The Market Monetarist Choir

         This is what indoctrination sounds like:

        "It seems to me that, whether right or not, the barrier to the median economist accepting the Market Monetarist framework is the lack of a mathematical model. As much as I enjoy reading this blog every day (the blog responsible for liberating me from fiscal Keynesianism), in terms of the big picture, perhaps it’s time to concentrate your efforts into producing a formal DGE model?"

        http://www.themoneyillusion.com/?p=15135

        The commentator Robert has been "liberated" for fiscal Keynesianism. Based on what exactly? Because Sumner says don't do fiscal stimulus because it will "drive up our debt?"

        It really is interesting to behold-the slow steady progress of Monetarist propaganda. Listen to what DWB said:

        "This is what it’s come too! My comment section is a debate between MMTers and MFers!"

        "i view that as an excellent indication. generally people comment when they disagree (selection bias). So, if the worst thing that people can come up with is some silly MMT or MF argument that is easily rebutted 1000 different ways, then i view that as excellent."

         http://www.themoneyillusion.com/?p=15169#comment-167961

         So is that Sumner's goal? A site where there are no comments as everyone agrees 100%? Yet I don't really see what Sumner has proved. In large part people want to understand what's going on and how to fix it. I've always found NGDP targeting an interesting idea but I can't say that I find Scott himself terribley credible. Incidentally, DWB's a very nice guy, as is Satorous, but I get a little restless around so much preaching to the choir. The message seems to be 'Shut up and Sing.'

         He's a guy who has a story to sell rather than any real meeting of the minds. It's like those quotes we looked at from Robert Mundell about the beauty of a currency union-a la the euro-is that it neuters politicians of any fiscal power and takes away the ability of nations to set their own monetary policy.

         No doubt if you could get Sumner to answer this question at all he'd make some canard about how he can't be lumped in with Mundell anyway as he has never supported the euro. Such an answer is vintage Scott and the fact is of course it's a total red herring. Whether or not he agrees with the euro he supports the idea of fiscal austerity which means he shares Mundell's goal.

        The shrewdness of Sumner is why he's Friedman 2.0. Monetarism has always been shrewd. It takes a different tact than most Right wing anti-Keynesian econ theories. While a wild eyed Rothbardian like Major Freedom claims there no such thing as a demand shortfall-unless government induced-which is also what Real Business Cycle Theory believes, the Monetarist view made concern trolling an art form by conceding the demand shortfall point.

       Unlike Austrians and RBC it admits the problem of a demand shortfall, it just says that monetary policy is the only legitimate weapon. Yet for all that. when Reagan and Thatcher one in the 80s, both Friedman and Hayek were frequent guests of the Right wing Administrations.

        So while Monetarism seems to deny Say, in fact theirs is simply backdoor Say's Law:

        "I’m so convinced that stabilizing expected NGDP (via level targeting) would also roughly stabilize actual NGDP that I have in the past made grand claims about “the end of macro.” (Of course I actually meant the end of certain types of macro, just as Francis Fukuyama actually meant the end of certain types of history.)"

       "Macroeconomics is the study of policy failure. Once an issue goes away the field loses interest. Liquidity traps were dropped from the curriculum in the 1970s, when 13% inflation and 15% interest rates made the “problem” of being stuck in deflation and zero rates seem absurd."

        http://www.themoneyillusion.com/?p=14433

      

        See if we can just do NGDP  targeting then Say's Law really will apply:

        "In 1984-2007 we came close to solving the key macro problem, NGDP stabilization. We were thrown off course by a number of factors, including an inability to use the interest rate instrument at the zero rate bound. If we can get a better policy instrument (NGDP futures targeting anybody?) then we will go right back to the macro problem being solved. When that happens, it will no longer be necessary to divide textbooks into micro and macro splits. The remaining macro areas (such as long run growth) will be special topics, analogous to international trade."

      "The irony here is that the NKs (and of course us market monetarists) can only succeed by making our models obsolete—thrown into the dustbin of history—and by allowing the RBC-types to take over what little is left of macro."

     "PS. Wikipedia year 3012: “Scott Sumner was an economist who for some odd reason was obsessed with the money supply and NGDP. Of course as we all know NGDP fluctuates very little, and those small fluctuations are completely uncorrelated with changes in the money supply. He had his 15 minutes of fame, and then rapidly fell back into obscurity.”

        Again, I return to the question up top: what has Sumner proved? Nothing. However, we're living in a world desperate for some answers in what has now already been a 5 year crisis. What Sumner gives everyone is a highly intuitive theory with a very high level of explanatory power. What Sumner does have going for him is a theory with legs.

Grammer (UG) train and some of them even had some good objections but when push came to shove-he prevailed because he had the theory that explained so much and they just had objections.

       This may be what helps Sumner. Still in his claim that it's the median Macroeconomist he needs to persuade, time will tell. He definitely has had some success though Stepehen Williamson's recent andti NGDPT posts shows there will be some resistance-as there always are to proposed paradigm shifts.

      Chomsky won largely on one negative review of Joel B. Skinner-so Sumner hasn't proved quite that supple. I think a large problem with Monetarism in general is the wrong assumption that somehow monetary stimulus is less distortionary than fiscal stimulus. In reality the idea that all Cantillion effects can be negated is a fool's errand.

     More than anything they are simply different-monetary policy is more about adding liquidity for the financial system, fiscal policy is more directly about the real economy.

      I was tickled to see that the famous Nanute left a question for Scott:

       "Is there a nexus between velocity and the M1 multiplier? Haven’t looked lately, but last time I did the multiplier was “negative.”

        I was thinking of complimenting such a probing, perspicacious inquiry, but thought the better of it-if Sumner sees me talking to Nanute, he's less likely to give him a decent answer.

        http://www.themoneyillusion.com/?p=15208