I'm particularly gratified about this as he is a very sharp guy with a background in economics. Here is how he describes himself at his blog
"This blog is intended as an antidote to mainstream or neoclassical economics. Though other blogs like this exist, I feel few of them offer a ‘ground up’ critique. As an economics student, I can credibly claim to know what is taught on undergraduate courses, and hope to demonstrate clearly and intelligibly that much of it is built on incredibly suspect foundations, and is often internally contradictory."
I spoke with Unlearning Econ more at Twitter. He provides an important pubic service as someone who is knowledgeable about what they teach in college economic classes. Sumner takes advantage of the fact that many are not.
Unlearning's checking in with me is agreeable for another reason. Sumner answered my comments to him yesterday about his snark against Krugman with this:
"A few weeks ago you asked me why I didn’t read your blog more often. How can I put this politely . . .
BTW, How old are you Mike? "
A few things should be noted. Sumner is not answering me in good faith. He changes the subject by pretending to be Miss Manners accusing me of being "immature" for disagreeing with him too vigorously. However Unlearning Econ's dropping in shows Scott is even wrong here-I have had a number of quality economists stop by.
A tactic he employs a lot is the following: "Rather than the Keynesian cross, Paul Krugman should have argued that I was clueless about how research works in my own field."
"I started out in the early 1980s, and for 25 years submitted papers to journals, and then patiently twiddled my thumbs and waited for referee reports."
http://www.themoneyillusion.com/?p=12809#comments
This is typical. What it amounts to is: I'm an expert in this. You can't question me. To question me you have to have also been in academia for 25 years.
In a twitter correspondence Unlearning said this to me, "I consider him quite dangerous as he's a classic high priest of 'free market' economics. However, NGDP targeting, if tried..."
"will simply fail. And if it doesn't then great, it should improve people's lives."
This is an interesting point. I did like the idea of NGDP targeting when I first learned about it-that Krugman, Delong, and Romer supported it helped too-I figured if smart Keynesians like them buy it maybe it is valid.
But the disingenuous way Sumner so often argues makes me careful about him. At bottom his agenda is as Unlearning says, "is more of an ideological opposition to a positive role for the state than anything else."
A very important point he then says is that, "he thinks macroeconomic policy can only influence nominal GDP. But it can have real impacts."
This is very important. Think about an extreme example: if a meteor wiped out Europe and Asia what would be the NGDP level we should target to get us back to full employment? In this extreme example, the the real economy peeks through.
Thanks for the post.
ReplyDeleteNot only the example of fiscal policy being more direct, but the rate of interest can determine what *type* of investments that are made. Higher interest rates push people into more speculative endeavours. Here's Adam Smith on the subject:
'If the legal rate of interest in Great Britain, for example, was fixed so high as eight or ten per cent., the greater part of the money which was to be lent, would be lent to prodigals and projectors, who alone would be willing to give this high interest. Sober people, who will give for the use of money no more than a part of what they are likely to make by the use of it, would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into the those which were most likely to waste and destroy it. Where the legal rate of interest, on the contrary, is fixed but a very little above the lowest market rate, sober people are universally preferred as borrowers to prodigals and projectors. The person who lends money gets nearly as much interest from the former as he dares to take from the latter, and his money is much safer in the hands of the one set of people, then in those of the other. A great part of the capital of the country is thus thrown into the hands in which it is most likely to be employed with advantage.'
This is crucial. Monetarists neglect this role for interest rates completely in their analysis.
See these are the sorts of points that need to be drawn clearly. Essentially the point of Sumner anc Chrsitensen-at Market Monetarism-is there is no role for fiscal stimulus as monetary stimulus does the same ting but more efficeintly.
ReplyDeleteThey ways in which fiscal stimulus is more direcet and why this is often preferrable needs to be understood.
By the way, John Leemk who comments at Money Illusion accuses me of not understanding the difference between aggregate supply and aggregate demand in my point about a meteor destroying Europe and Asia.
His point is that stimulus only effects aggregate demand-a natural disater on the level of Europe and Asia being destroyed would seriouisly imperil supply not demand.