Does Scott Sumner Sound Like a Man Who Thinks Markets Can Fail?

     Patrick Sullivan denies this-he says that all conservatives admit they can fail-Sumner admits this, Friedman did.

      http://diaryofarepublicanhater.blogspot.com/2013/08/does-anyone-deny-market-failures.html

     I'd love for anyone to provide any proof that either of these great Monetarists believe any such thing. Not only does Sumner deny that the financial crisis, the deep recession or the weak recovery had any cause but tight money but the also believes in a pretty strong form of EMH too boot. All versions of EMH are pretty strong, to be sure.

     John Cassidy tells of how in 1970, Eugene Fama gave us the three species of EMH. Which one is Sumner?

     1. A market is weakly efficient if it wasn't possible to predict prices on the basis of past movements.

     2. Then you have a semi-strong market where prices reflect all publicly available information like SEC filings, and any coverage received in the media.

     3. Finally there's the strong form efficiency that believes that prices reflect not only all available information but even nonavailable information, even information that is private like an in-depth analysis a company does of itself before the report is even made public.

     Here, market efficiency is so strong, it's almost spooky. If you ask me which form Sumner believes in, I have to say 3. After all, his Market Monetarism believes that monetary policy reacts with long and variable leads. 

      By the way, as long as we're picking on Sumner, another thing he believes in is Supply Side economics. Is Patrick going to deny that Sumner is a Supply Sider? Supply Side econ is the perfect theory for the GOP. After al, it's a 19th century party, with a 19th century view of women's reproductive rights and the voting rights of nonwhites. It needs a 19th century economic theory.

      To that vein, SS theory fits the bill. As Robert D. Atkinson tells us, SS theory is wrong on each one of its premises. It claims that tax cuts increase savings and this is wrong. It claims that savings increases capital accumulation and this is wrong. One thing that SS ignores is that so much of our modern investment-the kind we've seen post 1900-again not surprising, it's a 19th century theory-is facilitated by finance. Our total investment is not merely the some of all our available savings-if it were we'd be back in the horse and buggy era.

    Yet, it's also wrong in its single minded obsession with capital accumulation. What it misses is that capital accumulation-the simple addition of physical capital-may have seemed a plausible theory of growth in the-ahem, 19th century-however not since then. Starting early in the 20th century a factor more important that either capital or population growth is technology progress.

     http://www.amazon.com/Supply-Side-Follies-Conservative-Economics-Innovation/dp/0742551067/ref=sr_1_10?s=books&ie=UTF8&qid=1375918401&sr=1-10&keywords=robert+atkinson

     So what's important for growth is not tax cuts for the rich but R&D and technological progress-which requires some government funding as R&D is an area that the market does not excel at-because of the Free Rider problem.

    One of the unsung achievements of Obama's fiscal stimulus is ARPA-E where so much scientific research has been funded. The GOP of course loved stories about seemingly wasteful projects, ignoring that when it comes to such research it's a feature not a bug to not have to be driven by short-term profit concerns.

    http://diaryofarepublicanhater.blogspot.com/2013/06/a-new-new-deal-obama-is-no-fdr-or-is-he.html