With everyone else telling me I'm reading too much into all this talk about 'a stake in the heart of Keynesianism' and the 'negative fiscal multiplier' it takes my good friend Morgan Warstler to give us a reality check.
"Guys, This is just silly. NGDPLT shrinks government. Period. The end.
It's far far trickier than Monetarism. To get it you have to THINK MECHANISTICALLY."
"NGDPLT is a HARD CAP on growth every month. That means we're NOT PLAYING CATCH UP. The norm will be: every month we are a little bit shy or in front of a staying right on a laser. WE KNOW EXACTLY what the target is, we can predict it 10 years into future and not miss."
"Let's say this is $65B per month this year to hit 4.5%.Now let's think about the news story:
"Federal employees who were advocating for a 3% pay increase were disappointed by the CBO report that said it would PUSH INTEREST RATES HIGHER STARTING NEXT MONTH"
"Because we're already AT LEVEL TARGET! New spending that DOES NOT COME WITH PRODUCTIVITY GAINS TO OFFSET IS INFLATION. 100% of the time. Baumol is a joke."
"And YES Nick, we will also get "the economy is overheating! let's cut government spending and we can keep rates low longer!" Here's this pie of $65B for next month. Some will be real growth, some will be inflation..."
"At run time, we will always side with the Real Growth side and we will always say "that's just inflation" We KNOW which is which - bc GOVERNMENT PAYCHECKS = INFLATION."
"Look guys, if we kept public employee pay at CPI since 1998, we'd have $6T+ LESS DEBT. We are overpaying them $550B this year - bc those pay raises have not come with ANY productivity gains!"
"Anyway, you can noodle yourselfs to death here, but as a guy who's spending his life automate government, and deliver more services for less money, to cuts spending, and be able to pay out current pensions, I'd LOVE to have NGDPLT tomorrow."
http://worthwhile.typepad.com/worthwhile_canadian_initi/2014/02/tiff-macklem-retail-competition-flexible-it-vs-ngdplt.html?cid=6a00d83451688169e201a73d778422970d#comment-form
I think that's pretty plausible. Much more persuasive than anything I'm hearing from Nick, Mark, and Tom. Here's Nick more or less conceding my point:
"Of course, if "keynesianism" is interpreted as using *fiscal* policy to ensure that Say's Law is true in practice, then Scott does indeed seek to drive a stake through the heart of "keynesianism".
So after all these tortured linguistic gymnastics we finally get it. Here's what I asked Nick in response:
"Nick how would you interpret Keynes-while leaving it as a distinct school of economic thought. I mean what is it that we learned from Keynes that we didn't know before or what policy insights did we have that we lacked before?"
P.S. I should thank Mark for turning me on to Peter Drucker.
http://druckersociety.at/files/p_drucker_proph_en.pdf
Morgan Warstler gets one thing: GI/CYB.
ReplyDeletehttp://4.bp.blogspot.com/-YSseQGSxFzM/UGEoOHQem2I/AAAAAAAAC2M/_g9Y96APQfU/s1600/Lion2BAR0602_468x366.jpg
I never get tired of that picture.
DeleteMorgan Warstler says many things, some smart, some crazy . (although not as crazy as MF)
ReplyDeleteMostly though, he is a WERIDO WHO TALKS IN CAPITALIZED LETTERS ALL THE TIME!
Why are you even agreeing with him?
Mike has been desperate for a friend over the past 48 hours. He'll take what he can get at this point. :D
Delete... but it could be worse for him... he might have to settle for me!
DeleteYou said some of the things says are smart. This is one of the smart things he says.
DeleteI think this is much closer to what Sumner says then any of those telling me I'm wrong about this are-Mark, Tom, Nick,
Edward.
No Tom, I'm not desperate in all honesty. Even if no one agrees with me that doesn't make them right. Morgan, on this has been consistently right.
DeleteAnyway, I got my friend Greg here who is better than ten of Sumner's followers.
DeleteThis comment has been removed by the author.
DeleteSorry Mike... that was supposed to be a joke. I suppose you have plenty of friends ... I'm just jealous of your 10M+ readership. :D
DeleteNo my point Tom is I don't mind being the voice in the wilderness. The last man not to buy into MM
Delete"The last man not to buy into MM" ... I think Vincent Cate will give you a run for your money in that regard. He'd convinced that we need to go back to gold and silver coins (only: no paper or electronic), ban FRB, ban central banks, and of course have a fixed gold standard... otherwise hyperinflation will happen and all paper currencies will be destroyed, save maybe those that have some gold backing (and then their issue will only be worth their gold backing value of course). In fact there's not much we can do about it... except sit back and wait for the catastrophe... and then the world will finally comes to its senses and realizes that only gold (and a bit of silver I guess) will do for money.
DeleteHe "gets it" in that he realizes what the end consequences of it (and the intent of it) would be, but he clearly doesn't get it in regards to whether it is even a workable model. It would have to rely on some sort of futures market and I think those that know futures markets have already spoken about the unworkability of it.
ReplyDeleteBut hey, its the 21st century, and we don't need our big thinkers like Sumner being encumbered with actually understanding how "markets" work, he's got beautiful models! If he doesn't like the answer he hears from people who know markets he just yells louder....... and he has his henchmen in Sadowski and Warstler (Sadowski may be more of a sycophant)
re: sychophant: now wait just a minute Greg!... that's my job! ;^)
DeleteNo Tom you're more the Mushy Middle type like David Brooks who insists that 'both sides do it' no matter the evidence, no side can be right and no side wrong. LOL.
DeleteI like Mark-and I like Morgan. Heck I like Nick Rowe a lot. The only one I guess I don't like so much on a personal level is Scott himself because of how rude and petty he has been in his personal exchanges with me. Not that this is the crucial problem I have with him-the problem is that he's wrong about monetary offset, and he is just a trojan horse just like Morgan will happily tell you.
ReplyDeleteGreg, the point is though it doesn't matter if the futures market would work-it's obvious it won't as Mark Sanowski showed this pretty conclusively last year.
Just like Monetarism 1.0 failed when Thatcher and Volcker tried it in the early 80s. However, it worked in that since then domestic discretionary spending has had a meat ax taken to it.
NGDPLT isn't the point, It's the means not the end. It's a shiny object, a decoy.
The interesting thing though is that Mark really believes there's a big difference between him and Morgan. I know in a way there seems to be but it's packaging.
"The only one I guess I don't like so much on a personal level is Scott himself because of how rude and petty he has been in his personal exchanges with me."
DeleteThat part I can understand!
... how did you two get to that point? Was it something in particular, or were your interchanges always like they are now?
DeleteHe's always been this way with me. I guess he finds my mode of questioning unpleasant.
DeleteActually, it's Michael Sankowski, not Mark Sanowski (nor Mark Sadowski!) I think, right? The guy at monetaryrealism.com.
ReplyDeleteNow if you really want to be confused, there's a thread between Mark Sadowksi and Michael Sankowski discussing Michael's criticism of Sumner's proposal for an NGDP futures market. I know the thread exists, but I haven't read it... only Mark's description of it. I'd like to read it because Mark made it sound intriguing.
You should read Nick's last response to Morgan too. It's brief, but he makes a good point.
Looks like David Glasner is almost itching to get into this discussion:
ReplyDeletehttp://uneasymoney.com/2014/02/13/what-does-keynesian-mean/
Mike, you ought to love this guy:
ReplyDeletehttp://www.designntrend.com/articles/10882/20140214/billionaire-tom-perkins-argues-rich-deserve-million-votes-venture-capitalists-crusade-wealthy-1-percent.htm
Mike, after our recent conversation about Say's Law, this caught my eye:
ReplyDeletehttp://marketmonetarist.com/2014/01/29/the-awkward-moment-when-george-selgin-realized-he-agree-with-paul-krugman/
Christensen, Krugman, Selgin, Prescott... and RBC types all folded in there (well he even mentions Austrians as opposed to RBCes).
"PS As I have stressed before all the different models of the business cycle are basically about different assumptions about the monetary policy rule. 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."
... so Lars repeats what we've already heard before, but this time wrt RBC: effective policy makes RBC *look* like it's true... but it's a huge mistake to think that it actually is true.