Few things caused as much umbrage as Krugman's essay back in 2010 that macroeconomists had 'mistaking beauty for truth.'
http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?pagewanted=all&_r=0
In the conversation over EMH, Sumner usually makes a similar move. He doesn't so much make an argument for beauty as utility. Whenver he does a piece on EMH it's inevitable that someone will question him about it. When they do, his stock answer is-maybe it's true and maybe it isn't but it sure is useful.'
In his latest EMH piece-Of course there are no bubbles as markets are efficient-the commentator Brian questions whether EMH is just a tautology. Sumner's response:
Not at all. It predicts that index funds will outperform mutual funds set up to take advantage of bubbles.
"I come down on Toms side in this MOA MOE discussion. I think its pretty useless mostly. MOE is a dollar and MOA is simply price which reflects the number of dollars it takes to acquire that thing with a price. Prices can fluctuate, and I hate to break it to Scott, price fluctuations aren't just due to some alteration in the UOA/exchange rate. Monetary authorities can screw with things affecting prices no doubt but those alterations will not lead to restoration of some sort of previous equilibrium (GDP/employment). In the days where your UOE was actually tied to a price of a commodity the UOA/UOE distinction held some validity I think. Not anymore."
"As Cullen stated so well in a recent post, monetarist have simply substituted reserves for gold in today's monetary system and don't change anything else in their analysis. Its why they are so incompetent at actually formulating coherent policy."
"Looking for inflation in Japan, one must simply look in Japan and compare where they are today relative to 5 or 10 years ago. You don't need to look at dollar parity."
http://www.nytimes.com/2009/09/06/magazine/06Economic-t.html?pagewanted=all&_r=0
In the conversation over EMH, Sumner usually makes a similar move. He doesn't so much make an argument for beauty as utility. Whenver he does a piece on EMH it's inevitable that someone will question him about it. When they do, his stock answer is-maybe it's true and maybe it isn't but it sure is useful.'
In his latest EMH piece-Of course there are no bubbles as markets are efficient-the commentator Brian questions whether EMH is just a tautology. Sumner's response:
Not at all. It predicts that index funds will outperform mutual funds set up to take advantage of bubbles.
I don’t argue the EMH is true, I argue it is useful.
Your greed/fear maxim is probably true if the EMH is false.
Incidentally, I was mistaken yesterday about Greg being AWOL after my Sadowksi piece that looked into Sumner's claim that the price level is 100 times higher in Japan than the U.S. I had done this piece basically inspired by Greg as he was the one who has brought it to attention. I had later suggested that Greg didn't respond to the piece-done on his inspiration-but was out slacking with the grand kids. I'm happy to report that I was mistaken-I had missed his comment that actually was very much to the point.
"Well to me that's a bullshit answer by Mr Sadowski. I gave Sumner about 5 or 6 chances to truly distinguish what he meant, even suggesting at some point that I had been unclear in my question to him. He's just a weasel and doesn't want to admit that some internet troll might have made some Phd look like a fool, which he is if we really believes what he says he does."
"I come down on Toms side in this MOA MOE discussion. I think its pretty useless mostly. MOE is a dollar and MOA is simply price which reflects the number of dollars it takes to acquire that thing with a price. Prices can fluctuate, and I hate to break it to Scott, price fluctuations aren't just due to some alteration in the UOA/exchange rate. Monetary authorities can screw with things affecting prices no doubt but those alterations will not lead to restoration of some sort of previous equilibrium (GDP/employment). In the days where your UOE was actually tied to a price of a commodity the UOA/UOE distinction held some validity I think. Not anymore."
"As Cullen stated so well in a recent post, monetarist have simply substituted reserves for gold in today's monetary system and don't change anything else in their analysis. Its why they are so incompetent at actually formulating coherent policy."
"Looking for inflation in Japan, one must simply look in Japan and compare where they are today relative to 5 or 10 years ago. You don't need to look at dollar parity."
That is what I would have thought as well. Yet how did Sumner get 100 if not by looking at the exchange rate? Is it just a coincidence that the exchange rate and his price level are the same?
The idea that Monetarists have simply substituted reserves for gold seems to be given further weight by Sumner's 'paper cash buggery.'
Greg is surely right that Sumner's big fear is some Internet troll will make a Phd like him look like a fool. This would explain why he's always so peevishly ill-mannered in my discussions with him. He has more than once shown his respect for truth and his interest as a public servant in furthering the public's education by asking me why I blog about monetary matters when I'm not a monetary economist. In any case, I'm already for my nest encounter with him. I plan to ask him in light of his argument for EMH on a utilitarian basis if economics is a truth discourse after all. I'm sure that will win him over..
I did finally get him to clarify last night that the price level and the exchange rate are not one in the same. Yet the only way his claim about the Japanese price level makes sense is if they are the same thing as the exchange rate is roughly give or take 100 yen to $1 dollar. That's why I thought maybe he thinks they're the same thing-basically his price level in Japan and the exchange rate are the same.
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