comparison, the average real income of the other 95% of households grew less than 10%.

The average net worth of the lower half of the distribution, representing 62 million households, was $11,000 in 2013. About one-fourth of these families reported zero wealth or negative net worth, and a significant fraction of those said they were "underwater" on their home mortgages, owing more than the value of the home. This $11,000 average is 50 percent lower than the average wealth of the lower half of families in 1989, adjusted for inflation.

Are deviations from full employment a social problem? Obviously.

My bottom line is that monetary policy should react to rising prices for houses or other assets only insofar as they affect the central bank's goal variables - output, employment, and inflation.

Firms don't just try to pay as little as possible to get the needed bodies on board; when there is unemployment, they ask themselves how wage cuts would affect the behavior of the employees. Would they quit or feel dissatisfied and work less hard on the firm's behalf if they feel that wage policies are unfair?