Again, if nothing else we've facilitated a conversation here. Under questioning from Tom Brown, Nick Rowe had this to say:
"If I were a Big Government guy, I would still want (the government's) central bank to make Say's Law true in practice. Especially since it would free up the rest of the government to do all the other big things I would want the government to do, without the constraint of managing AD."
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/tiff-macklem-retail-competition-flexible-it-vs-ngdplt.html?cid=6a00d83451688169e201a5116bca0f970c#comment-formg
Tom Brown does a good job of voicing my concerns I see.
"Nick, that is exactly the point I'm always making to Mike, except you've said it more elegantly... and I'm not fully committed to the message: I just tell him that this view is consistent with being an MMer, and thus MMers are not necessarily out to dismantle the government and declare open season on the little guy (well in fact, you might all be out to do that -- it's not clear --, but in theory it doesn't have to be that way, right?). :D"
"If I were a Big Government guy, I would still want (the government's) central bank to make Say's Law true in practice. Especially since it would free up the rest of the government to do all the other big things I would want the government to do, without the constraint of managing AD."
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/tiff-macklem-retail-competition-flexible-it-vs-ngdplt.html?cid=6a00d83451688169e201a5116bca0f970c#comment-formg
Tom Brown does a good job of voicing my concerns I see.
"Nick, that is exactly the point I'm always making to Mike, except you've said it more elegantly... and I'm not fully committed to the message: I just tell him that this view is consistent with being an MMer, and thus MMers are not necessarily out to dismantle the government and declare open season on the little guy (well in fact, you might all be out to do that -- it's not clear --, but in theory it doesn't have to be that way, right?). :D"
"I think he's worried that if MMists are right, that this will eliminate the justification for having a gov with an expansionist fiscal policy, ... or for having a gov at all, outside the CB. In fact I think he believes that's the primary motivation for MM: remove the last justification for gov, so we can drown it in the bathtub. Perhaps there is a wee bit of legitimacy to his concern... but still, it doesn't mean that you can't believe in "big government" as you say, and simultaneously advocate an MMist monetary policy."
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/tiff-macklem-retail-competition-flexible-it-vs-ngdplt.html?cid=6a00d83451688169e201a5116bca0f970c#comment-form
I think Tom himself quite 'elegantly' or at least quite effectively expresses my concerns here.
Tom: "I think he's worried that if MMists are right, that this will eliminate the justification for having a gov with an expansionist fiscal policy, ..."
"Remember as well, it would also eliminate the justification for having a government with a contractionist fiscal policy: "Aggregate Demand is too high! We must cut government spending!"
"Fiscal policy is not about the average size of government over time; it is about volatility in the size of government over time."
Well if Sumner explained this sort of stuff it might be different. Really the reason why I distrust him so much is obvious. He has never suggested that MM might actually lessen the level of fiscal contraction over time-and I don't think he would agree with that. Tom if you can get him to agree with that I will truly be impressed. Again, no disrespect to Nick but on matters of MM ideology Sumner is the Alpha thinker-kind of like the founder of a new school. What he says is a lot more important than anyone else even his fellow MMers.
Again, if you don't get what I mean, read Plato's New Republic. Sumner has made me very skeptical because:
1. He has pushed the idea of a zero multiplier and full monetary offset-he even claims that the 2009 stimulus 'may' have had a negative multiplier; I notice that in later he dropped the 'may.' He has made a point of roasting anyone-Krugman, Delong, Konczal, et. al.
2. He's also been extremely hostile to me whenever I've attempted to engage him on 1, insisting on either calling me a 'liar' whatever that means in this contest, or that I'm just not smart enough to discuss these issues.
This makes me suggest that he's not operating in good faith and is not interested in honest intellectual engagement but just wants sheep.
To Nick's point, I find it hard to believe that the size of govt will be more with MM than without it.
P.S. I would say I'm a big govt guy in the U.S. as I think our govt is too small but I wouldn't necessarily be in some European countries-I certainly wouldn't support the deep austerity of countries like Spain and Greece as that cure is worse than the disease. To say "I'm a a big govt guy' is a relative term. I use it in these discussions as I'm talking to people who are opposed to the govt and want it to shrink. I want a larger govt than they do-they want a small one.
P.S.S. To Nick's point that the goal is not to shrink the size of govt but simply to make its growth stable, I'm not sure why this is desirable. I mean the size it seems to me should the whatever is necessary for it to provide the goods and services we as voting citizens agree it should. MM's rule-just like Old Monetarism's rules always seem to be about pigeonholing our choices. I've never really understood why Monetarists and New Classicals want to eliminate 'discretion' in policy-other than to do what I'm describing-pigeonholing our choices.
Mike, shhhhhhhh.. don't put that in a headlline!... that's going to ruin Market Monetarism for Morgan Warstler! :D
ReplyDelete... and simultaneously confirm every word that a newly encouraged Major_Freedom ever wrote! :(
DeleteIt won't for two reasons:
ReplyDelete1. Morgan believes that's false
2. He's dead right
Mike, Morgan's attention has been attracted... and it looks like he might be your... uh... unnatural ally:
Deletehttp://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/tiff-macklem-retail-competition-flexible-it-vs-ngdplt.html?cid=6a00d83451688169e201a5116c2467970c#comment-6a00d83451688169e201a5116c2467970c
No problem. I like Morgan. Unlike Sumner he tells the truth
Delete"To Nick's point that the goal is not to shrink the size of govt but simply to make its growth stable, I'm not sure why this is desirable."
ReplyDeleteYou're totally missing Nick Rowe's point when he says:
"Fiscal policy is not about the average size of government over time; it is about volatility in the size of government over time."
He's not talking about MM's goals for fiscal policy. He's talking about what using fiscal policy to regulate AD means. Using fiscal policy to regulate AD implies absolutely nothing about the average size of government. What it says is you need to vary its size as needed order to regulate AD.
So Mark, what's your take on the idea that good policy should make Say's law true in practice (if not in theory)? So far we've got for people liking that description: Nick Rowe, Scott Sumner, and Brad DeLong. For those saying "Say's Law?... What's that got to do with it?" we have David Glasner. Nick assures me David is not alone in this opinion though, and that he is probably actually in the majority.
DeleteGood catch on the above, BTW. I agree w/ your interpretation.
Ah... and in the "liking" category I almost forgot Keynes.
DeleteMy take on this is that the idea that good macroeconomic policy would make Say's Law true is an idea first thought of by Keynes. People who say this usually are doing so specifically to invoke Keynes. And even those who are not doing so for this reason nevertheless share their desire to identify themselves as being among those who believe in the existence of aggregate demand shortfalls.
DeleteSaying this is also an implicit appeal to those who believe in the veracity of Classical Theory (flexible prices, Say's Law, the investment savings equality) to support the use of macroeconomic policy to eliminate aggregate demand shortfalls and thus make their view true.
What I found amusing about this whole affair is that when Mike Sax heard Nick Rowe had said this, Mike thought he had finally found his proof that MM shares the same goals as New Classical, RBC and ABCT economics, when all he had found was that MM shares the same goals as outlined by Keynes in the General Theory.
"What I found amusing about this whole affair is that when Mike Sax heard Nick Rowe had said this, Mike thought he had finally found his proof that MM shares the same goals as New Classical, RBC and ABCT economics, when all he had found was that MM shares the same goals as outlined by Keynes in the General Theory."
DeleteNot really Mark. My point of the affinity of MM with NC, RBC and ABCT remains. It doesn't stand and fall on one quote from Keynes.
If you want to really prove me wrong here, this is how you do it. Tell me where MM disagrees with any of these Right wing economic schools on fiscal matters. Again, I said fiscal so the answer isn't that Sumner believes in NGDPLT and that the RBCers, et. al think monetary policy has no effect as this is not fiscal policy.
On the other hand you can run a mack truck through the disagreement Sumner-and the RBCers, et. al-have with Keynes on fiscal policy.
Thanks for your perspective Mark
DeleteSo Mark Sadowski is also in the "liking" category. I also think we can put Lars Christensen there, although he doesn't mention Say's Law here, just RBC:
"Hence, we would in fact be in something, which looked like a Real Business Cycle world if the central bank targets nominal GDP. So if the central bank had got it “perfectly right” then Prescott would have been sort of right, but we of course know that central banks tend to get it horribly wrong."
http://marketmonetarist.com/2014/01/29/the-awkward-moment-when-george-selgin-realized-he-agree-with-paul-krugman/
I'm still waiting on a reply from JP Koning. Perhaps Nick is wrong about who's in the majority and who's in the minority on this one.
If I wanted to make myself into a real pest (more than I am now) I'd ask Woolsey, Beckworth, Nunes, and maybe Kimball too: and perhaps a few others. I wonder what Cochrane would say? (No?). Noah Smith? (Yes?). Bob Murphy? (No?)
Also I should note I asked Cullen Roche: he didn't answer directly but responded with a quote from Hayek! I'll put him in the "No, doesn't like" category.... or at least the ambivalent category.
Delete