I almost feel bad having to do this. After all Sumner and I had a moment the other day. I finally got something right-according to him. It was the recent Stephen Williamson debate with his rather counterintuitive claims and conclusions. One issue that came up with that over his claims on inflation and deflation in a liquidity trap.
It was only a matter of time until Mark Sadowski gave Scott a 'smoking gun.' I basically just asked if I was interpreting Sumner/Sadowski's argument right here.
"What SW says here: ” If the central bank targets the nominal interest rate at a low enough rate forever, you have to get deflation.”
"Sounds almost like what Scott has said in the past:"
“In fact, the tightest monetary policy imaginable would actually produce zero interest rates forever.”
http://www.themoneyillusion.com/?p=2810
"Is the crucial difference cause and effect? Whereas deflation and low interest rates go together SW thinks that low interest rates give you the deflation rather than simply being a byproduct?"
http://www.themoneyillusion.com/?p=25119#comments
For once Sumner-who claims that I'm in over my head for even trying to discuss monetary issues, agreed that I understood the argument correctly.
"Mike, Exactly."
Happy day... I also got the approval of Money Illusion commentator SG:
"Bingo. Steve Williamson has unintentionally illustrated the great New Keynsian mistake of defining the stance of monetary policy by using an utterly ambiguous metric.
The irony is that that Steve Williamson is getting all this attention because he *misunderstands* the issue so badly, whereas Scott and the other MMs are more or less ignored, despite having beaten the tight money ==> low interest rate drum for nearly 5 years now."
Much as I enjoyed this era of good feeling and hate to have to ruin it, I must disagree with the idea that the problem is all because SW follows NK models-he actually has nothing good to say about them and claims to be a New Monetarist-whatever this means. I'm not at all sure that I agree that Keynesians-note I'm not talking about New Keynesians for which I have no particular brief for- are in anyway responsible for whatever SW's confusion is.
However, in the post after this one Sumner ruins whatever warm glow there might have been by a truly obnoxious post-just totally elitist. The title says it all Your Not Entitled to Your Opinion.
http://www.themoneyillusion.com/?p=25159
I know he would protest that he's quiflied this point in the post by saying this:
"And don’t say that “everyone is entitled to an opinion,” or that the bubble thing is a valid perspective. No, as Paul Krugman pointed out in Pop Internationalism, if you don’t understand the theory of comparative advantage you are not entitled to an opinion that protection makes sense today because comparative advantage doesn’t apply to the modern world for blah blah blah reasons. And I would say that people who don’t understand basic AS/AD are not entitled to an opinion that unconventional monetary policies that focus on “art and wine” markets are needed. First you have to show you understand conventional policies. And everywhere we look we see fewer and fewer people on both the left and the right that understand even economics 101. People who don’t are not entitled to an opinion. People who do, but still reject econ101, are entitled to an opinion."
Ok, are the MMTers then entitled to their opinion? You may think this is an unfair gloss for me to take but it isn't. This is what Monetarism is all about-Old or New, or Market.
http://diaryofarepublicanhater.blogspot.com/2013/10/central-bank-independence-and-scott.html
Is it an accident that the place it was tried most thoroughly is Pinochet's Chile? His argument that laypeople are two ignorant of economics to vote implies a preference for dictatorship. Besides that he has a truly obnoxious example of bad economic ideas that we're not entitled to entertain:
"we have the President of the United States informing us that a huge rise in the minimum wage, hard on the heels of a previous 40% increase, will actually create new jobs. And yet I don’t see many liberal economists accusing him of “voodoo economics.” But that term’s passé, as even liberals now claim that deficits pay for themselves in terms of economic growth. A belated apology to Art Laffer."
If only those who understand a wrong theory can criticize it, plenty of economists will say that Sumner is wrong in thinking that the minimum wage is this huge drag on the economy. The President's claim is not so outlandish if you realize that a higher minimum wage contributes significantly to lowering the poverty rate. In addition putting more money in the pockets of consumers is stimulative. I understand that correlation doesn't necessarily mean causation but it can.
All we know is that the best period of U.S. economic history correlates with a high minimum wage-in 1969 it was at its highest point in history adjusted for inflation and productivity.
It was only a matter of time until Mark Sadowski gave Scott a 'smoking gun.' I basically just asked if I was interpreting Sumner/Sadowski's argument right here.
"What SW says here: ” If the central bank targets the nominal interest rate at a low enough rate forever, you have to get deflation.”
"Sounds almost like what Scott has said in the past:"
“In fact, the tightest monetary policy imaginable would actually produce zero interest rates forever.”
http://www.themoneyillusion.com/?p=2810
"Is the crucial difference cause and effect? Whereas deflation and low interest rates go together SW thinks that low interest rates give you the deflation rather than simply being a byproduct?"
http://www.themoneyillusion.com/?p=25119#comments
For once Sumner-who claims that I'm in over my head for even trying to discuss monetary issues, agreed that I understood the argument correctly.
"Mike, Exactly."
Happy day... I also got the approval of Money Illusion commentator SG:
"Bingo. Steve Williamson has unintentionally illustrated the great New Keynsian mistake of defining the stance of monetary policy by using an utterly ambiguous metric.
The irony is that that Steve Williamson is getting all this attention because he *misunderstands* the issue so badly, whereas Scott and the other MMs are more or less ignored, despite having beaten the tight money ==> low interest rate drum for nearly 5 years now."
Much as I enjoyed this era of good feeling and hate to have to ruin it, I must disagree with the idea that the problem is all because SW follows NK models-he actually has nothing good to say about them and claims to be a New Monetarist-whatever this means. I'm not at all sure that I agree that Keynesians-note I'm not talking about New Keynesians for which I have no particular brief for- are in anyway responsible for whatever SW's confusion is.
However, in the post after this one Sumner ruins whatever warm glow there might have been by a truly obnoxious post-just totally elitist. The title says it all Your Not Entitled to Your Opinion.
http://www.themoneyillusion.com/?p=25159
I know he would protest that he's quiflied this point in the post by saying this:
"And don’t say that “everyone is entitled to an opinion,” or that the bubble thing is a valid perspective. No, as Paul Krugman pointed out in Pop Internationalism, if you don’t understand the theory of comparative advantage you are not entitled to an opinion that protection makes sense today because comparative advantage doesn’t apply to the modern world for blah blah blah reasons. And I would say that people who don’t understand basic AS/AD are not entitled to an opinion that unconventional monetary policies that focus on “art and wine” markets are needed. First you have to show you understand conventional policies. And everywhere we look we see fewer and fewer people on both the left and the right that understand even economics 101. People who don’t are not entitled to an opinion. People who do, but still reject econ101, are entitled to an opinion."
Ok, are the MMTers then entitled to their opinion? You may think this is an unfair gloss for me to take but it isn't. This is what Monetarism is all about-Old or New, or Market.
http://diaryofarepublicanhater.blogspot.com/2013/10/central-bank-independence-and-scott.html
Is it an accident that the place it was tried most thoroughly is Pinochet's Chile? His argument that laypeople are two ignorant of economics to vote implies a preference for dictatorship. Besides that he has a truly obnoxious example of bad economic ideas that we're not entitled to entertain:
"we have the President of the United States informing us that a huge rise in the minimum wage, hard on the heels of a previous 40% increase, will actually create new jobs. And yet I don’t see many liberal economists accusing him of “voodoo economics.” But that term’s passé, as even liberals now claim that deficits pay for themselves in terms of economic growth. A belated apology to Art Laffer."
If only those who understand a wrong theory can criticize it, plenty of economists will say that Sumner is wrong in thinking that the minimum wage is this huge drag on the economy. The President's claim is not so outlandish if you realize that a higher minimum wage contributes significantly to lowering the poverty rate. In addition putting more money in the pockets of consumers is stimulative. I understand that correlation doesn't necessarily mean causation but it can.
All we know is that the best period of U.S. economic history correlates with a high minimum wage-in 1969 it was at its highest point in history adjusted for inflation and productivity.
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