Krugman has really kicked it here. I often wonder why he doesn't call out Sumner more often for a few reasons.
1). Sumner has quite often over the last 4 years of his blog called out Krugman.
2). Sumner often makes some very controversial claims that you'd think it would behoove Krugman to want to correct.
However, I suppose there's probably a few reasons why he doesn't do it very often.
1. Krugman may have thought doing so was "punching down." When Sumner left a comment on Krugman's board when Money Illusion had just started in March, 2009 it got him a lot of notice. Krugman may have felt that any attention he gave Sumner would only increase his standing.
2. Sumner is someone who doesn't let a thing go-just remember how long his fight about Krugman and Simon-Wren Lewis criticizing Lucas and "tax smoothing" went and don't these dumb Keynesians realize that S=I, and that savings means building capital goods?
http://diaryofarepublicanhater.blogspot.com/2012/01/scott-sumner-becomes-even-more-shrill.html
http://diaryofarepublicanhater.blogspot.com/2012/01/scott-sumner-becomes-even-more-shrill.html
Krugman may well just rather avoid being caught up in a polemical feud with a guy like Sumner who will drag it out for 2 or 3 weeks till someone agrees he's right. In the case linked to above, Noah Smith ended up saying he is-kind of-right-about something. Smith admitted to me-over email-that this was partly just to get Sumner to let it go.
http://www.themoneyillusion.com/?p=12819
However, on Sunday Krugman went there. I say good for him: it's not like Sumner hasn't written his share of anti Krugman screeds over time. He actually was simply endorsing something Mike Konczal had written on Friday after the GDP numbers came in under expectations:
http://diaryofarepublicanhater.blogspot.com/2013/04/good-news-and-bad-news-in-todays-25-gdp.html
Sumner had already answered Konczal.
"Here’s a recent claim by Mike Konczal:
http://www.themoneyillusion.com/?p=20854
Of course, for the criticism to come from Krugman is different and has sent Sumner off the deep end:
" Paul Krugman has a new post that fails on every level possible."
"But it’s even worse. RGDP growth (which is what the Keynesians focus on) actually accelerated in Q1. The sharp slowdown predicted by the Keynesians failed to occur. But they are so convinced by the accuracy of their model that they simply assume that a sharp slowdown occurred because by God it should have occurred. I really can’t understand how any thinking person could take Krugman’s “proof” of Keynesianism seriously. BTW, the Keynesian model implies they should be focused on NGDP as an indicator of aggregate demand, as supply-side factors also impact RGDP. This leads me to wonder whether Keynesians even understand their own model."
It accelerated vs. what it did in the 4th quarter last year where it had a tiny contraction. However, while the number was positive it was beneath expectations. Sumner himself has acknowledged that what the Fed has done may not be enough to offset the sequester. He's also conflates apples and oranges by harping on the idea that 1st quarter GDP 2013 is higher than the entire year of 2012; the trouble is that this year, the first quarter forecast was supposed to be considerably higher than the year so we're behind schedule and if the rest of the year also misses expectations we could even end up under2% RGDP-which Sumner admits would mean the Sunmner Critique hasn't held up.
1). Sumner has quite often over the last 4 years of his blog called out Krugman.
2). Sumner often makes some very controversial claims that you'd think it would behoove Krugman to want to correct.
However, I suppose there's probably a few reasons why he doesn't do it very often.
1. Krugman may have thought doing so was "punching down." When Sumner left a comment on Krugman's board when Money Illusion had just started in March, 2009 it got him a lot of notice. Krugman may have felt that any attention he gave Sumner would only increase his standing.
2. Sumner is someone who doesn't let a thing go-just remember how long his fight about Krugman and Simon-Wren Lewis criticizing Lucas and "tax smoothing" went and don't these dumb Keynesians realize that S=I, and that savings means building capital goods?
http://diaryofarepublicanhater.blogspot.com/2012/01/scott-sumner-becomes-even-more-shrill.html
http://diaryofarepublicanhater.blogspot.com/2012/01/scott-sumner-becomes-even-more-shrill.html
Krugman may well just rather avoid being caught up in a polemical feud with a guy like Sumner who will drag it out for 2 or 3 weeks till someone agrees he's right. In the case linked to above, Noah Smith ended up saying he is-kind of-right-about something. Smith admitted to me-over email-that this was partly just to get Sumner to let it go.
http://www.themoneyillusion.com/?p=12819
However, on Sunday Krugman went there. I say good for him: it's not like Sumner hasn't written his share of anti Krugman screeds over time. He actually was simply endorsing something Mike Konczal had written on Friday after the GDP numbers came in under expectations:
http://diaryofarepublicanhater.blogspot.com/2013/04/good-news-and-bad-news-in-todays-25-gdp.html
Sumner had already answered Konczal.
"Here’s a recent claim by Mike Konczal:
We rarely get to see a major, nationwide economic experiment at work, but so far 2013 has been one of those experiments — specifically, an experiment to try and do exactly what Beckworth and Ponnuru proposed. If you look at macroeconomic policy since last fall, there have been two big moves. The Federal Reserve has committed to much bolder action in adopting the Evans Rule and QE3. At the same time, the country has entered a period of fiscal austerity. Was the Fed action enough to offset the contraction? It’s still very early, and economists will probably debate this for a generation, but, especially after the stagnating GDP report yesterday, it looks as though fiscal policy is the winner.
"I’m puzzled by this. The first quarter RGDP numbers show a growth rate of 2.5%, which is actually higher than the growth rate of 2012. NGDP growth is similar to 2012. How does that show fiscal policy is slowing the economy?"
Perhaps fiscal policy is slowing the economy, but I just don’t see it in the data.
BTW, if fiscal austerity did slow the economy, the solution would not be fiscal stimulus, it would be monetary stimulus. If the Fed is unwilling, an employer-side payroll tax cut would be a good form of fiscal stimulus, much more effective than what they did in 2009.
"And I can’t speak for Beckworth and Ponnuru, but I very much doubt the Fed did “exactly what Beckworth and Ponnuru proposed,” which was NGDPLT, if I’m not mistaken."
http://www.themoneyillusion.com/?p=20854
Of course, for the criticism to come from Krugman is different and has sent Sumner off the deep end:
" Paul Krugman has a new post that fails on every level possible."
as Mike Konczal points out, we are in effect getting a test of the market monetarist view right now, with the Fed having adopted more expansionary policies even as fiscal policy tightens.And the results aren’t looking good for the monetarists: despite the Fed’s fairly dramatic changes in both policy and policy announcements, austerity seems to be taking its toll.
"Let’s start with the obvious double standard, identified by one of my commenters (Hellestal):
During 2009, the administration came up with a stimulus plan to fight the downturn in the economy. Keynesians like Krugman said, clearly and repeatedly, that the plan was in the right direction but that it would be insufficient to fight the downturn.After the plan “failed” — for whatever reason — there were some who blamed Krugman for having advocated stimulus. Keynesian had been tested, they said, and it had failed. Krugman denied this, pointing out (correctly) that he had been saying from the beginning that the plan could be too small to make a difference. He linked repeatedly to his old posts, where he explicitly mentioned the possibility that the plan was insufficient. He vigorously defended the viewpoint that this “test” of his views was not proper.Now we have Mike Konczal saying that market monetarism has been tested. We can, once again, go back to the original posts of the market monetarists to see what expectations they had. We can, once again, compare the actual policy that was implemented against what the original recommendations were. A brief search will indicate, once again, that the monetarists — like Krugman before them — believed that the plan was in the right direction but insufficient.We remember, yet history still manages to repeat itself.Ah, there is a difference. This time, Krugman is saying “we are in effect getting a test of the market monetarist view right now”. This is a rather ostentatious double standard.
"But it’s even worse. Fiscal stimulus is costly, as it increases the burden of future taxes, whereas monetary stimulus is free. Indeed monetary stimulus actually reduces the burden of future taxes. So it makes some sense to talk about the “effort” that fiscal policymakers put into stimulus, but no sense to talk about monetary policymakers “making an effort.” The analogy for monetary stimulus is steering a ship. It’s not “how hard should they try,” it’s “which direction do they want to go?” The Fed believes their policies will lead to roughly 5% NGDP growth; hence they don’t want to do more. I think they overestimate the effect, and want them to do more. But that difference of opinion has nothing to do with the validity of market monetarism."
"But it’s even worse. RGDP growth (which is what the Keynesians focus on) actually accelerated in Q1. The sharp slowdown predicted by the Keynesians failed to occur. But they are so convinced by the accuracy of their model that they simply assume that a sharp slowdown occurred because by God it should have occurred. I really can’t understand how any thinking person could take Krugman’s “proof” of Keynesianism seriously. BTW, the Keynesian model implies they should be focused on NGDP as an indicator of aggregate demand, as supply-side factors also impact RGDP. This leads me to wonder whether Keynesians even understand their own model."
It accelerated vs. what it did in the 4th quarter last year where it had a tiny contraction. However, while the number was positive it was beneath expectations. Sumner himself has acknowledged that what the Fed has done may not be enough to offset the sequester. He's also conflates apples and oranges by harping on the idea that 1st quarter GDP 2013 is higher than the entire year of 2012; the trouble is that this year, the first quarter forecast was supposed to be considerably higher than the year so we're behind schedule and if the rest of the year also misses expectations we could even end up under2% RGDP-which Sumner admits would mean the Sunmner Critique hasn't held up.
Sumner also hardly gives fiscal stimulus the death knell he thinks here:
"Meanwhile, government output in the US has been falling at the sharpest rate in decades, and yet NGDP keeps chugging along at 4%. So is Keynesianism a model that applies to the UK, but not the US? Or have we had monetary offset?"
The point of this piece-Krugman's double standard-is that he argues that fiscal stimulus didn't fail in 2009 it just wasn't big enough but yet he doesn't acknowledge that MMers said that the Fed's new Evan Rule-keep rates low until 6.5% unemployment or 2.5% inflation-may not be enough.
If that's true surely he's not suggesting that the economy is optimum with 7.6% unemployment? If argues that the Fed can and should have done more then clearly there's room for more fiscal stimulus or at least an absence of fiscal pullback.
I'm glad that Krugman went here though Sumner may not get over this one for weeks. While Krugman is probably right to avoid ongoing polemics with individuals it might be beneficial if he at least reply to this piece.
Sumner of course followed this up with another anti KRugman post this time saying that Krugman criticizng Reinhart and Rogoff is the pot calling the kettle black.
For all this, it's true that it's early to say definitively say what has worked and failed this year. The Economist is right:
"while this is an interesting academic debate, as a practical matter there is little reason not to push for more monetary expansion and for a slower pace of fiscal consolidation. I feel strongly, however, that anyone drawing firm conclusions from this "experiment" knew what conclusions were going to be drawn before the experiment was ever run."
http://www.economist.com/blogs/freeexchange/2013/04/monetary-policy-3
If Sumner agrees that the Fed isn't doing enough how can he criticize those who criticize austerity? By definition even if the Fed is offsetting it, we'd still be better off without it. Put it this way, are we better off with:
1. The Evans Rule and QEInfinity with the sequester
2. Or the ER but without the sequester?
If you say 2, then you agree with the Keynesians.
"while this is an interesting academic debate, as a practical matter there is little reason not to push for more monetary expansion and for a slower pace of fiscal consolidation. I feel strongly, however, that anyone drawing firm conclusions from this "experiment" knew what conclusions were going to be drawn before the experiment was ever run."
http://www.economist.com/blogs/freeexchange/2013/04/monetary-policy-3
If Sumner agrees that the Fed isn't doing enough how can he criticize those who criticize austerity? By definition even if the Fed is offsetting it, we'd still be better off without it. Put it this way, are we better off with:
1. The Evans Rule and QEInfinity with the sequester
2. Or the ER but without the sequester?
If you say 2, then you agree with the Keynesians.
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