As for what led Bernanke to his decision, there's little doubt that Woodford's recent paper at Jackson Hole, Wyoming had a big impact. Sumner himself is being magnanimous and refusing to take any bait. To a man he claims not to be bothered in the least about Woodford's dismissal of him:
"Interestingly, several commenters in the previous post thought Woodford’s views on NGDP targeting conflicted with my views. Not so. They also thought I’d be upset by this part of the Washington Post interview of Woodford:
DM: One big advocate of an NGDP target, on his blog and elsewhere, has been Scott Sumner at Bentley University. Did he influence your thinking on this?
MW: I don’t think it affected me. This theme is one that I had been pushing extensively even before the current crisis, both for reasons that relate to my general views on monetary policy, and the fact that I had been giving talks on responding to the zero lower bound in this general situation. So I already had a well worked out view of that kind. I don’t think it changed my mind about the importance of the particular themes."Upset? The Washington Post is one of the elite newspapers in America. And they just asked the world’s leading monetary economist if his views on the Fed were influenced by a professor at a small New England business school. Yes, I’m heartbroken."
"Seriously, five years ago I would have been thrilled to hear a Washington Post reporter ask Woodford if he was influenced by me. And I still am."
http://www.themoneyillusion.com/?paged=2
Is this really Sumner's attitude? Who knows? However, no doubt if it isn't how he really feels it's still a very shrewd posture to take. On the other hand, his MMers can be outraged for him:
"Michael Woodford was asked if he had been influenced by Scott Sumner, and he said no."
"I believe him."
"On the other hand, where has Woodford been for the last four years?"
"I think the answer is obvious--way, way up there in his ivory tower."
"Apparently, in his own mind, Woodford is a long time advocate of gap-adjusted price level targeting. Nominal GDP targeting, according to Woodford, is a similar, though less than optimal, simplistic alternative."
"On the other hand, where has Woodford been for the last four years?"
"I think the answer is obvious--way, way up there in his ivory tower."
"Apparently, in his own mind, Woodford is a long time advocate of gap-adjusted price level targeting. Nominal GDP targeting, according to Woodford, is a similar, though less than optimal, simplistic alternative."
"Touche! On the other hand some feel that Sumner is taking too much credit. Not him personally, so much but his acolytes. Of course, his brilliant strategy of not being offended by Woodford puts him in the position of having his friends make the case for him as Woolsley clearly did."
Daniel Kuehn though has a totally different view. Woodford in his piece also zinged Krugman:
"Woodford is no Krugman. If Krugman had been damning the Fed for the last four years for promising to keep interest rates low rather than promising to keep them low until the gap adjusted price level had returned to 125 (or something,) then we would know. No, we had Krugman saying that monetary policy was out of ammunition (with fine print and occasional clarification that this means "conventional" monetary policy.) We had Krugman saying that the only answer was for the Fed to commit to being irresponsibly inflationary. (How is that for rhetorical sabotage?) No, Krugman was insisting we need more government spending to create jobs."
Kuehn offers a nice contrast to all this:
"Apparently some Sumner groupies thought this would upset him, which is nuts. This is the sort of distorted picture that the blogosphere gives sometimes. Sumner is a great thinker and public intellectual, but the idea that Michael Woodford would be getting his monetary theory from a blog post-crisis is laughable. Sumner knows this of course. So does anyone else who's actually studied economics and realizes that Woodford is one of the most respected monetary economists in the world. And as I was pointing out to Ryan the other day, Woodford had been saying since before the financial crisis, simply as a statement of theory, that in a liquidity trap you loosen monetary policy to act on demand and inflation expectations."
"Sumner also had this to say:"
"I knew I shouldn’t try to list names in the previous several posts. I forgot David Eagle, who has worked for many years on NGDP targeting. And people like Doug Irwin, Niklas Blanchard, Kantoos, and many others. And of course there’s Paul Krugman, who’s 1998 paper started the ball rolling on the expectations approach to the zero rate trap."
"This is a reference to an earlier post where he listed names and they were all market monetarists from what I could tell. That was annoying when it was posted because it continued this theme that somehow only market monetarists have been saying these things. The fact that he mentions Krugman here is huge, and it deserves to be recognized."
"Remember the disinformation that has been on Money Illusion for years now: that Krugman doesn't think monetary policy can work and those Keynesians think that at the zero lower bound you can only do fiscal policy. Well now here's two posts in a row that Sumner essentially acknowledges none of those claims are true (he didn't challenge the Woodford characterization, so I'm assuming that's an acknowledgement of sorts)."
"Better late than never I guess."
"And remember, Krugman in 1998 was just applying standard New Keynesian thinking to a new scenario that had emerged in Japan. New Keynesians had been talking about the expectations channel formally for long before that, and Old Keynesiansyou know the way the New Keynesians always talk about monetary policy acting through expectations: that has relevance here and that's something non-forward-looking Old Keynesian models missed". So this approach to monetary policy didn't even start with Krugman in 1998... that's just when the modern liquidity trap literature really began."
"I knew I shouldn’t try to list names in the previous several posts. I forgot David Eagle, who has worked for many years on NGDP targeting. And people like Doug Irwin, Niklas Blanchard, Kantoos, and many others. And of course there’s Paul Krugman, who’s 1998 paper started the ball rolling on the expectations approach to the zero rate trap."
"This is a reference to an earlier post where he listed names and they were all market monetarists from what I could tell. That was annoying when it was posted because it continued this theme that somehow only market monetarists have been saying these things. The fact that he mentions Krugman here is huge, and it deserves to be recognized."
"Remember the disinformation that has been on Money Illusion for years now: that Krugman doesn't think monetary policy can work and those Keynesians think that at the zero lower bound you can only do fiscal policy. Well now here's two posts in a row that Sumner essentially acknowledges none of those claims are true (he didn't challenge the Woodford characterization, so I'm assuming that's an acknowledgement of sorts)."
"Better late than never I guess."
"And remember, Krugman in 1998 was just applying standard New Keynesian thinking to a new scenario that had emerged in Japan. New Keynesians had been talking about the expectations channel formally for long before that, and Old Keynesiansyou know the way the New Keynesians always talk about monetary policy acting through expectations: that has relevance here and that's something non-forward-looking Old Keynesian models missed". So this approach to monetary policy didn't even start with Krugman in 1998... that's just when the modern liquidity trap literature really began."
So who's right? See the beauty of this is not swimming in this rarefied water I really don't care. If it works, if it helps which at this point it seems like it might, and if it locks in the President's re-election, they can all take whatever kudos they think they have coming to them.I do agree that Kuehn is right about misrepresenting Krugman, and note that Woolsley's comment above was a classic example of such a misrepresentation.
But ultimately they should all just go out to dinner. Sumner certainly is right in downplaying the whole debate over "influence."
P.S. I don't know why Blogger has forced me to use this new interface. Right now it's messing up a lot. For one thing spellcheck isn't working. So if there are more errors than usual you'll know why. Let's hope these are just engineering glitches.
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